Key Highlights
- Q1 revenue reached a record $19.3 billion, marking a 29% year-over-year increase
- AI-related revenue more than doubled, climbing 106% to reach $8.4 billion
- Company projects Q2 revenue at $22 billion with AI revenue anticipated at $14.8 billion
- Morgan Stanley upgraded price target from $462 to $470, maintaining Overweight stance
- Wall Street projects potential AI revenue of $120 billion by fiscal 2027
Shares of Broadcom (AVGO) surged 4.8% to close at $322.77 on March 5, following the release of its fiscal first quarter 2026 earnings. Despite the post-earnings rally, the stock has experienced minor declines since and continues trading lower on a year-to-date basis.
The chipmaker delivered quarterly revenue of $19.31 billion, setting a company record and exceeding Wall Street’s $19.18 billion projection. Earnings per share on an adjusted basis reached $2.05, surpassing the $2.03 consensus estimate.
The headline story centered on AI-driven revenue performance — hitting $8.4 billion, representing a 106% year-over-year leap and exceeding the company’s own internal projections.
Custom AI ASIC chips drove much of this growth, rocketing 140% higher. Meanwhile, AI networking revenue expanded 60%, with management highlighting that networking expansion should accelerate significantly during the second quarter, powered by Tomahawk Ethernet switches and SerDes technology.
Adjusted EBITDA expanded 30% from the prior year to $13.1 billion, representing a 68% margin relative to total revenue. Gross profit margins settled at 77%, modestly below last year’s 79.1% but relatively stable.
Semiconductor AI Momentum Drives Results
Revenue from semiconductor solutions jumped 52% year-over-year to $12.5 billion. Notably, chip revenue unrelated to AI expanded just 4% — highlighting where the company’s true growth engine lies.
Infrastructure software revenue increased modestly by 1% to $6.8 billion. Within this division, VMware-related revenue posted 13% growth.
CEO Hock Tan directly confronted concerns during the earnings call about potential competitive threats from large language model developers designing their own chips in-house. His stance was unequivocal: “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 highlighted that the company distributed $10.9 billion to shareholders during Q1 — comprising $3.1 billion through dividends and $7.8 billion via stock repurchases. Management also unveiled a new $10 billion buyback authorization extending through the conclusion of 2026.
Wall Street Analyst Lifts Valuation Target
Morgan Stanley’s Joseph Moore increased his valuation target on AVGO from $462 to $470 while reaffirming his Overweight recommendation. Moore characterized the quarterly performance as “strong,” highlighting AI-fueled upside potential and enhanced long-term business visibility.
He observed that margin-related worries have diminished, networking exceeded expectations, and the fiscal 2027 AI opportunity remains attractive as ASIC initiatives continue expanding.
Broadcom issued Q2 guidance projecting approximately $22 billion in revenue, suggesting 47% growth compared to the same period last year. AI-specific revenue for the upcoming quarter is expected to reach $14.8 billion — representing 76% year-over-year expansion.
Management informed analysts that its five primary custom AI chip clients are advancing successfully, and the company believes it can generate over $100 billion in AI chip revenue during fiscal 2027 alone. Morgan Stanley’s research team projects an even higher figure of approximately $120 billion, with potential for additional upward adjustments.
AVGO currently commands a valuation of approximately 32 times fiscal 2026 earnings projections and roughly 22.5 times fiscal 2027 consensus estimates.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
