Broadcom issued a more upbeat long-term forecast for its AI chip business, with Chief Executive Hock Tan saying revenue from the segment is expected to reach about $115 billion in fiscal 2027 and climb to $230 billion in fiscal 2028. He added that earnings per share could exceed $30 by then.
The company tied that outlook to expanding computing infrastructure spending by major cloud providers. Generative AI companies including Anthropic and OpenAI have become key customers, a shift Broadcom expects to drive demand for both custom chips and networking products. Broadcom is also working with private equity firms on financing structures to help customers manage capital spending needs. At the same time, competition is getting tougher, with rivals such as Marvell pushing for orders from large cloud service providers. Broadcom is using its custom silicon business to challenge Nvidia’s position in the market.
Third-quarter results topped expectations
For the fiscal third quarter ended Aug. 2, Broadcom reported revenue of $29.6 billion, up 86% from a year earlier and slightly above the market expectation of $29.5 billion. Adjusted earnings per share came in at $3.32, ahead of the expected $3.23.
Its AI semiconductor division, which includes custom accelerators and networking chips, posted $1.67 billion in revenue. That was above the average analyst estimate of $1.59 billion.
Customer mix is shifting
As companies including Alphabet unit Google, Meta and OpenAI look to diversify chip supply beyond existing purchases, Broadcom’s custom ASIC business has kept expanding. Tan said Broadcom currently has six major customers, four of them large in scale.
Anthropic is expected to replace Google in 2027 as Broadcom’s biggest custom chip customer, according to Tan. OpenAI is expected to become the second-largest customer. The shift points to faster growth in direct demand from model developers for dedicated compute architectures.
Hyperscaler spending and financing structures are growing
Broadcom said capital budgets at the world’s five largest hyperscalers are up about 40% from a year earlier, with the total exceeding $700 billion. The company said that gives it clearer demand visibility for networking and semiconductor products.
To support more than 20 gigawatts of computing power buildout, Broadcom is working with Apollo Global Management and Blackstone on financing structures worth hundreds of billions of dollars. The setup is intended to help customers including Anthropic fund large custom chip purchases and infrastructure spending.
Fourth-quarter guidance trailed estimates as ASIC competition heats up
Despite the stronger long-term view, Broadcom guided for fiscal fourth-quarter revenue of $34.8 billion, slightly below the average Wall Street estimate of $35.1 billion. It expects AI chip revenue for the quarter to come in at $2.17 billion.
Competition in custom semiconductors is also intensifying. Google, which had worked with Broadcom for years on tensor processing units, has recently seen Marvell secure part of its custom chip manufacturing agreements. That points to a broader effort by major cloud companies to spread supply-chain risk.