Strong quarterly earnings and bullish outlook
Broadcom exceeded Wall Street expectations for its fiscal third quarter and issued strong guidance for the next quarter, signaling confidence in its custom AI chip business. Shares rose in after-hours trading as the company revealed a massive $10 billion order from a new cloud client for its AI-focused XPUs.
Adjusted earnings per share came in at $1.69, topping the $1.65 consensus from LSEG. Revenue reached $15.96 billion, also above the $15.83 billion forecast. The company now expects $17.4 billion in revenue for the fourth quarter, surpassing analysts’ projections of $17.02 billion.
Custom AI chips drive revenue surge
Broadcom’s net income hit $4.14 billion, or 85 cents per share, a turnaround from last year’s net loss of $1.88 billion, which was caused by a one-time $4.5 billion tax provision tied to IP relocation. This recovery is largely attributed to its accelerating AI business.
The chipmaker’s AI segment generated $5.2 billion in revenue for the quarter, marking a 63% year-over-year increase. That figure exceeded the company’s prior estimate of $5.1 billion. CEO Hock Tan said AI revenues are projected to climb further to $6.2 billion in the current quarter.
Broadcom builds custom chips for major players like Google and other hyperscalers. These chips play a critical role in connecting and managing AI infrastructure at scale. The company’s XPUs are designed for high-efficiency AI workloads, making them a key competitor in the market.
New customer boosts future prospects
In a call with analysts, CEO Tan disclosed that a fourth major cloud customer has placed $10 billion in production orders for Broadcom’s XPUs. He emphasized that this order reclassifies the client as a “qualified customer” for the company’s AI chips and further lifts revenue expectations for 2025.
“We will ship pretty strongly beginning 2026,” Tan stated, highlighting a robust pipeline of demand that extends well into the future. He also reiterated that Broadcom is actively working on AI chip development with three other major clients.
Investors increasingly view Broadcom as a rising threat to Nvidia’s dominance in the AI chip market. While Nvidia maintains a stronghold in GPUs, Broadcom’s emphasis on tailored, scalable solutions is gaining traction, particularly among enterprise cloud platforms.
Software and networking add to growth
Beyond chips, Broadcom’s infrastructure software unit—now including VMware—posted $6.79 billion in revenue, up 43%. Semiconductor solutions revenue surged 57% year over year, reaching $9.17 billion.
The integration of VMware is expected to support Broadcom’s end-to-end AI offerings, combining software orchestration with powerful hardware. Tan credited this synergy as another driver of the strong third-quarter performance.
With shares up 32% year-to-date and nearly doubling over the past 12 months, Broadcom’s market cap has surpassed $1.4 trillion. This momentum, fueled by consistent innovation and strategic customer wins, is positioning the company as a central player in the global AI race.
