Broadcom (AVGO) delivered a powerful fiscal Q3, sending shares up more than 10% and adding roughly $130 billion to its market value.
Revenue rose 22% year over year to nearly $16 billion, while adjusted earnings of $1.69 per share edged past expectations. The highlight was artificial intelligence, where semiconductor revenue jumped 63% to $5.2 billion. Management expects AI chip sales to climb further to $6.2 billion in Q4, a pace equal to two-thirds growth from last year.
CEO Hock Tan credited demand for custom AI accelerators and networking gear, two areas that allow cloud giants to connect thousands of processors into unified computing systems. The strength more than offset flat results in Broadcom’s non-AI semiconductor businesses, which remain under pressure from weaker traditional markets.
A New Customer, and a Bigger Backlog
Investors cheered Broadcom’s disclosure that a fourth major AI client has joined its roster, alongside three existing hyperscalers. Wall Street widely believes the new buyer is OpenAI, which is said to have placed $10 billion in orders. That single deal contributed to Broadcom’s record $110 billion backlog, providing rare visibility into future demand.
While the company has not issued specific fiscal 2026 guidance, management signaled confidence that AI growth will accelerate further into that year. Analysts noted that Broadcom’s role in designing custom processors—known as ASICs—gives it a strong niche alongside Nvidia’s (NVDA) dominant GPUs. Bank of America estimates Broadcom’s share of the AI compute and networking market could more than double to 24% by 2027.
Investors cheered Broadcom’s disclosure that a fourth major AI client has joined its roster, alongside three existing hyperscalers. Wall Street widely believes the new buyer is OpenAI, which is said to have placed $10 billion in orders. That single deal contributed to Broadcom’s record $110 billion backlog, providing rare visibility into future demand.
While the company has not issued specific fiscal 2026 guidance, management signaled confidence that AI growth will accelerate further into that year. Analysts noted that Broadcom’s role in designing custom processors—known as ASICs—gives it a strong niche alongside Nvidia’s (NVDA) dominant GPUs. Bank of America estimates Broadcom’s share of the AI compute and networking market could more than double to 24% by 2027.
Valuation Debate Heats Up
The surge has made Broadcom one of the most valuable companies in the world, with a market cap of about $1.6 trillion. However, investors face a dilemma. On a GAAP basis, the company earned just $0.85 per share last quarter, though free cash flow was much stronger at $7 billion, up nearly 47% from a year ago. At current levels, the stock trades at a lofty 168 times earnings or 70 times free cash flow—multiples that imply years of sustained high growth.
The enthusiasm for Broadcom comes as Nvidia shares have slipped, with some investors questioning how much of the AI boom the GPU leader can retain. Broadcom’s entry into high-end custom chips shows the AI pie is getting larger, but also more competitive.
Conclusion
Broadcom’s latest results show it is no longer just riding the AI wave—it is helping shape it. With a growing backlog, a fresh marquee customer, and confidence from CEO Hock Tan, the company has secured a prime seat in the AI supply chain. For investors, the upside looks compelling, but the rich valuation demands that AI momentum not just continue, but accelerate.
Broadcom’s latest results show it is no longer just riding the AI wave—it is helping shape it. With a growing backlog, a fresh marquee customer, and confidence from CEO Hock Tan, the company has secured a prime seat in the AI supply chain. For investors, the upside looks compelling, but the rich valuation demands that AI momentum not just continue, but accelerate.
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