Broadcom shares drop 5% despite robust earnings and AI demand 🗽

Broadcom (AVGO.US) delivered another exceptionally strong quarter, comfortably outperforming Wall Street expectations and reinforcing its position as the second major beneficiary of the global AI semiconductor boom after Nvidia. Revenue and EPS came in ahead of estimates, but the real story lies in the company’s forward guidance and the accelerating trajectory of AI-related demand. The company said that margins would fall due to a mix of AI revenue, which is probably the main reason which triggered profit-taking despite robust earnings.

• Broadcom beat revenue expectations ($18.02 billion vs. the forecasted $17.49 billion) and earnings per share ($1.95 vs. the projected $1.87), and issued guidance for the current fiscal first quarter at $19.1 billion in sales, compared with the $18.3 billion expected by LSEG analysts. 

AI remains the engine of Broadcom’s growth

Management guided to $19.1B in fiscal Q1 revenue, well above consensus, implying robust 28% YoY growth. Most importantly, Hock Tan confirmed that AI chip sales will double YoY to $8.2B in the current quarter driven both by custom accelerators (XPUs) and AI networking silicon. This underscores Broadcom’s growing strategic relevance in the hyperscale build-out cycle.

Custom silicon momentum is accelerating

Broadcom disclosed that it has now secured a fifth hyperscale customer for its custom AI chips, and revealed that Anthropic was the previously unnamed buyer behind the $10B Google TPU order. With a $73B AI-related backlog across XPUs, switches, and data-center components for the next 18 months, visibility into future revenue is unusually strong for a semiconductor firm.

Broadcom is emerging as the primary alternative to Nvidia

The company’s custom chips including Google’s Ironwood TPUs used by Anthropic continue to gain traction as hyperscalers pursue architectural differentiation and tighter cost control. Tan emphasized that customers increasingly want to “control their own destiny” by developing proprietary accelerators, a structural trend that directly benefits Broadcom.

Core performance remains outstanding across segments

• Total revenue grew 28%, with AI chip sales up 74% YoY.
• Semiconductor Solutions: $11.07B (+22% YoY), above expectations
• Infrastructure Software: $6.94B (+26% YoY), supported by VMware integration

Net income nearly doubled to $8.51B, highlighting strong operating leverage.

The quarterly dividend was raised to $0.65 per share, reflecting ongoing confidence in cash-flow generation. Broadcom is executing at a level that validates its position as the key supplier in the rapidly expanding custom-silicon ecosystem. With AI revenue set to double, a deepening customer roster, and a record backlog, the company enters 2026 with one of the strongest growth profiles in the semiconductor industry - even if short-term volatility persists around expectations. The reaction on Wall Street seems to be profit-taking rather than any serious move; Broadcom earnings came in robust, with record AI backlog.

Source: xStation5

Source: XTB Research, Bloomberg Finance L.P.

Source: XTB Research, Bloomberg Finance L.P.