Broadcom posts record revenue as AI chip demand accelerates
Strong financial results and long-term partnerships with Alphabet and Meta Platforms underscore Broadcom’s position in the growing market for custom AI processors, despite a post-earnings share decline.
Broadcom has reported second-quarter fiscal 2026 results for the period ending 3 May, posting net revenue of $22.2 billion, a 48 per cent increase year-on-year. Adjusted earnings per share rose 54 per cent to $2.44, while free cash flow reached $10.3 billion, marking a 60 per cent increase compared to the prior-year quarter.
Despite the robust financial performance and positive outlook, Broadcom’s shares declined following the announcement. The company provided guidance indicating that artificial intelligence semiconductor revenue is expected to grow by more than 200 per cent year-on-year in the third quarter, accelerating from the 143 per cent growth recorded in the second quarter.
The results highlight a broader shift in the technology sector towards Application-Specific Integrated Circuits (ASICs) as alternatives to general-purpose Graphics Processing Units. Reports indicate that Amazon is in early talks to sell its Trainium AI chips to external customers, having previously utilised them primarily within its own data centres. Similarly, Alphabet has announced plans to begin selling its Tensor Processing Units to select outside customers.
Broadcom has secured significant long-term agreements to capitalise on this trend. The company has entered a deal with Alphabet to design Tensor Processing Units through 2031 and a partnership with Meta Platforms for AI chip development through 2029. These contracts position the company to benefit from sustained demand as major tech firms seek to reduce reliance on market leader Nvidia.
The earnings release comes amidst wider volatility in global markets, with technology indices retreating due to concerns over AI valuations. Competitor Micron Technology recently reported a 1,400 per cent surge in profits driven by AI-related memory chip demand, underscoring the intense activity in the sector.
Industry observers note that the move by major cloud providers to commercialise their custom chips signals a maturing market for specialised hardware. Broadcom’s ability to design and manufacture these custom solutions for Alphabet and Meta Platforms reinforces its status as a key player in the infrastructure supporting artificial intelligence workloads.
While the immediate market reaction to the earnings was negative, the company’s strong cash flow generation and locked-in partnerships suggest continued strength in its core business. The guidance for over 200 per cent growth in AI semiconductor revenue points to a significant expansion in this segment of the business over the coming quarters.
