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AI Accelerators and Networking Fuel Broadcom's Growth: What's Ahead?
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Key Takeaways
Broadcom's semiconductor revenues surged 79% to $15.01B as AI demand drove record quarterly sales.
AI semiconductor bookings topped $30B, with third-quarter AI revenues forecast at $16B.
Long-term XPU and networking deals lifted remaining performance obligations to about $164.6B.
Broadcom’s (AVGO - Free Report) Semiconductor Solutions business is riding on strong AI demand. Strong shipments of custom AI accelerators, including XPUs and TPUs, and advanced networking products used to connect large-scale AI clusters have been major drivers. In the second quarter of fiscal 2026, Semiconductor Solutions revenues surged 79% year over year to a record $15.01 billion, accounting for 68% of total revenues. AI semiconductor revenues alone jumped 143% year over year to $10.8 billion, supported by increasing demand for custom accelerators and AI networking, with networking contributing nearly 40% of AI revenues.
The growth outlook remains strong, as quarterly AI semiconductor bookings exceeded $30 billion. Broadcom expects AI revenues to accelerate to $16 billion in the third quarter, representing growth of more than 200% year over year, and forecasts total Semiconductor Solutions revenues of approximately $20.5 billion. Long-term agreements covering multiple generations of XPUs and networking products with major hyperscalers and AI companies are strengthening revenue visibility. The company’s remaining performance obligations reached approximately $164.6 billion, including commitments under a new long-term custom AI accelerator contract.
Broadcom is also benefiting from its broad AI networking portfolio, including Tomahawk Ethernet switches, Jericho fabric solutions, high-speed SerDes, digital signal processors and co-packaged optics. These products enable the scale-up and scale-out of increasingly large AI data centers, allowing Broadcom to capture semiconductor content beyond accelerators. Continued investments in leading-edge AI semiconductor research, rising inventory levels to secure supply and accelerating customer deployments are expected to sustain Semiconductor Solutions revenue growth through fiscal 2027 and beyond.
AVGO Faces Tough Competition in the Semiconductor Market
Broadcom is facing stiff competition from NVIDIA (NVDA - Free Report) and Advanced Micro Devices (AMD - Free Report) in the semiconductor space.
NVIDIA poses the biggest competitive threat to Broadcom by offering a tightly integrated AI infrastructure platform that combines GPUs, CPUs and networking. The company is rapidly expanding beyond accelerators into networking with NVLink, InfiniBand, Spectrum-X Ethernet, BlueField DPUs and its upcoming Vera CPU, reducing customers' need for third-party networking silicon. With Blackwell and Rubin systems shipping as fully integrated AI factories and networking attached to more than 90% of deployments, NVIDIA is capturing a larger share of AI infrastructure spending, directly challenging Broadcom’s custom AI accelerators and Ethernet switching business.
AMD is intensifying competition through its expanding AI compute portfolio spanning EPYC server CPUs, Instinct GPUs and Helios rack-scale AI systems. The company expects server CPU demand to accelerate sharply as agentic AI increases CPU requirements for orchestration, head nodes and inference, while forecasting the server CPU TAM to exceed $120 billion by 2030. AMD is also strengthening long-term relationships with hyperscalers through multigeneration deployments, including Meta’s planned deployment of up to 6 gigawatts of Instinct GPUs and growing adoption of its Helios platform integrating Instinct GPUs with EPYC Venice CPUs. These integrated AI systems, together with aggressive investments in ROCm software and AI infrastructure, position AMD as a stronger alternative for hyperscalers evaluating custom AI silicon and networking solutions.
Broadcom shares have appreciated 10.7% year to date, outperforming the broader Zacks Computer and Technology sector’s return of 6.9%.
AVGO Stock Outperforms Sector
Image Source: Zacks Investment Research
The AVGO stock is trading at a premium, with a forward 12-month price/sales of 11.26X compared with the broader sector’s 6.01X. Broadcom has a Value Score of D.
AVGO Stock Has a Stretched Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for fiscal 2026 earnings is pegged at $11.74 per share, up by a penny over the past 30 days, suggesting 72.14% growth from the figure reported in fiscal 2025.
