Broadcom’s stock surges to all-time high after $10B in new AI chip orders – News

Broadcom Inc. beat expectations again for its latest financial results, driven by insatiable customer demand for artificial intelligence chips.

The chipmaker also revealed it had secured $10 billion in new orders for custom chips from a new client, sending its stock higher in extended trading.

The company reported third-quarter earnings before certain costs such as stock compensation of $1.69 per share, edging past Wall Street’s target of $1.65, while revenue for the period came to $15.96 billion, up 22% and above the $15.83 billion forecast.

The strong performance helped to boost Broadcom’s bottom line. It delivered net income of $4.14 billion in the quarter, rising from a loss of $1.88 billion in the year-ago period. The loss one year earlier stemmed from a onetime tax provision of $4.5 billion relating to an intellectual property transfer to the U.S.

Broadcom Chief Executive Hock Tan (pictured) noted the company’s revenue was a record for the third quarter, enabled by its growing strength in custom AI accelerators, networking infrastructure and the growth of VMware. “AI revenue accelerated 63% year-over-year,” Tan said. “We expect growth in AI semiconductor revenue to accelerate in Q4, delivering 11 consecutive quarters of growth as our customers continue to strongly invest.”

For the fourth quarter, Broadcom is eyeing sales of $17.4 billion, above the Street’s $17.02 billion forecast. The company’s stock gained more than 3% in extended trading, adding to a 1% gain earlier in the day.

Zacks Investment Research analyst Kevin Cook told News that Broadcom’s shareholders are getting accustomed to beat and raise quarters. “The beats weren’t so big, but the guidance raise was big enough to send the stock soaring briefly to a new all-time high near $320,” he said.

Broadcom specializes in designing custom chips for hyperscale cloud infrastructure providers such as Google LLC and others, as well as the required networking parts and software necessary to tie thousands of those chips together in huge clusters for AI processing.

The company has emerged as one of the major rivals to Nvidia Corp. this year, and its stock has now gained 32% in the year to date, lifting its market capitalization past $1.4 trillion.

Investors are optimistic that Broadcom can increase its market share in AI chips as cloud operators buy up more of its customer processors as an alternative to Nvidia’s graphics processing units, which currently power most AI workloads today. This optimism was boosted in March when Tan revealed Broadcom is working with three large cloud customers to develop new AI chips.

In the latest quarter, Broadcom said revenue from its semiconductor solutions business, which accounts for sales of AI chips and other processors, rose 57%, to $9.17 billion. Meanwhile, the infrastructure solutions business, which includes networking hardware and VMware, saw revenue jump 43% to $6.79 billion

On a conference call with analysts today, Tan said AI revenue increased 63% during the quarter, to $5.2 billion, ahead of the company’s prior forecast of $5.1 billion. For the third quarter, he expects AI revenue to surge to more than $6.2 billion.

Holger Mueller of Constellation Research Inc. said Broadcom is on a roll right now, growing its revenue nicely from its custom AI chips, and seemingly avoiding any major pitfalls with VMware, despite its rivals’ best efforts to get customers to ditch it.

“Semiconductor revenue grew by about a third, and soon it looks as if AI chip revenue will account for a third of the company’s total,” the analyst said. “This demand is being driven by the big cloud providers, in contrast to their initial posture, which saw them scramble to buy thousands of GPUs from Nvidia. What’s impressive is that Broadcom delivered these gains without any increase in its operating costs, which is a very rare thing for tech companies these days. Expect more record-breaking revenue and profitability in the next quarter.”

Tan saved the best news until last when he revealed on the call that the company has just secured $10 billion worth of orders for custom AI chips, which it calls XPUs, from a fourth customer. As a result, the company has increased its AI revenue forecast for fiscal 2026. “One of these prospects released production orders to Broadcom, and we have accordingly characterized them as a qualified customer for XPUs,” Tan told analysts. “We will ship pretty strongly beginning in 2026.”

Cook said this announcement confirms that the AI infrastructure buildout will persist strongly into the new year. He also hailed Broadcom as an “early leader” in custom silicon for hyperscaler cloud providers, contrasting its success with the struggles of rival chipmaker Marvell Technology Inc. to achieve similar momentum.

“I had always viewed AMD as No. 2 in the GPU-driven AI buildout, especially with it trading at under eight times sales,” Cook said. “But Broadcom’s growth is so strong with custom XPUs that it can command its 22-times multiple for the next few quarters at least.”

Photo: Sarbjeet Johal (Stackpane)/YouTube