Broadcom posted strong quarterly results after the bell on Wednesday, but didn’t provide enough upside to its guidance to move the stock higher. Revenue in the fiscal second quarter of 2026, which ended May 3, was $22.19 billion, a slight miss versus the $22.27 billion consensus forecast, according to estimates compiled by LSEG. On an annual basis, revenue rose 48%. Adjusted earnings per share (EPS) increased 54% to $2.44, beating expectations of $2.40, LSEG data showed. Adjusted EBITDA grew 52% to $15.24 billion in the quarter, beating the FactSet consensus of $15.06 billion. A measure of operating profitability, EBTIDA is short for earnings before interest, taxes, depreciation, and amortization. Why we own it Broadcom is a high-quality semiconductor and software company run by an incredible CEO, Hock Tan. The company is a major beneficiary of AI through its networking and custom chip businesses. It also has a shareholder-friendly capital allocation strategy with its dividends and buybacks. Competitors : Marvell Technology, Advanced Micro Devices , and Nvidia Last buy : Nov. 21, 2024 Initiation date : Aug. 24, 2023 Bottom line Broadcom delivered a solid quarter, with continued momentum in its AI semiconductor business only partially offset by softness in infrastructure software. And while the company provided a positive outlook for the current quarter, the market was looking for even stronger AI revenue, sinking shares in the after-market. Part of this AI stock frenzy has been about explosive earnings reports and ever-expanding total addressable markets, so investors were quick to sell the stock after CEO Hock Tan reiterated expectations of delivering $56 billion of AI semiconductor revenues in fiscal year 2026, and backed his target of at least $100 billion in fiscal year 2027. But we were encouraged to hear that management expects continued AI semiconductor revenue growth in fiscal 2028, driven by several initiatives with its six core customers, including Alphabet , the parent of Google, Anthropic, OpenAI, and Meta Platforms. In April, Broadcom entered into a long-term agreement with Google to develop and supply multiple generations of tensor processing units (TPUs) and AI networking. Also in April, Broadcom struck a deal with Anthropic to supply an additional 5 gigawatt (GW) of next-generation TPU-based compute, beginning in 2027. With OpenAI, Broadcom reiterated it has a contractual commitment to deploy 1.3 GW of compute in 2027 as part of the larger 10 GW by 2029 deal. And with Meta, the company expects to deploy 3 GW of compute capacity through the end of 2028. Helping ease some concerns about how the leading AI frontier labs and soon-to-be-public Anthropic and OpenAI will pay for these chips, Tan announced on the call that it is creating an AI special purpose vehicle (SPV) with Apollo and Blackstone . The two alternative asset managers will provide debt financing to facilitate Broadcom’s chip sales. For Broadcom’s other two unnamed…
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