Broadcom guided to $22 billion in FQ2 revenue up 47% YoY and adjusted EBITDA at 68% of revenue. Within that, management guided semiconductor revenue to $14.8 billion, up 76% YoY, and AI revenue to $10.7 billion, up 140% YoY, indicating an acceleration from Q1.
The most explosive comment was that: “Today, in fact, we have line of sight to achieve AI revenue from chips, just chips in excess of $100 billion in 2027. We have also secured the supply chain required to achieve this.”
Management characterized this demand as being driven by a small number of hyperscalers and frontier model builders, with both training and inference contributing as those customers will soon productize their LLM platforms. Within discussing the impressive customer list, the CEO of Broadcom hinted toward 2027 being significantly higher than $100 billion – plus another analyst did math that would show a sharp inflection in 2028 due to OpenAI’s incoming GWs.
The majority of the Q&A was about the $100 billion comment, including surfacing why this estimate may prove to be far too low.
$100 Billion for Chips Alone … and Counting
AI revenue was at $8.4 billion this quarter and is guided to $10.7 billion next quarter for a run rate of about $43 billion. On the surface, the guide doesn’t look like much and would imply a deceleration given AI is growing at a rate of 140% YoY and 27% QoQ – whereas this is effectively saying Broadcom will double in 7-8 quarters.
However, the easy-to-miss details on the guide is that the $100 billion is only for silicon and does not include networking. The words “significantly in excess” were also added later to the guide in the following statement during the Q&A portion:
“Now to clarify your first part, Blayne. When I say we forecast, we have a line of sight that our revenue in '27 will be significantly in excess of $100 billion, I'm focusing on the fact that these are pretty much all based on chips, whether they are XPUs, whether they are switch chips DSPs, these are silicon content we're talking about.”
According to the earnings call, networking is about 33% to 40% of AI revenue today: “AI networking revenue grew 60% year-on-year and represented 1/3 of total AI revenue. In Q2, we project AI networking to accelerate a lot more and grow to 40% of total AI revenue.”
If we assume this mix continues on the low end for about 30% mix in AI networking of total AI revenue, then it’s reasonable to assume Broadcom’s AI revenue will be $143 billion with networking of $43 billion (or 30% of $143B). This represents a QoQ growth of 30% for 7-8 quarters – which is an excellent baseline to set.
When you add the words “significantly in excess” of this amount, it spells a solid runway for Broadcom.
The analysts in the Q&A session were not satisfied with this blanket comment and began poking around with one analyst doing the math on the customers plus what each GW is worth, and coming out closer to $180 billion to $200 billion in AI revenue. Here was the exchange – the CEO did not confirm the math but it still helps to know what the sell-side is thinking:
“Stacy Rasgon Bernstein:
I don't know if this is for Hock or Kirsten, but I wanted to dig in a little more to this substantially more than $100 billion next year. I'm trying to just count up the gigawatts. I counted, I don't know, 8 or 9, you have 3 from Anthropic, one from open AI, so that's 4. You said Meta was multiple, so east, that gets you to 6. Google, I figure should be bigger than Meta.so like at least 3, that's 9 and then you got a few others.
I just thought that your content per gigawatt was sort of, call it, a $20 billion per gigawatt range. I guess what I'm asking, is my math around the gigawatts you plan to ship in 27 correct? And how do I think about your content per gigawatt as that ships — maybe we'll be "substantially" more than $100 billion.
Hock Tan CEO:
Stacy, you have a very interesting perspective, and I've got to [ remind ] you for that. But you're right. You can look at it a gigawatts, which is the right way to look at it instead of dollars because that's how we sell our chips. So you have to realize we — depending on our LLM customer, our 6 customers, sorry, not 56. The dollars per gigawatt is varies, sometimes quite dramatically. — it does vary. But you're right. It's so far from the dollars you are talking about. And if you look at it by gigawatt in '27, we are seeing getting close to 10 gigawatts.”
OpenAI to Drive Strong Fiscal 2028
During the opening remarks, the CEO stated that OpenAI represents 1 GW stating: “We expect OpenAI deploying in volume, their first-generation XPU in 2027 and over 1 gigawatt of compute capacity.” Later, an analyst drilled into the math to where OpenAI will eventually represent 10GWs, which could make for a strong inflection come 2028.
