Broadcom's AI revenue tripled—faster than Nvidia's. Why did its stock price fall?

Broadcom, a developer of chips, networking equipment, and software, reported that its revenue from sales of semiconductors for artificial intelligence more than tripled in the last quarter. The company expects this trend to continue and to drive a fourfold increase in AI chip sales over the next two years, fueling optimism about the company’s ability to challenge Nvidia’s dominance in the market, according to Bloomberg.

However, Broadcom’s total revenue and its forecasts fell short of analysts’ expectations. Investors reacted mixed: the company’s stock initially fell, then began to rise, but eventually ended up in the red again.

Broadcom’s revenue from AI chips in the third quarter of fiscal year 2026, which ended on August 2, rose 221% year-over-year to $16.7 billion. Thus, Broadcom outpaced its competitor Nvidia in terms of growth, as Nvidia reported an 117% increase in revenue from its AI business in the most recent quarter. In the current quarter, Broadcom expects this figure to accelerate by 236% year-over-year, reaching $21.7 billion.

"Demand for our custom AI accelerators and networking solutions remains very high," said Broadcom President and CEO Hock Tan in a press release.

The company’s revenue from AI chips will double to approximately $115 billion in fiscal year 2027 and will double again the following year to $230 billion, Tan said during a conference call, according to Bloomberg. According to the executive, Broadcom is also on track to earn more than $30 per share in fiscal year 2028—a figure higher than current Wall Street forecasts, the agency notes.

Broadcom’s total revenue for the quarter rose 86% year-over-year to a record $29.6 billion. However, analysts had forecast an average of $35.1 billion, with some estimates exceeding $36 billion, according to Bloomberg. Adjusted earnings per share came in at $3.32, exceeding the forecast of $3.24, according to LSEG data cited by CNBC.

In the fourth quarter of fiscal year 2026, Broadcom expects to generate approximately $34.8 billion in total revenue—a 93% increase compared to the same period last year. Meanwhile, according to LSEG, analysts are forecasting $35.03 billion.

Broadcom has become one of the main beneficiaries of the push by major technology companies to develop their own AI processors as an alternative to Nvidia’s general-purpose AI chips. The company helps customers develop custom chips and supplies the networking components needed to integrate accelerators into large-scale computing systems. Its partners include Google—for which Broadcom is helping to develop Tensor Processing Units (TPUs)—as well as OpenAI and Anthropic.

The growth of the AI business is becoming increasingly significant for Broadcom: as early as the first quarter of fiscal year 2026, revenue from AI semiconductors stood at $8.4 billion; in the second quarter, it was $10.8 billion; and it has now reached $16.7 billion. “We have six customers, and four of them will become incredibly successful,” Tan said during a conference call.

But competition is intensifying, Bloomberg notes. Last month, Marvell Technology announced an agreement with Alphabet under which it will also participate in the development of specialized chips for Google.

Broadcom’s revenue forecast for the current quarter came in slightly below Wall Street’s consensus, which explains investors’ initial negative reaction to the report. The company’s outlook disappointed the market after Nvidia had significantly exceeded expectations with its forecast a week earlier, Bloomberg notes.

“The pressure on the stock is entirely understandable, given that Wall Street is a game of expectations,” Bloomberg quotes Andrew Rocco, a strategist at Zacks Investment Research, as saying. “Although Broadcom’s outlook was weak, the company remains one of the leaders in the AI market.”

This article was AI-translated and verified by a human editor