Broadcom on Wednesday evening beat quarterly earnings expectations and provided a strong multiyear revenue forecast for its artificial intelligence custom chip business. Revenue in the fiscal third quarter of 2026, which ended Aug. 2, rose 85% year-over-year to $29.59 billion, a slight beat versus the $29.36 billion consensus forecast, according to estimates compiled by LSEG. Adjusted earnings per share (EPS) increased 96% to $3.32, beating expectations of $3.24, LSEG data showed. AVGO YTD mountain Broadcom YTD However, Broadcom shares down modestly in up-and-down extended-hours trading. A silver lining is that the stock was down 7% at one point. Broadcom has become a big disappointment of late, with shares only up about 6% for the year. Bottom line CEO Hock Tan needed to come out swinging on the conference call, and he did just that when he went over what he expected Broadcom’s AI revenues will be over the next few years. How the market rewards his bullish framework remains to be seen. Based on current fiscal fourth-quarter AI revenue guidance of $21.7 billion, Broadcom expects to do $58 billion of AI revenue in fiscal year 2026. That’s up from its prior view of $56 billion. That was a good first step, but the market was much more interested in Tan’s estimates for fiscal year 2027 and beyond. Recall, Broadcom shares sold off last quarter when Tan simply reiterated expectations of at least $100 billion in AI revenue in fiscal year 2027. On Wednesday evening, Tan updated that guide to $115 billion on the earnings call, a figure that is constrained by supply. That number was actually a little disappointing at first blush. Many expected Broadcom to raise its outlook somewhere in the $20 billion to $25 billion range. So, what got the stock to climb after hours? It was when Tan said he expects AI revenue to double again in fiscal year 2028 to $230 billion. That was the blowout the market had patiently waited for. This longer-term outlook was above the FactSet consensus estimate of $177 billion. On the bottom line, Tan said he believes the company is on track to exceed EPS of $30 in fiscal year 2028. That’s firmly above the FactSet consensus estimate of $26.38. Importantly, this outlook not only incorporates the chip supply Broadcom expects to receive, but also physical infrastructure constraints such as land, power, and data center shells. The math behind these figures is based on the company’s relationship with Alphabet’s Google, Anthropic, OpenAI, and Meta Platforms . Broadcom’s relationship with Alphabet has been questioned for the last few months given a recent deal with Marvell and ongoing share loss concerns against MediaTek. Tan defended his relationship with Google on the call. “Our partnership with Google will continue to sustain because we have the strongest IP portfolio in semiconductor design, including industry leading service chip to chip interconnect, leading-edge HBM [high-bandwidth memory] and SRAM [static random-access memory]…
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