“Joshua Buchalter, TD Cowen:
Congrats on the results. I appreciate all the details on the expectations for deployment at specific customers. I was hoping you could just maybe reflect on how visibility has changed over the last 1 to 2 quarters that gave you the confidence to give us more details? And then on a specific one, you mentioned greater than 1 gigawatt for OpenAI in 2027, with that deal being for 10 gigawatts through 2029, that implied a pretty sharp inflection, I guess, in 2028. Is that the right way to think about it? And was that sort of always the plan?
Hock Tan, CEO:
Yes. Well, yes, this — as you've all seen, and you all know in this generative AI race that we are in now, and I shouldn't use the word race, let's call it, progression among the few players we see here, I mean, it's a competition. Each is trying to create an LLM better than the other and more tailored for specific purpose, be it enterprise, be it consumer, be it search. Each one is trying to create it more and more. And all of that requires not just training, which is important to keep improving your LLM models. But inference for productization and monetization of your LLMs.
And we are going — and probably call it the fact that we've been engaged with some of them now for more than a couple of years. We're getting better and better visibility as they have more and more confidence that the XPUs they are working on with us is achieving what they are getting it as they get the sense that the XPUs they are working on with the software, with the algorithms they needed, they are having more confidence that this XPU silicon is what they need.
And it gets better and better. And It's get better, we get more visibility as Charlie puts up perfectly because at the end of the day, we only have 6 guys to work on. And these 6 guys are all, as I said, look at XPUs and AI in a very strategic manner. They don't think 1 generation at a time. They think multiple generation multiple years.”
Speaking of large customers, in the exchange above, Broadcom refutes the idea that Meta is facing significant hurdles for its MITA chips, stating in the opening remarks that: “Now contrary, the recent analyst reports Meta's custom accelerator MTIA roadmap is alive and well. We're shipping now. And in fact, for the next generation XPUs, we will scale to multiple [ gigawatts ] in '27 and beyond.”
Financials
By Royston Roche
Revenue grew by 29.5%
Broadcom’s FQ1 ending January 2026 revenue grew by 29.5% YoY and 7.2% QoQ to $19.3 billion, beating estimates by 0.9%. Revenue growth accelerated by 1.3 percentage points from 28.2% growth in the previous quarter.
Management provided a strong FQ2 guide of $22 billion, implying a YoY growth of 46.6% and 13.9% QoQ, beating estimates by 7.8%. The expected strong growth is primarily driven by AI revenue, which is expected to grow 140% YoY and 27% QoQ to $10.7 billion. Analysts expect strong growth to continue, with revenue expected to grow 71.7% YoY to $27.39 billion in FQ3 and 74% YoY to $31.35 billion in FQ4.
Key Segments
Semiconductor Solutions
FQ1 Semiconductor solutions revenue grew by 52% YoY and 13% QoQ to $12.5 billion and was better than the management guidance of $12.3 billion. Revenue growth accelerated by 17 percentage points from 35% growth in the previous quarter. Management expects semiconductor revenue to further accelerate to 76% YoY and 18% QoQ to $14.8 billion in the next quarter, driven by the surge in AI revenue.
FQ1 AI revenue grew by 106% YoY and 29% QoQ to $8.4 billion. Revenue growth accelerated from 74% YoY and 25% QoQ in the previous quarter. Management expects strong growth to continue in the next quarter and AI revenue is expected to grow 140% YoY and 27% QoQ to $10.7 billion.
The company’s CEO, Hock Tan, said in the earnings call, “Now our custom accelerator business grew 140% year-on-year in Q1. This momentum continues in Q2. The ramp of custom AI accelerators across all our 5 customers is progressing very well. For Google, we continue our trajectory of growth in '26 with strong demand for the seventh-generation Ironwood TPU. In 2027 and beyond, we expect to see even stronger demand from next generations of TPU. For Anthropic, we are off to a very good start in 2026 for 1 gigawatt of TPU compute. And for '27, this demand is expected to surge in excess of 3 gigawatts of compute. Our XPU franchise, I should add, extends beyond TPUs.”
