Story Stocks^®

Broadcom (AVGO) is trading higher following its Q1 (Jan) earnings report, even though the upside relative to estimates was smaller than usual. The company still delivered robust growth and issued strong Q2 guidance as demand for AI semiconductors and custom accelerators continues to surge. Revenue increased 29.5% yr/yr to a record $19.31 bln, driven primarily by strong AI semiconductor demand.

• Semiconductor revenue jumped 52% yr/yr to $12.52 bln, accelerating from +35% growth in Q4 and topping the company's prior +50% guidance. AI semiconductor revenue surged 106% yr/yr to $8.4 bln, well above prior guidance.
• The company guided Q2 (Apr) revenue higher, expecting semiconductor revenue of about $14.8 bln (+76% yr/yr) and AI revenue growth of about 140% yr/yr to $10.7 bln.
• Broadcom's custom accelerator business grew 140% yr/yr in Q1, supported by deployments across five major customers.
• Demand remains strong from Google's (GOOGL) seventh-generation Ironwood TPU, while Anthropic is ramping 1 GW of TPU compute in 2026 with expectations for more than 3 GW in 2027.
• Meta's (META) MTIA custom accelerator roadmap remains active, with shipments currently underway and scaling expected to multiple gigawatts beginning in 2027.
• Broadcom also disclosed a sixth major customer, with OpenAI expected to deploy its first-generation XPU in volume in 2027 at over 1 GW of compute capacity.
• AI networking revenue rose 60% yr/yr in Q1 and represented about one-third of total AI revenue, with expectations for that mix to increase to about 40% in Q2.
• Broadcom said it now has line-of-sight to generating more than $100 bln in AI chip revenue by 2027 and has secured the necessary supply chain to support that target.

Briefing.com Analyst Insight:

While Broadcom's Q1 upside versus estimates was not as large as in prior quarters, investors appear focused on the company's powerful Q2 outlook and accelerating AI trajectory. The guidance points to a meaningful ramp in both semiconductor and AI-related revenue, led by custom accelerators and networking products. Equally notable is management's growing confidence in its long-term AI opportunity, with visibility now extending to over $100 bln in AI chip revenue by 2027. That ambitious target, combined with expanding hyperscaler partnerships and improving supply chain visibility, is helping reinforce the bullish narrative around Broadcom's position at the center of the AI infrastructure buildout.