Broadcom reports AI-driven third-quarter growth and forecasts further expansion

Broadcom reported strong, AI-driven results for the third quarter of fiscal 2026 and forecast substantial additional growth. The results were led by the company’s semiconductor business, while its VMware-led Infrastructure Software division also delivered higher revenue.

Broadcom’s total third-quarter revenue rose 86 percent year over year to $29.6 billion. Semiconductor Solutions revenue increased 127 percent to $20.8 billion. Infrastructure Software revenue grew 29 percent year over year to nearly $8.8 billion. As a result, the software division’s share of total revenue fell from 43 percent in the same quarter last year to 30 percent this year.

GAAP net income increased by more than 200 percent to nearly $13.1 billion. Broadcom generated $14.2 billion in cash during the quarter and reported $500 million in capital expenditure.

AI networking forecast

Chief executive officer Hock Tan said Broadcom expects AI networking revenue to double in fiscal 2027 to $115 billion, then double again in fiscal 2028 to $230 billion.

“We have secured the supply to meet this outlook,” Tan told investors during the earnings call. “This AI revenue guidance through [2028] is being provided to give you the trajectory of our growth, and that demand for compute continues to be extremely strong. As a result, I have to say we are very much on target to exceed $30 in earnings per share in fiscal 2028.”

Tan described several ongoing AI data center projects. Broadcom recently expanded an agreement with Google to develop and supply future Tensor Processing Units (TPUs) and AI networking equipment. Its work with Anthropic includes the upcoming one-gigawatt (1GW) Ironwood system, another five gigawatts of TPU Version 8i planned for fiscal 2027, and a stated path toward delivering an additional 10 gigawatts.

“Even as we expect Google to grow for us, Anthropic is on track to become our largest XPU customer in 2027, and sustain that in 2028,” Tan said.

Broadcom is also working with OpenAI on the AI data movement-optimized “Jalapeño” chip. The project remains on track for a planned 1.3-gigawatt deployment in 2027.

“Together with OpenAI, we are deep in development of the next-generation XPU beyond Jalapeño, which is approaching tape-out in 2028,” Tan said. “We have line of sight for OpenAI to deploy over five gigawatts of Jalapeño and its successor generation of XPU, which would make OpenAI our second largest XPU customer.”

Tan described Broadcom’s forecasts as conservative despite concerns about supply chain constraints. He said demand continued to exceed available supply and that the company had secured the supply needed to support its current outlook.

The forecast is based on expected data center sites, customer requirements, and the availability of leading-edge wafers, substrates, and high-bandwidth memory. Tan said Broadcom could raise its forecast if it gained access to additional supply, but that $115 billion for fiscal 2027 and $230 billion for fiscal 2028 represented the company’s current best estimates.

Networking products

Broadcom’s networking business was another focus of the earnings call. Tan described the company as a leader in AI networking, citing its 100 Tbps Tomahawk 6 and the recent tape-out of the 200 Tbps Tomahawk 7.

The company is also continuing work on optical digital signal processors (DSPs), electro-absorption modulated lasers (EMLs), and continuous-wave (CW) indium phosphide (InP) lasers.

“We continue to invest and invest heavily to provide the broadest and most leading-edge AI portfolio,” Tan said. “In fact, our AI networking revenue is expected to grow just as fast as XPUs over the next few years, reflecting our excellent progress with this key group of [large language model] customers.”

Other semiconductor and software businesses

Broadcom’s non-AI semiconductor business grew more modestly. Revenue increased 5 percent year over year to $4.2 billion and was unchanged sequentially. Tan said the company expects a similar 5 percent year-over-year increase in the following quarter.

Tan gave a brief update on the VMware-linked Infrastructure Software business. He said it was operating at a 15 percent annual recurring revenue growth rate. However, quarterly revenue is expected to decline slightly to $8.7 billion in the next quarter.

Broadcom expects VMware’s recently launched Private AI Cloud platform to address growing enterprise AI consumption. Tan said this demand represented a new opportunity for the Infrastructure Software business.