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Broadcom’s AI Strength Meets UBS Optimism as Stock Struggles
Broadcom makes important computer chips and other technology used for artificial intelligence.
Its latest quarter was its strongest ever, with revenue rising sharply.
The company earned $29.6 billion in revenue and generated $13.7 billion in free cash flow.
Sales of its AI chips grew especially quickly.
Broadcom also expects sales to grow even more in the next quarter.
UBS believes spending on AI infrastructure will remain strong and raised its forecasts for Broadcom.
However, investors are still worried that competition could increase and that it is unclear which companies will earn the most from the AI boom.
Broadcom also relies heavily on major customers including Anthropic and OpenAI.
These concerns may help explain why Broadcom’s shares have performed worse than NVIDIA’s despite strong business results.
Broadcom reported record fiscal third-quarter revenue of $29.6 billion, up 86% year over year.
AI semiconductor revenue reached $16.7 billion, up 221% year over year and 54% from the prior quarter.
The company expects fourth-quarter revenue of approximately $34.8 billion and AI semiconductor revenue of $21.7 billion.
UBS raised its forecast for Broadcom’s fiscal 2027 AI-chip revenue to about $115 billion and expects roughly $230 billion in fiscal 2028.
Despite strong results, Broadcom’s stock has lagged NVIDIA, reflecting market concerns about competition, valuations, customer concentration and future returns.
- Who
- Broadcom Inc., led by President and CEO Hock Tan, with UBS assessing the company’s AI outlook.
- What
- Broadcom reported strong fiscal-third-quarter results, issued optimistic fourth-quarter guidance and announced continued growth expectations for AI-chip revenue.
- Where
- When
- The results covered Broadcom’s third quarter of fiscal 2026, with guidance for its fourth quarter; longer-term forecasts extend through fiscal 2028.
- Why
- AI infrastructure demand remains strong, but competition, valuation pressures, customer dependence and uncertainty over future returns are weighing on investor sentiment.
Bullish case
Risks and pressure
AI demand
Bullish case
Broadcom reported rapidly growing AI semiconductor revenue and expects further acceleration in the fourth quarter.
Risks and pressure
Competition across the AI industry is increasing, and it remains uncertain which companies will ultimately capture the returns from rising investment.
Long-term growth
Bullish case
UBS raised its fiscal 2027 AI-chip revenue forecast for Broadcom to about $115 billion and expects approximately $230 billion in fiscal 2028.
Risks and pressure
Broadcom’s agreements with leading AI labs, including Anthropic and OpenAI, create dependence on two major customers.
Share performance
Bullish case
Broadcom’s record results, strong cash generation and optimistic guidance support the view that its business remains powerful.
Risks and pressure
The stock has lagged NVIDIA, while elevated energy prices and long-dated government bond yields may weigh on valuations of companies whose profits are expected further in the future.
Key facts
- Third-quarter revenue
- $29.6 billion, up 86% from the prior-year period.
- Third-quarter AI semiconductor revenue
- $16.7 billion, up 221% year over year and 54% quarter over quarter.
- Third-quarter free cash flow
- $13.7 billion, equal to 46% of revenue.
- Fourth-quarter revenue guidance
- Approximately $34.8 billion, up 93% from the prior-year period.
- Fiscal 2027 AI-chip forecast
- About $115 billion, according to UBS’s updated assessment.
- Fiscal 2028 AI-chip forecast
- Approximately $230 billion, according to Broadcom’s expectations cited by UBS.
- Stock performance cited
- Broadcom was up 3% year to date and 6.6% over the past year, compared with NVIDIA’s 22.5% and 37%, respectively.
Quotes
Hock Tan
President and CEO of Broadcom
“Demand for our custom AI accelerators and networking continues to be very strong. Q3 AI semiconductor revenue of $16.7 billion grew 221% year-over-year, and 54% quarter-over-quarter. In Q4, the momentum continues, and we expect AI semiconductor revenue to accelerate to $21.7 billion, up 236% year-over-year.”
financialexpress.com
Sources
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