Broadcom Shows AI Infrastructure Spending Remains Strong

Broadcom (AVGO) dispelled concerns that the buildout of artificial intelligence infrastructure might be softening with its solid fiscal first-quarter results and heady guidance. Broadcom stock rose on the news.

The fabless chipmaker and infrastructure software provider late Wednesday reported adjusted earnings of $2.05 a share on sales of $19.31 billion in the quarter ended Feb. 1. Analysts polled by FactSet had expected Broadcom to earn $2.03 a share on sales of $19.26 billion in fiscal Q1. On a year-over-year basis, Broadcom’s earnings rose 28% while its sales increased 29%.

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For the current quarter ending May 3, Broadcom forecast revenue of $22 billion, up 47% from the same quarter last year. Analysts had been modeling for fiscal second-quarter 2026 sales of $20.5 billion.

Better still, the company expects to generate more than $100 billion in AI semiconductor revenue in fiscal 2027. It has secured manufacturing capacity to meet its needs through 2028.

“We are seeing stronger and stronger demand for compute capacity,” Broadcom Chief Executive Hock Tan said on a conference call with analysts.

Tan also revealed that the company now has six AI chip customers. Broadcom makes custom AI chips, called XPUs, for Alphabet’s (GOOGL) Google, Facebook parent Meta Platforms (META), Anthropic and OpenAI. Analysts speculate that the unidentified customers could be Apple (AAPL), ByteDance, Fujitsu or SoftBank.

Tan disputed analyst and media reports that it could lose Meta’s business. Broadcom’s Meta AI accelerator road map is “alive and well,” he said.

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‘Deep, Strategic Partnerships’ With AI Customers

Tan described Broadcom’s relationships with its six AI customers as “deep, strategic and multiyear” collaborations. Broadcom brings expertise in silicon design, process technology, advanced packaging, networking and more to help customers meet their AI goals, he said.

Broadcom’s partnerships with AI customers are focused on helping them create platforms to productize and monetize their generative and agentic AI innovations, Tan said.

“We have the track record to deliver these XPUs at high volumes at an accelerated time-to-market with very high yields,” Tan said.

In fiscal Q1, Broadcom’s AI semiconductor revenue surged 106% year over year to $8.4 billion. It forecasts AI chip sales will soar 140% to $10.7 billion in the current fiscal Q2.

While discussing Broadcom’s networking equipment business, Tan said copper-based gear will continue to be the technology of choice for scale-up networking within data centers. Copper is less expensive and more power efficient than optical networking systems, he said. However, optical gear is preferred for scale-out networking.

Those comments provided a boost for copper-focused networking firms Astera Labs (ALAB) and Credo Technology (CRDO).

Broadcom Stock Scores Price-Target Hikes

At least 10 Wall Street analysts raised their price targets on Broadcom stock after the company’s fiscal Q1 earnings report.

Rosenblatt Securities analyst Kevin Cassidy reiterated his buy rating on Broadcom stock and upped his price target to 500 from 450.

On the stock market today, Broadcom stock jumped 4.8% to close at 332.74. With the move, it rose above its 200-day moving average line and was close to retaking its 50-day line, key technical support levels.

In a client note, Cassidy called Broadcom’s $100 billion AI chip sales target for fiscal 2027 a “mic-drop moment.”

AI Chip Sales Outlook Called Conservative

UBS analyst Timothy Arcuri said the fiscal 2027 target “seems very conservative.” He increased his AI chip forecast for fiscal 2027 to more than $130 billion from $106 billion previously.

The most important takeaway from Broadcom’s earnings call was management commentary that they expect to sustain current profit margins, Arcuri said in a report. He rates Broadcom stock as buy with a price target of 475.

Barclays analyst Tom O’Malley also believes Broadcom’s AI chip guidance is conservative.

“We ultimately think the $100 billion AI guide gets blown away as back-of-the-envelope math can get us to over $100 billion in ASIC (application-specific integrated circuits) alone and closer to $150 billion including networking,” O’Malley said in a report.

Jefferies analyst Blayne Curtis said Broadcom’s AI chip revenue in fiscal 2027 potentially could reach over $200 million.

William Blair analyst Sebastien Naji kept his outperform rating on Broadcom stock.

“All in all, this was another thesis-confirming quarter, highlighting the depth of Broadcom’s AI custom chip engagements and the substantial runway for growth ahead,” Naji said in a report.

Broadcom stock is on the IBD Tech Leaders list.

Follow Patrick Seitz on X at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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