Broadcom Inc. was up 15% on Friday alone. This spike came just after their earnings call announcement that they had acquired a new $10 billion customer. Analysts believe this big customer will be OpenAI, deepening Broadcom’s reach into the rapidly growing artificial intelligence market.
During the earnings call, Broadcom CEO Hock Tan shared some more exhilarating updates. The bright spot is the company’s fourth major customer has ordered substantial shipments of its custom artificial intelligence chips, referred to as XPUs. This latter development is a major game changer for Broadcom. Over the last 12 months, its stock has exploded, up about 130%, taking its market capitalization to over $1.6 trillion.
Investors were cheering after Broadcom announced new customers landing and beating the analysts’ expectations. That performance helped propel their fiscal third quarter earnings and revenue to record levels. The company is projecting its revenue to grow by around 30% for the fiscal year ending in October 2026. They project total revenue will reach $81.8 billion, up from $63.1 billion this current fiscal year. That growth is being driven by strong demand for new AI-related products and services.
Broadcom’s fourth-quarter revenue forecast stands at $17.4 billion, exceeding Wall Street’s expectations of $17.02 billion. The company expects its own AI revenue to reach $6.2 billion in that same quarter. Specifically, this forecast paints a robustly positive picture of the sector.
Broadcom’s custom AI chips are not expected to start shipping until 2026. Analysts are convinced that the company’s initial three clients already represent heavy hitters in the field. Those clients include Google, Meta, and ByteDance, the parent company of TikTok. Just as significant are the partnerships with these major players, which all point to Broadcom’s growing clout in the AI ecosystem.
CEO Hock Tan emphasized the significant demand for these chips, stating that it has “immediate and fairly substantial demand,” which enhances the company’s outlook for next year. Broadcom declined to provide detailed guidance for the coming fiscal year. Tan indicated that the pace of AI development could even be higher than the initially projected growth of 50%-60%.
Along with its software business, the company’s success has, at least in part, been fueled by its $61 billion acquisition of VMware in 2023. Revenue in Broadcom’s infrastructure software business, which now includes VMware, increased 43% to $6.79 billion.
According to the Financial Times, Broadcom is now collaborating with a automotive partner to jointly design a new chip. This breakthrough product is now awaiting approval and should get to market next year. This collaboration emphasizes Broadcom’s dedication to innovation and strengthens its foothold in the highly competitive AI industry.