Key Highlights
- Q1 revenue reached $19.3 billion, marking a 29% year-over-year increase and establishing a company record
- AI revenue doubled, climbing 106% to reach $8.4 billion, surpassing internal projections
- Company forecasts Q2 revenue of $22 billion, with AI revenue expected to hit $14.8 billion
- Morgan Stanley upgraded its price target from $462 to $470, maintaining Overweight rating
- Analyst estimates suggest Broadcom’s AI revenue could reach $120 billion by fiscal 2027
Shares of Broadcom (AVGO) advanced 4.8% to close at $322.77 on March 5, following the release of fiscal Q1 2026 earnings results. The stock experienced modest retracement afterward and continues trading below year-to-date breakeven.
The company delivered total revenue of $19.31 billion, setting a new record and exceeding analyst projections of $19.18 billion. Adjusted earnings per share reached $2.05, surpassing the $2.03 consensus estimate.
The AI division produced the headline figure — $8.4 billion in revenue, representing a 106% year-over-year expansion and outperforming the company’s own initial forecasts.
Custom AI ASIC revenue powered the growth, skyrocketing 140%. AI networking revenue expanded 60%, with management highlighting that networking segment growth should accelerate significantly in Q2, propelled by Tomahawk Ethernet switch products and SerDes technology.
Adjusted EBITDA expanded 30% year-over-year to $13.1 billion, representing 68% of total revenue. Gross margins settled at 77%, compared to 79.1% in the prior-year period, though remained relatively stable.
Semiconductor Division Drives Growth
Semiconductor solutions revenue jumped 52% year-over-year to reach $12.5 billion. Revenue from non-AI chip products increased just 4% — highlighting where growth momentum concentrates.
Infrastructure software revenue advanced 1% to $6.8 billion. VMware revenue within that division expanded 13%.
CEO Hock Tan confronted concerns raised during the earnings call regarding the possibility of large language model developers bypassing chip suppliers like Broadcom to develop proprietary silicon. His response came directly: “You need the best silicon design team around. You need cutting-edge SerDes, very advanced packaging. We’ve been doing this for more than 20 years. I would say we are by far way out there, and we will not see competition in customer-owned tooling for many years to come.”
CFO Kirsten Spears highlighted the company distributed $10.9 billion to shareholders during Q1 — $3.1 billion through dividends and $7.8 billion via buybacks. Management also unveiled a new $10 billion share repurchase authorization extending through the end of 2026.
Wall Street Analyst Increases Valuation
Morgan Stanley analyst Joseph Moore increased his price target on AVGO from $462 to $470, maintaining an Overweight rating. Moore characterized the quarter as “strong,” highlighting AI-fueled growth and enhanced long-term predictability.
He observed that margin concerns have diminished, networking performance exceeded expectations, and the fiscal 2027 AI outlook remains attractive as ASIC programs continue expanding.
Broadcom issued Q2 revenue guidance of approximately $22 billion, representing 47% year-over-year expansion. AI revenue for Q2 stands projected at $14.8 billion — reflecting 76% year-over-year growth.
Management informed analysts that its five largest custom AI chip clients continue advancing successfully, and the company can produce more than $100 billion in AI chip revenue during fiscal 2027 alone. The Morgan Stanley team projects an even higher figure, estimating approximately $120 billion, with potential for additional upward adjustments.
AVGO currently commands a valuation around 32 times fiscal 2026 earnings projections and approximately 22.5 times fiscal 2027 consensus estimates.
