TLDR
- Broadcom stock jumped 9% in premarket trading after securing a $10 billion AI chip order
- Q3 2025 revenue grew 22% year-over-year to $15.95 billion with strong AI performance
- AI revenue surged 63% to $5.2 billion, driving optimism for fiscal 2026 growth
- CEO Hock Tan commits to five more years of leadership at the chipmaker
- Market speculation points to OpenAI as the mystery customer behind the massive deal
Broadcom stock surged nearly 9% in premarket trading Friday following news of a blockbuster $10 billion AI chip order. The deal validates the chipmaker’s custom semiconductor strategy targeting cloud giants seeking Nvidia alternatives.
The massive order could add $125 billion to Broadcom’s $1.44 trillion market valuation. Analysts from J.P.Morgan, Bernstein, and Morgan Stanley believe OpenAI is the unnamed customer based on deal timing and scale.
Financial Times previously reported OpenAI’s collaboration with Broadcom on custom AI chip development. The partnership makes strategic sense as OpenAI abandoned expensive foundry plans last year.
Record Q3 Financial Performance
Broadcom delivered impressive Q3 2025 results alongside the AI chip announcement. Revenue climbed 22% year-over-year to $15.952 billion, beating expectations.
The company posted $4.14 billion in GAAP net income and $8.40 billion non-GAAP net income. Free cash flow reached $7.02 billion with adjusted EBITDA hitting $10.70 billion.
AI revenue drove growth with a 63% year-over-year increase to $5.2 billion. This performance demonstrates successful execution of Broadcom’s AI-focused strategy.
Leadership and Future Outlook
CEO Hock Tan announced his commitment to lead Broadcom for at least five more years. Tan has guided the company through nearly two decades of growth and positioned it at the center of the AI boom.
Broadcom provided strong Q4 2025 guidance with expected revenue of $17.4 billion. This represents 24% growth compared to the previous year with maintained EBITDA margins of 67%.
Market Position and Valuation
Broadcom stock trades at 38.6 times forward earnings, premium to competitors like Marvell at 20.3 times. The valuation reflects investor confidence in the company’s AI chip strategy.
Year-to-date, AVGO shares have gained 32% following the company’s entry into the trillion-dollar market cap club in December. The custom chip approach differentiates Broadcom from traditional semiconductor players.
Management expects continued AI revenue growth in fiscal 2026 as customer investments persist. The $10 billion order provides visibility into sustained demand for application-specific AI semiconductors.
Russ Mould from AJ Bell highlighted Broadcom’s strength in developing custom chips that deliver superior performance and energy efficiency at lower costs. This capability positions the company well for ongoing AI infrastructure buildouts.
The combination of strong financial results and the major customer win reinforces Broadcom’s role as a key AI infrastructure provider beyond traditional chip giants.
