Broadcom stock jumps 5% as CEO sees AI chip revenue topping $100B

Broadcom stock surged 5% in after hours trading after reporting stronger-than-expected quarterly results as demand for artificial intelligence infrastructure continues to expand across the technology sector.

The semiconductor and software company said AI revenue in its fiscal first quarter more than doubled from a year earlier to $8.4 billion.

Total sales rose 29% to $19.31 billion, slightly ahead of analysts’ expectations of $19.26 billion, according to FactSet.

Adjusted earnings came in at $2.05 per share, exceeding the $2.03 forecast by analysts.

Chief Executive Hock Tan told investors that demand for Broadcom’s custom AI chips and networking products is accelerating as both hyperscalers and other technology companies expand their artificial intelligence capabilities.

“Some of them are hyperscalers, some of them are not hyperscalers, but they all have one thing in common, which is to create LLMS, productize it and generate platforms,” Tan said.

Broadcom also forecast revenue of $22 billion for the current quarter, above analysts’ projections of $20.5 billion.

Broadcom stock gained 5.27% to $334.25.

AI chip demand expected to surge further

Tan said the company expects artificial intelligence chip revenue to expand significantly in the coming years as large technology companies continue developing custom processors.

“We have also secured the supply chain required to achieve this,” Tan said, referring to a projection that AI chip revenue could reach levels “significantly in excess of $100 billion” by 2027.

Broadcom helps major technology companies design custom silicon before the chips are manufactured by foundries such as Taiwan Semiconductor Manufacturing Company.

The company currently works with six key customers on custom AI processors.

These include Google, Meta, Anthropic and OpenAI, with Fujitsu and ByteDance expected to complete the group.

Google was among the earliest adopters of custom AI chips, launching its tensor processing units in 2015 with Broadcom’s assistance.

The chips have since been deployed to support Google Cloud customers.

Broadcom also assists Meta with developing its MTIA accelerator.

Analysts have questioned the future of Meta’s custom silicon program, but Tan said the company remains committed.

“The MTIA roadmap is alive and well,” Tan said.

Tan also indicated that OpenAI is expected to become one of Broadcom’s major customers, deploying its first generation of XPUs in 2027 with more than one gigawatt of compute capacity.

During the earnings call, Bernstein Research analyst Stacy Rasgon attempted to estimate the sources of the projected AI chip revenue, citing compute capacity estimates across several hyperscalers.

Tan responded that revenue per gigawatt can vary widely.

“The dollars per gigawatt vary, sometimes quite dramatically,” Tan said, adding that Rasgon’s estimates were “not far” off.

Networking and software also support growth

Broadcom’s AI business extends beyond custom accelerators.

Ben Bajarin of Creative Strategies said in a CNBC report that the category includes a broad set of semiconductor products.

“It’s everything in that bucket,” Bajarin said, including digital signal processors, data processing units and networking switches.

Tan said the company expects AI networking to become an increasingly important contributor to the segment.

AI networking is projected to account for about 40% of total AI revenue as the company gains share in that market.

The company’s infrastructure software business also showed signs of acceleration.

Tan said infrastructure software revenue is expected to rise 9% year over year in the current quarter to $7.2 billion, after growing 1.4% in the first quarter to $6.8 billion.

“Let me reinforce that this growth in our infrastructure-software business reflects our focus and investments in foundational infrastructure, and our infrastructure software is not disrupted by AI,” Tan said.

Broadcom also announced a new share repurchase program of up to $10 billion.

Broadcom’s shares had fallen 8.3% this year through Wednesday’s close, lagging the broader market as investors weigh the sustainability of the AI investment cycle.