Broadcom (NASDAQ: AVGO ) Once again reported strong artificial intelligence (AI) revenue growth when it released its fiscal 2026 Q1 results this week. While the stock got a boost from the news, as of this writing, shares are still down year-to-date.
Let’s take a closer look at Broadcom’s results and prospects to see if the semiconductor stock is a buy.
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Broadcom continues to see strength in both its networks and traditional AI chip businesses, as its total AI revenue rose 106% year over year to $8.4 billion in fiscal Q1, above expectations. Its traditional AI ASIC (application-specific integrated circuit) business saw a 140% revenue increase, while AI networking revenue rose 60%. It expects its network revenue growth to accelerate materially in Q2, led by its Tomahawk Ethernet switch and Serdize (serializer/deserializer) products.
For fiscal Q2, it is looking to increase its AI revenue by 76% to $14.8 billion. Meanwhile, Broadcom said its five largest custom AI chip customers are making good progress, and it could generate more than $100 billion in AI chip revenue alone in fiscal 2027.
Broadcom’s total revenue for the quarter rose 29% year over year to $19.31 billion, while adjusted earnings per share (EPS) rose 28% to $2.05. The results beat analysts’ expectations for adjusted EPS of $2.03 on revenue of $19.18 billion, as compiled by LSEG. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), meanwhile, rose 30% year over year to $13.1 billion.
Semiconductor Solutions’ total revenue rose 52% year over year to $12.5 billion, as growth in its non-AI chip revenue remained sluggish, rising just 4% in the quarter. Infrastructure software revenue, meanwhile, rose 1% to $6.8 billion, leading to a 13% increase in VMware revenue.
Gross margin, which has been a point of contention with investors because its ASIC business has low gross margins, came in at 77%, down from 79.1% a year ago. However, they are well maintained.
Looking ahead, Broadcom guided for fiscal Q2 revenue to grow 47% to $22 billion. It’s looking for gross margins to be flat, respectively. As noted, semiconductor revenue is expected to rise 76% to $14.8 billion, while infrastructure software revenue is expected to rise 9% to $7.2 billion.
