Custom chipmaker Broadcom Inc. beat expectations on earnings and revenue in its third-quarter financial report and hinted at the prospect of doing more business with leading artificial intelligence labs.
However, its stock came under pressure in late trading after it issued a forecast for the current quarter that trailed Wall Street’s expectations.
The chipmaker reported adjusted earnings of $3,32 per share on sales of $29.59 billion in the quarter, up 86% from the $15.95 billion in revenue it posted in the same period last year. That was better than expected, with Wall Street analysts modeling earnings of just $3.24 per share and $29.36 billion in sales. The numbers had a massive impact on the company’s bottom line, with net rising by more than triple to $13.09 billion, from just $4.14 billion a year earlier.
Broadcom’s semiconductor business unit provided the lion’s share of its revenue, with sales there tripling from a year earlier to $16.7 billion, surpassing the Street’s $15.2 billion target. The infrastructure business added $8.75 billion in sales, just below the $8.82 billion consensus estimate.
Broadcom has emerged as one of the top beneficiaries of the AI boom that kicked off almost four years ago when OpenAI Group PBC’s ChatGPT first arrived on the scene, taking the technology world by storm. While Nvidia Corp.’s graphics processing units continue to power the majority of AI workloads, Broadcom is one of its major competitors, helping design custom AI accelerators for the likes of Google LLC, Meta Platforms Inc. and OpenAI. In the last four years, its stock has shot up more than sixfold, boosting its market capitalization to over $1.7 trillion.
However, Broadcom’s stock has struggled to gain much momentum in 2026, and it declined almost 2% in the wake of today’s report, meaning it’s up just 6% since in the year to date. In contrast, the broader S&P 500 index has gained 12% so far this year. The company didn’t help its cause much today when it came up with disappointing guidance for the current quarter. Its management said it’s looking for four-quarter revenue of just $34.8 billion at the midpoint of its forecast range, trailing the Street’s forecast of $35.03 billion.
Despite the caution, Broadcom has continued to make progress on the business front. During the quarter, it revealed the new Jalapeno custom processor that it helped to develop for OpenAI, while the iPhone maker Apple Inc. also said it’s going to commit more money toward Broadcom’s U.S. chip production operations.
Holger Mueller of Constellation Research said Broadcom, like other chipmakers, is being treated a little unfairly by investors due to their extremely lofty expectations. “It just delivered another record-breaking quarter, and if you look at all of the KPIs, like revenue, net income etc., they’ve all grown by close to or more than 100% in the last year,” he said. “If someone had said a couple of years ago that Broadcom would soon be doubling all of its main KPIs in a year-over-year comparison, they’d have been called a fool, but that is what’s happening now.”
The analyst saw another sign in Broadcom’s numbers that makes him convinced that its long-term fortunes are secure. He said the increased efficiency in its business operations is extremely impressive. “The most remarkable thing is that its operating expenses are down, both year-over-year and on a quarterly basis,” Mueller said. “It has done that while doubling all of its main KPIs, and that is a remarkable feat.”
On a conference call with analysts, Broadcom Chief Executive Hock Tan (pictured) said the company hopes to be able to speed up the delivery of Google’s newest Ironwood tensor processing units to Anthropic PBC. It’s also hoping to accelerate shipments of those chips to Google itself. He added that he expects the company to be able to ship “tens of billions of dollars worth of processors” to Google each year, for the next several years. “Shipments of Jalapeno for OpenAI will continue, and for Meta, we expect production shipments of its custom MTIA accelerator optimized for inference and recommendation at scale,” Tan said.
The company believes Anthropic will deploy about 5 gigawatts of Google’s TPU8i processors next year, with line of sight to deliver an additional 10 gigawatts later, Tan said. Meanwhile, OpenAI is now preparing to tape out its second-generation Jalapeno chip, while its developers are already working on concepts for a third-generation. In 2027, the company expects OpenAI to deploy about 1.3 gigawatts of Jalapeno, with line of sight for more than 5 gigawatts after that.
That explains why Tan has a lot of optimism over the company’s prospects in fiscal 2027, as opposed to the current quarter. He said he expects it to double its AI revenue over the course of the next year to $115 billion, and also called for it to double again to $230 billion in the following year. The company is also on track to deliver earnings of $30 per share in fiscal 2027, he added.
“We are empowering two of our most strategic customers, the leading AI labs, to bridge the gap between their current cash flow and the significant upfront investments required for their businesses,” Broadcom Chief Financial Officer Amie Thuener said on the call.
Tan added that Broadcom is considering providing “residual value guarantees” that are contingent liabilities to the two AI labs. “It makes economic sense for Broadcom to invest in and enable these guys,” he explained.