View the Zacks #1 Rank List
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AI Accelerators and Networking Fuel Broadcom's Growth: What's Ahead?
Key Takeaways
Broadcom’s (AVGO - Free Report) Semiconductor Solutions business is riding on strong AI demand. Strong shipments of custom AI accelerators, including XPUs and TPUs, and advanced networking products used to connect large-scale AI clusters have been major drivers. In the second quarter of fiscal 2026, Semiconductor Solutions revenues surged 79% year over year to a record $15.01 billion, accounting for 68% of total revenues. AI semiconductor revenues alone jumped 143% year over year to $10.8 billion, supported by increasing demand for custom accelerators and AI networking, with networking contributing nearly 40% of AI revenues.
The growth outlook remains strong, as quarterly AI semiconductor bookings exceeded $30 billion. Broadcom expects AI revenues to accelerate to $16 billion in the third quarter, representing growth of more than 200% year over year, and forecasts total Semiconductor Solutions revenues of approximately $20.5 billion. Long-term agreements covering multiple generations of XPUs and networking products with major hyperscalers and AI companies are strengthening revenue visibility. The company’s remaining performance obligations reached approximately $164.6 billion, including commitments under a new long-term custom AI accelerator contract.
Broadcom is also benefiting from its broad AI networking portfolio, including Tomahawk Ethernet switches, Jericho fabric solutions, high-speed SerDes, digital signal processors and co-packaged optics. These products enable the scale-up and scale-out of increasingly large AI data centers, allowing Broadcom to capture semiconductor content beyond accelerators. Continued investments in leading-edge AI semiconductor research, rising inventory levels to secure supply and accelerating customer deployments are expected to sustain Semiconductor Solutions revenue growth through fiscal 2027 and beyond.
AVGO Faces Tough Competition in the Semiconductor Market
Broadcom is facing stiff competition from NVIDIA (NVDA - Free Report) and Advanced Micro Devices (AMD - Free Report) in the semiconductor space.
NVIDIA poses the biggest competitive threat to Broadcom by offering a tightly integrated AI infrastructure platform that combines GPUs, CPUs and networking. The company is rapidly expanding beyond accelerators into networking with NVLink, InfiniBand, Spectrum-X Ethernet, BlueField DPUs and its upcoming Vera CPU, reducing customers' need for third-party networking silicon. With Blackwell and Rubin systems shipping as fully integrated AI factories and networking attached to more than 90% of deployments, NVIDIA is capturing a larger share of AI infrastructure spending, directly challenging Broadcom’s custom AI accelerators and Ethernet switching business.
AMD is intensifying competition through its expanding AI compute portfolio spanning EPYC server CPUs, Instinct GPUs and Helios rack-scale AI systems. The company expects server CPU demand to accelerate sharply as agentic AI increases CPU requirements for orchestration, head nodes and inference, while forecasting the server CPU TAM to exceed $120 billion by 2030. AMD is also strengthening long-term relationships with hyperscalers through multigeneration deployments, including Meta’s planned deployment of up to 6 gigawatts of Instinct GPUs and growing adoption of its Helios platform integrating Instinct GPUs with EPYC Venice CPUs. These integrated AI systems, together with aggressive investments in ROCm software and AI infrastructure, position AMD as a stronger alternative for hyperscalers evaluating custom AI silicon and networking solutions.
AVGO’s Share Price Performance, Valuation & Estimates
Broadcom shares have appreciated 10.7% year to date, outperforming the broader Zacks Computer and Technology sector’s return of 6.9%.
AVGO Stock Outperforms Sector
Image Source: Zacks Investment Research
The AVGO stock is trading at a premium, with a forward 12-month price/sales of 11.26X compared with the broader sector’s 6.01X. Broadcom has a Value Score of D.
AVGO Stock Has a Stretched Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for fiscal 2026 earnings is pegged at $11.74 per share, up by a penny over the past 30 days, suggesting 72.14% growth from the figure reported in fiscal 2025.
Broadcom Inc. Price and Consensus
Broadcom Inc. price-consensus-chart | Broadcom Inc. Quote
Broadcom currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.