Non-AI semiconductor FQ1 revenue was flat YoY at $4.1 billion, in line with guidance. Enterprise networking, broadband, server storage revenues were up YoY, offset by a seasonal decline in wireless. In FQ2, management expects non-AI semiconductor revenue to be $4.1 billion, up 4% YoY.
Infrastructure Software
FQ1 Infrastructure Software revenue came at $6.8 billion, up 1% YoY and down (2%) QoQ and was in line with the guidance. VMware revenue grew 13% YoY. Management expects infrastructure software revenue to grow 9% YoY and 6% QoQ to $7.2 billion in the next quarter.
Margins
The company’s adjusted EBITDA margins beat management guidance in FQ1, primarily driven by operating leverage.
- FQ1 gross profits grew by 29.7% YoY to $13.16 billion. Gross profit margin improved by 10 basis points YoY and QoQ to 68.1%. Adjusted gross margin came at 77%, down 210 basis points YoY and 90 basis points QoQ and marginally beat the guidance by 10 basis points. Management has guided adjusted gross margin to be flat sequentially to 77% and down 240 basis points YoY.
- FQ1 operating income grew by 36.8% YoY to $8.56 billion. Operating margin improved by 230 basis points YoY and 260 basis points QoQ to 44.3% primarily driven by operating leverage. The adjusted operating margin was 66.4%, compared to 65.9% in the same period last year and 66.2% in the previous quarter.
- FQ1 net income grew by 33.5% YoY to $7.35 billion with a net profit margin of 38.1% compared to 36.9% in the same period last year. Adjusted net income grew by 30.2% YoY to $10.19 billion with an adjusted net profit margin of 52.7% compared to 52.4% in the same period last year.
FQ1 adjusted EBITDA grew by 30.2% YoY to $13.1 billion with an adjusted EBITDA margin of 68% and was better than the management guidance of 67%. Management has guided FQ2 adjusted EBITDA guidance to be flat sequentially and up 100 basis points YoY to 68%.
Adjusted EPS grew by 28%
FQ1 GAAP EPS grew by 31.6% YoY to $1.50. Adjusted EPS grew by 28.1% YoY to $2.05, beating estimates by 1.3%, primarily driven by operating leverage. Analysts expect strong growth in the coming quarters and adjusted EPS is expected to grow 36.9% YoY to $2.16 in FQ2 and 69.5% YoY to $2.86 in FQ3.
Cash Flow and Balance Sheet
Broadcom’s cash flows are improving, driven by higher profits.
- FQ1 operating cash flows grew by 35.1% YoY to $8.26 billion with an operating cash flow margin of 42.8% compared to 41% in the same period last year.
- FQ1 free cash flows grew by 33.2% YoY to $8.01 billion with a free cash flow margin of 41.5% compared to 40.3% in the same period last year.
- Cash was $14.2 billion at the end of FQ1 with debt of $66.1 billion compared to cash of $16.2 billion and debt of $65.1 billion at the end of FQ4. The company repurchased shares worth $7.85 billion and paid dividends of $3.1 billion in the recent quarter. Management authorized an additional $10 billion share repurchase program effective through the end of calendar year 2026.
- Inventory increased by 30.4% QoQ to $2.96 billion to support the strong AI demand.
Conclusion:
Broadcom’s most consequential message this quarter was not the near-term guide, but the long-range visibility: management stated it has line of sight to AI-related revenue in FY2027 “significantly in excess of $100 billion.”
If that framework proves accurate, the market will be forced to shift from debating whether AI spend can persist to modeling how Broadcom scales into that demand across XPUs and networking as customers expand from early deployments into multi-gigawatt clusters.
Notably, management’s comments imply substantial silicon content per gigawatt—for example, Anthropic’s trajectory has been discussed in terms that can translate into roughly $20 billion per GW—and they also referenced a back-half weighted OpenAI ramp that appears more likely to contribute in 2028–2029.
And that’s only what we can quantify today …
Please note: The I/O Fund conducts research and draws conclusions for the company’s portfolio. We then share that information with our readers and offer real-time trade notifications. This is not a guarantee of a stock’s performance and it is not financial advice. Please consult your personal financial advisor before buying any stock in the companies mentioned in this analysis. Beth Kindig and the I/O Fund own shares in AVGO at the time of writing and may own stocks pictured in the charts.
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