TLDR
- Broadcom announced first-quarter revenue of $19.3 billion, a 29% year-over-year increase that set a new record.
- Revenue from AI surged 106% to $8.4 billion, exceeding the company’s own projections.
- Second-quarter revenue guidance was established at $22 billion, with AI revenue anticipated to be $14.8 billion.
- Morgan Stanley increased its price target to $470 from $462, while maintaining an Overweight rating.
- Analysts estimate Broadcom could achieve $120 billion in AI revenue during fiscal 2027.
Broadcom (AVGO) finished trading on March 5 up 4.8% at $322.77, following the release of its fiscal Q1 2026 earnings. The share price has since experienced a minor retreat and is still down for the year.
The total revenue figure of $19.31 billion was a record and surpassed analyst expectations of $19.18 billion. Adjusted earnings per share of $2.05 also exceeded the consensus estimate of $2.03.
AI-related revenue was the highlight, reaching $8.4 billion. This represents a 106% year-over-year increase and was higher than the company’s internal forecast.
Custom AI ASIC revenue was the primary driver, skyrocketing 140%. AI networking revenue increased 60%, and the company indicated that networking growth is projected to accelerate significantly in the second quarter, fueled by its Tomahawk Ethernet switch and SerDes products.
Adjusted EBITDA grew 30% from the prior year to $13.1 billion, with margins representing 68% of revenue. Gross margins were 77%, a decrease from 79.1% a year earlier but remaining stable.
AI Chip Revenue in Focus
Total semiconductor solutions revenue increased 52% year over year to $12.5 billion. In contrast, revenue from non-AI chips grew only 4%, underscoring the source of the current momentum.
Infrastructure software revenue saw a modest 1% increase to $6.8 billion. Revenue from VMware within that segment grew by 13%.
On the earnings call, CEO Hock Tan responded to speculation that large language model developers might bypass chip suppliers like Broadcom to create their own silicon. He stated bluntly, “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 reported that the company returned $10.9 billion to shareholders in the first quarter—comprising $3.1 billion in dividends and $7.8 billion in share buybacks. A new $10 billion share repurchase program was also announced, effective through the end of 2026.
Morgan Stanley Raises Price Target
Morgan Stanley analyst Joseph Moore lifted his price target on the stock to $470 from $462, reaffirming an Overweight rating. Moore described the quarter as “strong,” highlighting upside from AI and enhanced long-term visibility.
He observed that concerns about margins have diminished, networking performance exceeded expectations, and the outlook for AI in fiscal 2027 remains attractive as ASIC programs expand.
Broadcom provided second-quarter revenue guidance of about $22 billion, suggesting 47% year-over-year growth. AI revenue for Q2 is projected to be $14.8 billion, a 76% increase from the same period last year.
The company has informed analysts that its five largest custom AI chip customers are advancing successfully, and it has the potential to generate over $100 billion in AI chip revenue in fiscal 2027. The Morgan Stanley team projects an even higher figure of roughly $120 billion and believes there is potential for further increases to this estimate.
AVGO stock is currently trading at approximately 32 times the estimated earnings for fiscal 2026 and about 22.5 times the consensus earnings for fiscal 2027.