U.S. chipmaker Broadcom nearly doubled its quarterly revenue from a year earlier, lifted by the boom in artificial intelligence investment. The company also raised its AI revenue targets for the next two years, signaling confidence in long-term growth. Its fourth-quarter revenue forecast fell short of market expectations, however, sending the stock lower in after-hours trading immediately after the results.
Broadcom posted revenue of $29.591 billion for the third quarter of fiscal 2026, covering May through July, up 86% from a year earlier, CNBC and other outlets reported on the 2nd. The figure topped the Wall Street consensus of $29.36 billion compiled by the London Stock Exchange Group. Adjusted, or non-GAAP, earnings per share came in at $3.32, up 96% from a year earlier and above the $3.24 analysts had expected.
Cash generation improved sharply. Free cash flow reached $13.665 billion in the quarter, up 95% from a year earlier. Cash and cash equivalents totaled $24 billion, well above the $19.6 billion recorded at the end of the previous quarter.
AI chips drove the earnings improvement. Revenue in the semiconductor solutions segment rose 127% from a year earlier to $20.839 billion. Within that, AI chip revenue climbed 221% to $16.7 billion, far exceeding the $15.2 billion analysts had expected, according to StreetAccount.
Broadcom raised its AI revenue outlook for fiscal 2026 to $58 billion. It also projected AI revenue of $115 billion in fiscal 2027 and $230 billion in fiscal 2028. Reuters noted that companies such as Broadcom are benefiting as AI infrastructure spending spreads beyond Nvidia's high-priced processors to custom chips and networking components.
Broadcom is regarded as a leader in designing custom AI chips tailored to the requirements of big technology firms including Google, Meta and OpenAI. Anthropic and OpenAI, both moving quickly to build out AI infrastructure, are emerging as key customers. Anthropic is expected to overtake Google as the largest customer of Broadcom's custom chip business in 2027, with OpenAI ranking second. "We have six customers, and four of them will be extremely large," Chief Executive Hock Tan said, adding that supply shortages have left chip demand running ahead of Broadcom's ability to ship.
Revenue in the infrastructure software segment, by contrast, rose just 29% from a year earlier to $8.752 billion.
Market reaction was mixed. Analysts welcomed the long-term growth outlook but said the near-term forecast fell short. Broadcom guided to fourth-quarter revenue of $34.8 billion, below the $35.1 billion average analyst estimate compiled by Bloomberg.
Broadcom shares, which fell 0.66% in regular trading, dropped nearly 5% in after-hours trading right after the results. The stock later pared some of those losses and finished down 0.82%. At a previous earnings release, Broadcom shares plunged 13% after the company declined to raise its AI chip revenue guidance for fiscal 2027.
