- Record Q1 Revenue & EBITDA: Broadcom's fiscal Q1 2026 revenue hit $19.3B (+29% YoY), with adjusted EBITDA at $13.1B (68% of revenue).
- AI Semiconductor Surge: AI semiconductor revenue reached $8.4B (+106% YoY), driving semiconductor business revenue to $12.5B (+52% YoY).
- Q2 Guidance: Projects consolidated revenue of $22B (+47% YoY), $14.8B semiconductor revenue (+76% YoY), and $10.7B AI semiconductor revenue (+140% YoY).
- Shareholder Returns: Returned $10.9B to shareholders in Q1, with an additional $10B share repurchase program announced.
- AI Revenue Outlook: Targets AI chip revenue exceeding $100B by 2027, with 33-40% from networking components and 10 GW capacity by 2027.
AI Business Dominates Growth
The company's AI business is the main driver of its growth, with AI semiconductor revenue expected to be $10.7 billion, up 140% year-on-year. CEO Hock Tan discussed the company's AI business, citing strong demand for its networking components, particularly its Tomahawk 6 switch and 1.6 terabit optical transceivers. The company expects AI networking components to account for 33-40% of its AI revenue. Tan also addressed the disaggregation of AI workloads, noting that customized XPUs will become more prevalent.
Strategic Partnerships and Supply Visibility
The company has secured supply visibility for key components through 2028, thanks to its strategic partnerships with suppliers and its custom silicon design capabilities. Tan mentioned that the company has visibility into its customers' plans, allowing it to anticipate demand. The company is well-positioned to benefit from the growth of AI, with its XPUs and networking components playing a critical role in the development of large language models.
Valuation Metrics
With a P/E Ratio of 63.18 and an EV/EBITDA of 41.87, the market is pricing in significant growth expectations. Analysts estimate next year's revenue growth at 44.2%, which is lower than the current year's growth rate. The ROE of 32.85% and ROIC of 17.64% indicate a strong return on equity and invested capital, respectively. The Dividend Yield is 0.73%, which is relatively low.
Customer Plans and XPU Adoption
The company's engagements with its major customers are strategic and targeted, providing clear visibility into their plans. The customers are starting with inference, but many are now using XPUs for both training and inference, which are interchangeable. One customer, OpenAI, has a deal for 10 gigawatts through 2029, with expectations of reaching over 1 gigawatt in 2027, implying a sharp inflection in 2028.