Broadcom AI chip revenue jumps 221%, doubling forecast through 2028

Broadcom's AI semiconductor revenue surged 221 percent to $16.7 billion in the fiscal third quarter, and management now projects that business to double in both fiscal 2027 and 2028 as hyperscalers expand custom accelerator deployments. Total revenue reached $29.6 billion, up 86 percent year over year, while adjusted earnings per share of $3.32 beat the $3.24 consensus compiled by LSEG.

"Demand for our custom AI accelerators and networking continues to be very strong," Chief Executive Officer Hock Tan told analysts on the September earnings call.

Semiconductor Solutions segment revenue climbed 127 percent to $20.8 billion, and infrastructure software rose 29 percent to $8.8 billion. The company generated $13.7 billion in free cash flow during the quarter, equal to 46 percent of revenue. Management guided fiscal Q4 AI semiconductor revenue to about $21.7 billion, up 236 percent year over year, and total Q4 revenue to roughly $34.8 billion, up 93 percent.

The forward outlook extends well beyond the current fiscal year. Broadcom projects AI semiconductor revenue of approximately $115 billion in fiscal 2027 and $230 billion in fiscal 2028, up from an estimated $58 billion in fiscal 2026. That trajectory would make AI chips the dominant revenue source within two years, a structural shift that echoes Nvidia's data center ascent.

Custom Silicon Demand Reshapes the Competitive Map

Broadcom's custom application-specific integrated circuits, co-designed with hyperscalers including Google, OpenAI, Meta, and Anthropic, anchor the AI infrastructure buildout. The company pairs bespoke accelerators with high-speed networking silicon — Tomahawk 6 switches are deployed at essentially every AI hyperscaler — allowing it to capture more content per data center as clusters scale.

The model has also confirmed the broader custom silicon category. When Qualcomm announced a multi-generation AI silicon deal with Amazon's AWS unit in September, Broadcom shares rose alongside Qualcomm's, with investors reading the deal as confirmation of rising demand across the category rather than share migration away from the incumbent. Qualcomm's win adds another supplier to AWS's roster alongside Trainium and Graviton, but Broadcom's $1.755 trillion market capitalization dwarfs Qualcomm's roughly $190 billion, framing the scale gap between the two AI silicon stories.

Marvell Technology remains Broadcom's closest custom-silicon rival but operates at a fraction of the scale. Broadcom produced $16.7 billion in quarterly AI semiconductor revenue, and its short interest sits near 1.2 percent of float versus Marvell's 3.79 percent. Nvidia, AMD, and hyperscalers developing in-house chips continue to compete for specific workloads.

Margin Compression and Valuation Test the Bull Case

The rapid shift toward AI semiconductors carries a cost. Broadcom's gross margin fell to 75 percent in fiscal Q3, down 210 basis points sequentially, and management guided Q4 gross margin to roughly 73 percent versus 78 percent a year earlier. The compression stems partly from AI accelerators' growing memory content, which carries lower margins than Broadcom's traditional networking products.

Valuation adds another layer of scrutiny. Broadcom shares trade at 10.34 times forward sales, well above the semiconductor sector average of 6.11 times, according to Zacks. The stock closed at $357.90 on Sept. 4, more than 20 percent below its 52-week high of $495.00. William Blair analyst Sebastien Naji maintained a Buy rating after the results, citing Broadcom's custom silicon position, networking portfolio, and growing accelerator roadmap.

The central question for investors is whether Broadcom can sustain 221 percent annual growth in AI semiconductor revenue as early deployment waves normalize. Management has secured supply to support its fiscal 2027 and 2028 targets, and actual customer demand could exceed current projections. But with the stock already pricing in substantial growth — Zacks assigns a Hold rating — the margin for disappointment narrows with each passing quarter.

This article is for informational purposes only and does not constitute investment advice.