Broadcom (AVGO) shares experienced a notable increase of 7% during pre-market trading following the company”s robust earnings report and a significant forecast for artificial intelligence (AI) chip revenue. The semiconductor giant anticipates that its AI chip sales will exceed $100 billion by 2027, establishing itself as a key player in the AI market alongside competitors like Nvidia.
In the first quarter of fiscal 2026, Broadcom reported revenue of $19.31 billion, reflecting a 29% year-over-year growth and surpassing Wall Street”s expectations of $19.26 billion. This performance was bolstered by a substantial increase in AI semiconductor revenue, which reached $8.4 billion—an impressive 106% increase compared to the previous year.
The company also provided guidance for the second quarter, projecting revenue of $22 billion, well above the analyst consensus of $20.56 billion. Broadcom expects AI chip revenue to grow further, with estimates for the upcoming quarter set at $10.7 billion, exceeding previous models. Management”s confidence in future growth is reinforced by the announcement of key partnerships, including plans to deliver 3 gigawatts of tensor processing units to Anthropic and to manufacture OpenAI”s first custom AI chip.
Despite the promising outlook, the software division underperformed, falling short of expectations by 2.8%. In contrast, the semiconductor segment”s performance was a highlight, with an operating margin of 66.4%, surpassing analyst projections.
Analysts have responded positively to the earnings report. Truist Securities maintained a Buy rating with a price target of $510, while the wider analyst community remains bullish, with price targets ranging from $335 to $530. However, some firms, like RBC Capital, have adopted a more cautious approach, lowering their price target due to concerns about the sustainability of AI demand.
Broadcom”s recent achievements include the launch of what it claims to be the industry”s first 2nm custom compute chip, alongside the introduction of the BroadPeak chip aimed at next-generation 5G and 6G infrastructure. Analysts will be monitoring inventory levels closely, as these rose by approximately nine days sequentially, which is above the typical seasonal decrease.
Overall, the impressive earnings report and forward-looking statements from Broadcom signify a strong commitment to capitalize on the burgeoning AI market, potentially altering the competitive landscape in the semiconductor industry.
