Broadcom: Better-than-Expected but Not as Expected as Wall Street Reassesses

Author: Su Yang, Tencent Technology

On September 2nd, US local time, Broadcom announced its financial results for the third fiscal quarter of 2026, ending August 2nd, 2026.

The financial report shows that Broadcom achieved total net revenue of $29.591 billion in the quarter, an increase of 86% year-over-year, exceeding the market analysts' consensus range of $29.36 billion to $29.45 billion.

The financial report shows that Broadcom achieved total net revenue of $29.591 billion in the quarter, an increase of 86% year-over-year, exceeding the market analysts' consensus range of $29.36 billion to $29.45 billion.

According to U.S. Generally Accepted Accounting Principles (GAAP), net income was $13.088 billion (equivalent to diluted earnings per share of $2.68), representing a year-over-year increase of 216%. Excluding non-GAAP items, net income reached $16.372 billion, with adjusted earnings per share (EPS) of $3.32, also exceeding market expectations of $3.24. Broadcom's Key Financial Data for the Third Fiscal Quarter Broadcom's Board of Directors also announced the approval of a cash dividend of US$0.65 per share of common stock for the third fiscal quarter, payable on September 30, 2026, to shareholders of record as of the close of trading on September 21. However, after the release of this earnings report, which showed record highs in multiple metrics and exceeded expectations in both revenue and profit, Broadcom's after-hours stock price fell by as much as 5.6%. As of press time, Broadcom's stock price was $361.90, down 1.45% from the closing price of $367.24 that day. Broadcom's AI semiconductor revenue surged 221%

Broadcom's semiconductor solutions business revenue grew significantly

Broadcom's semiconductor solutions business revenue grew significantly

Despite after-hours pressure on its stock price, Broadcom's fundamentals in the core AI hardware sector remain strong when looking at its specific business segments.

In the third fiscal quarter, Broadcom's semiconductor solutions business generated $20.839 billion in revenue, accounting for 70% of total revenue, representing a year-over-year increase of 127%. Of this, AI semiconductor revenue reached $16.7 billion, a year-over-year increase of 221% and a sequential increase of 54%. Broadcom President and CEO Hock Tan stated, "Demand for our custom AI accelerators and networking products continues to maintain very strong momentum." In the fourth fiscal quarter, Broadcom expects AI semiconductor revenue to further accelerate to $21.7 billion, representing a year-over-year increase of 236%. Regarding specific collaborations with major clients, Broadcom is deeply integrating with leading global technology giants and top AI labs through multiple product lines: In its collaborations with OpenAI and Apple, Broadcom continues to advance the shipment of its jointly developed "Jalapeno" custom chip and has already begun in-depth discussions on the development plans for second- and third-generation chips. Meanwhile, Apple has also clearly stated that it will continue to increase capital expenditure on Broadcom's US-based chip manufacturing operations. In its ecosystem collaborations with Google and Anthropic, Broadcom is accelerating the delivery of TPUs based on Google's Ironwood architecture and simultaneously advancing the shipment of Google's TPU 8i chip. Hock Tan revealed in a conference call that Broadcom's annual processor deliveries to Google will reach tens of billions of dollars in the coming years. As a crucial part of Google's computing ecosystem, Anthropic plans to deploy a 5-gigawatt TPU 8i chip by 2027. Furthermore, Meta's custom-designed MTIA accelerator chip has entered mass production and delivery, primarily used to support and enhance Meta's AI inference and recommendation algorithm workloads across its vast business ecosystem. The balance sheet provides a solid foundation. Financial reports show that as of the end of the third fiscal quarter, Broadcom's cash and cash equivalents had increased significantly from $19.611 billion at the end of the previous fiscal quarter to $24.001 billion. In terms of cash flow, Broadcom's operating cash flow reached $14.197 billion in the quarter. After deducting $532 million in capital expenditures, free cash flow reached $13.665 billion, accounting for 46% of total revenue for the period. Broadcom CFO Amie Thuener stated that the company achieved record revenue, operating profit, and free cash flow in the third fiscal quarter, and expects to maintain a 66% non-GAAP operating profit margin in the fourth fiscal quarter. Addressing the financial pressure faced by leading AI labs during computing power expansion, Broadcom has proposed an innovative business support model to help strategic clients fill the funding gap for large-scale early-stage infrastructure investments. Analysts believe that Broadcom's large cash flow and strong balance sheet not only guarantee stable shareholder dividends but also provide a financial advantage in assisting core clients with early-stage large-scale computing infrastructure investments. Although the market fluctuated in the short term due to the slightly lower-than-expected fourth-quarter guidance, Broadcom's strong competitive advantage in AI computing power and data center networking remains difficult to replace. As the world's second-largest data center computing power ecosystem giant after Nvidia, Broadcom carries extremely high expectations from the capital market. However, even with record-breaking financial data, the decline in its after-hours stock price still reveals Wall Street's scrutiny and concerns regarding the extremely high AI premium. Firstly, the magnitude of the better-than-expected performance was less than anticipated, making it difficult to support the high valuation premium. StoneX equity research analyst Cody Acree points out that for a giant like Broadcom, which is highly anchored to the AI ​​boom, quarterly revenue exceeding expectations by only about 1.2% is a slight "minor overshoot" that is unlikely to excite the market. Broadcom's stock price has only risen by about 6% so far in 2026, far behind its competitor Nvidia's 20% increase. With market sentiment extremely high due to AI, the slight overshoot has been seen by investors as a "disguised underperformance." Secondly, the revenue guidance for the fourth fiscal quarter failed to meet Wall Street's highest expectations. Broadcom provided a revenue outlook of approximately $34.8 billion for the fourth fiscal quarter of 2026 (a 93% year-over-year increase), which, while still showing strong growth, is slightly below the average analyst expectation compiled by Bloomberg and LSEG ($35.03 billion to $35.05 billion). Meanwhile, revenue of $8.752 billion from its infrastructure software business in the same quarter also slightly fell short of analysts' expectations of $8.82 billion, further exacerbating market uncertainty. Furthermore, increased competition in the custom chip market and supply chain bottlenecks are also key concerns for the capital markets. In the ASIC custom chip arena, competitor Marvell reached a multi-year cooperation agreement with Google in August of this year (expected to bring significant revenue growth by fiscal year 2033), directly challenging Broadcom's monopoly among core customers. On the supply side, Broadcom itself is also facing constraints from tight production capacity. In July of this year, the company had to enter into a multi-year, over $200 billion strategic partnership with Samsung Electronics to diversify its manufacturing bases and ensure sufficient production capacity.