Chips & Hardware · Report

Broadcom is set to release third-quarter earnings that will closely scrutinize demand trends for its custom AI silicon and Tomahawk networking switches amid escalating hyperscaler spending.

Broadcom's results serve as a leading indicator for ASIC adoption rates and interconnect bandwidth requirements, directly reflecting the pacing of next-generation AI cluster builds.

Trade pressSlicast · September 1, 2026 at 15:02 UTC · US · Source: tradingview.com

importance 79

Broadcom (AVGO) is set to report its third-quarter fiscal 2026 results on September 2.

For the third quarter of fiscal 2026, Broadcom projects revenues of approximately $29.4 billion, reflecting 84% year-over-year growth. The Zacks Consensus Estimate stands at $29.47 billion, implying an 84.74% increase compared to the prior-year quarter.

Earnings consensus remains steady at $3.22 per share over the past 30 days, representing a 90.53% increase from the same period last year. Broadcom has beaten the Zacks Consensus Estimate in each of the trailing four quarters, with an average earnings surprise of 2.19%.

Ahead of the report, here is how AVGO shares have performed.

Factors to Note Prior to Broadcom’s Q3 Earnings

Broadcom’s third-quarter fiscal 2026 results are expected to benefit from accelerating demand for AI semiconductors, recovering non-AI semiconductor trends, and stronger infrastructure software revenues. Semiconductor revenue is projected at approximately $20.5 billion, a 124% year-over-year increase, while infrastructure software revenue is forecasted at roughly $8.9 billion, up 31%. This robust outlook underscores continued expansion across Broadcom’s semiconductor and VMware divisions.

AI semiconductors will likely remain the primary growth catalyst. Broadcom anticipates AI semiconductor revenue to accelerate to approximately $16 billion in the third quarter, marking more than 200% year-over-year growth. Demand for custom XPUs and AI networking products remains exceptionally strong; fiscal Q2 AI semiconductor bookings exceeded $30 billion against $10.8 billion in shipments. The company expects AI semiconductor revenue to double in the second half of fiscal 2026 compared to the first half, driven by firm customer commitments and a robust pipeline of multi-gigawatt partnerships with major AI developers including Google, Anthropic, OpenAI, and Meta.

The non-AI semiconductor segment is also expected to support fiscal third-quarter growth amid improving cyclical conditions. Non-AI semiconductor revenue reached $4.2 billion in fiscal Q2, up 6% year over year, with bookings surpassing $6 billion, signaling strengthening demand. Broadband, server storage, and enterprise networking posted gains despite seasonal softness in wireless. Reflecting this recovery, Broadcom forecasts fiscal third-quarter non-AI semiconductor revenue at approximately $4.5 billion, a 12% year-over-year increase.

However, fiscal third-quarter results are expected to face gross margin pressure due to a higher mix of lower-margin AI semiconductors, particularly TPUs. Consolidated gross margin is projected to decline to approximately 74%, despite strong operating leverage.

AVGO shares have rallied 7% year to date (YTD), underperforming the broader Zacks Computer and Technology sector, which returned 17.1%. Broadcom has also lagged key peers expanding their AI infrastructure footprints, including Cisco Systems (CSCO), Hewlett Packard Enterprise (HPE), and Marvell Technology (MRVL). Over the same period, shares of Cisco, HPE, and Marvell have surged 43.5%, 117.5%, and 149.1%, respectively.

Valuation appears stretched, reflected in a Value Score of D. On a forward 12-month price-to-earnings basis, Broadcom trades at 10.75x, above the Computer and Technology sector average of 6.18x, Cisco’s 6.06x, and HPE’s 1.39x, though below Marvell’s 12.64x.

Strong AI Portfolio Aids Broadcom’s Long-Term Prospects

Broadcom’s AI momentum is poised to continue, supported by a client base that includes Google, Anthropic, OpenAI, and Meta. The company holds a long-term agreement with Google to develop and supply multiple generations of TPUs and AI networking products. Anthropic is slated to receive an additional 5 gigawatts of next-generation TPU-based compute starting in 2027, while OpenAI has committed to deploying 1.3 gigawatts that same year. Additionally, Broadcom is collaborating with Meta on multiple generations of MTIA XPUs, with 3 gigawatts scheduled for deployment through 2028.

Broadcom’s networking portfolio further reinforces its AI positioning. The company supplies Ethernet switches, PCI Express products, DSPs, lasers, NICs, and routers that interconnect large-scale XPU and GPU clusters. Capabilities such as Tomahawk 6, Jericho fabric solutions, and co-packaged optics position Broadcom to capitalize as AI clusters scale across racks and data centers.

Broadcom forecasts fiscal 2026 AI semiconductor revenue at $56 billion, an approximate 180% year-over-year increase, and maintains guidance of over $100 billion for fiscal 2027. Management anticipates sustained AI demand through fiscal 2028, driven by accelerating compute capacity requirements and rising Broadcom content per gigawatt across successive XPU generations. These dynamics support AVGO’s long-term growth trajectory.

While Broadcom’s robust portfolio supports solid long-term top-line growth, near-term gross margin pressure and stretched valuation present risks ahead of the fiscal third-quarter earnings release. AVGO currently carries a Zacks Rank #3 (Hold), suggesting investors await a more favorable entry point to accumulate shares. Readers may view the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Research Chief Names "Single Best Pick to Double"

From thousands of stocks, five Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those five, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.

Free: See Our Top Stock And 4 Runners Up

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report