Is Broadcom a Buy as AI Revenue Continues to Surge?

Broadcom (NASDAQ: AVGO) erstwhile again reported beardown artificial quality (AI) gross maturation erstwhile it released its fiscal 2026 Q1 results this week. While the banal got a assistance from the news, shares are inactive down twelvemonth to date, arsenic of this writing.

Let's instrumentality a person look astatine Broadcom's results and prospects to spot if the semiconductor banal is simply a buy.

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Broadcom continues to spot spot successful some its networking and customized AI spot businesses, arsenic its full AI gross climbed 106% twelvemonth implicit twelvemonth successful fiscal Q1 to $8.4 billion, supra its expectations. Its customized AI ASIC (application-specific integrated circuit) concern saw gross surge by 140%, portion AI networking gross climbed 60%. It expects its networking gross maturation to materially accelerate successful Q2, led by its Tomahawk Ethernet power and SerDes (Serializer/Deserializer) products.

For fiscal Q2, it is looking for its AI gross to summation by 76% to $14.8 billion. Meanwhile, Broadcom said its 5 largest customized AI spot customers are progressing well, and that tin make much than $100 cardinal successful conscionable AI spot gross successful fiscal 2027.

Broadcom's wide gross for the 4th jumped 29% twelvemonth implicit twelvemonth to $19.31 billion, portion adjusted net per stock (EPS) climbed 28% to $2.05. The results surpassed expert expectations for adjusted EPS of $2.03 connected gross of $19.18 billion, arsenic compiled by LSEG. Adjusted net earlier interest, taxes, depreciation, and amortization (EBITDA), meanwhile, roseate by 30% twelvemonth implicit twelvemonth to $13.1 billion.

Total semiconductor solutions gross accrued by 52% twelvemonth implicit twelvemonth to $12.5 billion, arsenic its non-AI spot gross maturation remains sluggish, up conscionable 4% successful the quarter. Infrastructure bundle revenue, meanwhile, edged up by 1% to $6.8 billion, led by a 13% summation successful VMware revenue.

Gross margins, which person been a constituent of contention with investors, arsenic its ASIC concern does transportation little gross margins, came successful astatine 77%, down from 79.1% a twelvemonth ago. However, they are holding up well.

Looking ahead, Broadcom guided for fiscal Q2 gross to turn by 47% to $22 billion. It is looking for gross margins to beryllium level sequentially. As noted, semiconductor gross is expected to ascent 76% to $14.8 billion, portion infrastructure bundle gross is projected to emergence 9% to $7.2 billion.