Broadcom Inc (NASDAQ:AVGO, ETR:1YD) saw its revenue surge 20% year-over-year in the second quarter driven by growth in its AI semiconductor segment.
For the quarter ended May 4, revenue was $15 billion, slightly above the Wall Street consensus of $14.97 billion.
Adjusted earnings per share of $1.58 beat estimates of $1.56.
Hock Tan, Broadcom CEO, highlighted that the company achieved record Q2 revenue driven by continued momentum in AI semiconductor solutions and VMware.
“Q2 AI revenue grew 46% year-over-year to over $4.4 billion driven by robust demand for AI networking," the CEO said.
"We expect growth in AI semiconductor revenue to accelerate to $5.1 billion in Q3, delivering 10 consecutive quarters of growth, as our hyperscale partners continue to invest."
For the third quarter, Broadcom expects revenue of approximately $15.8 billion, a 21% increase year-over-year, slightly above analyst estimates of $15.7 billion, and an adjusted EBITDA margin of at least 66% of revenue.
A key AI beneficiary
Analysts at Jefferies see Broadcom’s latest earnings reinforcing its position as a key beneficiary of AI infrastructure demand.
The firm reiterated its ‘Buy’ rating and raised its price target to $300, implying 15% upside at the time of writing, as Broadcom continues to outperform expectations across its semiconductor and software segments, particularly in AI.
“The AI business continues chugging along with strength across both the Networking and ASIC businesses,” they wrote.
Networking saw particularly robust performance, driven by “Ethernet dominance in scale out being joined by increasing use of Ethernet in scale up.”
In total, Broadcom’s AI revenue hit $4.4 billion in the quarter, up 7% sequentially, with AI Networking representing 40% of that total and growing 170% year-over-year.
Notably, ASICs are poised to drive the next leg of growth, with Jefferies highlighting the upcoming ramp of Google’s TPU v7p (Ironwood).
“Performance remained on track through the transition periods with growth expected to accelerate with the Ironwood TPU (v7p) ramp in the second half of the year,” they wrote.
They noted that three hyperscalers are planning to deploy 1 million XPU clusters in 2027, and added that there’s potential upside from inference buildouts in the second half of 2026 as well.
Broadcom expects AI growth in fiscal 2026 to mirror fiscal 2025’s pace, or 60% year-over-year, far ahead of Street consensus estimates of 35%, the analysts highlighted.
However, analysts noted that Broadcom’s non-AI business “continues to bounce along the bottom,” with trends mixed by end market. “But two end markets are expected up and the rest flat next quarter, marking a return to growth,” they added.
“Lastly, execution in the VMWare business continues to be strong with 87% of the top 10,000 customers already converted to the VCS platform, reaching double-digit annual recurring revenue growth year-over-year.”
Despite the earnings beat and strong revenue guidance, Broadcom shares dipped 3.4% to about $251 on Friday.