Summary
- Broadcom’s first-quarter AI-related income surged over 100% to $8.4 billion, supported by networking chips and custom AI accelerators.
- CEO Hock Tan anticipates that AI chip sales will surpass $100 billion by the year 2027.
- The company reported an adjusted EPS of $2.05 for Q1, exceeding the $2.03 estimate, while revenue reached $19.31 billion, beating expectations.
- For the second quarter, Broadcom projected revenue of approximately $22 billion, significantly higher than the $20.5 billion predicted by analysts.
- A new $10 billion share repurchase program was unveiled, and the firm confirmed its supply chain is set through 2028.
Shares of Broadcom rose by about 5% on Thursday following the release of strong Q1 financial results and a positive long-term outlook for AI chip demand from CEO Hock Tan.
The stock price increase followed reports of adjusted earnings at $2.05 per share, slightly topping the $2.03 consensus. Total revenue grew 29% year-over-year to $19.31 billion, surpassing the $19.18 billion anticipated by the market.
The company’s Q2 outlook was particularly impressive, with revenue forecasted at roughly $22 billion, compared to the $20.5 billion expected by Wall Street.
AI-driven revenue was a major highlight, doubling to $8.4 billion during the quarter due to high demand for networking hardware and custom AI accelerators.
Tan noted that demand is expanding beyond major hyperscalers to include firms developing AI agents, consumer platforms, and code-generation software that require specialized silicon.
Broadcom’s client list for AI chips includes industry leaders like Meta, Alphabet, Anthropic, and OpenAI.
During the analyst call, Tan stated that the company expects annual AI chip revenue to top $100 billion by 2027, a figure that exceeded even the most bullish market predictions.
Analysts at JPMorgan suggested the firm could earn between $12 billion and $15 billion for every gigawatt of AI capacity by 2027, raising their own AI revenue projections to at least $120 billion.
Goldman Sachs highlighted that Broadcom’s dominance in custom silicon and AI networking helps provide the most cost-effective inference solutions for hyperscale clients.
Supply Chain and Profitability
Addressing concerns regarding high-bandwidth memory availability, Tan confirmed that Broadcom has locked in its supply of wafers and memory through 2028.
He also dismissed worries about profit margins related to AI chip rack shipments, noting that improvements in costs and yields have made the AI segment’s business model comparable to its other semiconductor units.
The company is currently approaching 10 gigawatts of capacity distributed among six major clients, which helped mitigate concerns regarding customer concentration.
Share Repurchases and Market Ratings
Broadcom further boosted investor sentiment by announcing a new $10 billion stock buyback initiative.
The stock maintains a consensus Strong Buy rating from 30 analysts—consisting of 28 Buys and 2 Holds—with a mean price target of $449.46.
The positive momentum also benefited related companies, with Amphenol rising 4% and Credo Technology gaining 10% as investors showed preference for copper-based connectivity in AI servers.
Tan added that AI chip revenue for the ongoing quarter is projected to reach $10.7 billion, indicating continued growth.
