Broadcom's strongest guidance in history stems from the collective "chip rush" among AI giants; Google is no longer the only answer.

Following its latest quarterly earnings release, chip giant Broadcom officially provided guidance for $230 billion in AI chip revenue for fiscal year 2028, promising earnings per share exceeding $30. This figure not only far exceeded Wall Street's previous expectations but also prompted several top Wall Street investment banks to ignore immediate concerns and focus on long-term prospects, collectively maintaining their "buy" ratings despite short-term underperformance.

Broadcom management, during its 3QFY26 (the third fiscal quarter ending July 2026) earnings call, raised its FY27 AI revenue guidance from "over $100 billion" to $115 billion, and for the first time explicitly stated its FY28 AI revenue target of $230 billion—corresponding to approximately 20GW of data center deployments—while also projecting FY28 non-GAAP earnings per share exceeding $30. Following the announcement, Goldman Sachs, HSBC, Jefferies, and other institutions maintained their "buy" ratings, with target prices of $540, $560, and $550 respectively, implying an upside of over 50% from the current share price of $367.24.

However, recent results have not been particularly impressive. Broadcom's 3QFY26 revenue was $29.6 billion, largely in line with market expectations; 4QFY26 revenue guidance was $34.8 billion, lower than HSBC and Goldman Sachs' expectations, and operating profit margin guidance was also lower than market estimates. The core driver behind the revaluation of the stock price lies in the profound changes in its customer structure—Anthropic and OpenAI are replacing Google as Broadcom's largest AI chip buyers, and this customer diversification has significantly reduced concerns about Broadcom's over-reliance on a single customer.

Short-term performance is solid, but fourth-quarter guidance appears somewhat conservative.

Broadcom's 3QFY26 revenue was $29.6 billion, roughly in line with the company's guidance of $29.4 billion and the market consensus of $29.5 billion. AI revenue was $16.7 billion, about 4% higher than the company's guidance of $16 billion, representing a significant year-over-year increase of 221%. Revenue from the Semiconductor Solutions segment was $20.8 billion, and revenue from the Infrastructure Software segment was $8.8 billion, both in line with expectations. Non-GAAP adjusted earnings per share were $3.32, exceeding the market consensus of $3.24.

4QFY26 revenue guidance is $34.8 billion, lower than Goldman Sachs' expectation of $36.2 billion and HSBC's expectation of $37.3 billion, and roughly in line with the market consensus expectation of $35.2 billion. Adjusted operating margin guidance is 66%, lower than Goldman Sachs' expectation of 67.5% and the market expectation of 66.8%. Gross margin pressure stems from the continued increase in the proportion of custom AI chips (ASICs) and the drag from the cost of memory components such as HBM shipped with XPU products—4QFY26 gross margin guidance is approximately 73%, a decrease of about 200 basis points from 75% in 3QFY26.

According to Goldman Sachs research, despite short-term pressure on profit margins, Broadcom's management expects operating profit margins to remain stable amid rapid revenue growth through fixed cost leverage, and anticipates that operating profit leverage will offset some of the gross margin dilution.

FY27 guidance revised upwards, FY28 target far exceeds Wall Street expectations

What truly boosted the market was Broadcom's management's significant upward revision of its medium- to long-term outlook. The full-year AI revenue outlook for FY26 was raised from $56 billion to $58 billion; the FY27 AI revenue guidance was raised to $115 billion, higher than the previous statement of "over $100 billion," but still lower than HSBC's forecast of $140.4 billion and Goldman Sachs' original forecast of $133 billion.

Even more groundbreaking is Broadcom's first-ever FY28 AI revenue guidance of $230 billion, corresponding to approximately 20GW of data center deployments. This figure significantly exceeds HSBC's previous forecast of $201 billion, the market consensus of $174.5 billion, and Goldman Sachs' original forecast of $192.9 billion. Meanwhile, the FY28 non-GAAP earnings per share guidance exceeds $30, also higher than HSBC's estimate of $28.77 and the market consensus of $26.23.

According to a Goldman Sachs research report, Broadcom's management stated that key supply chain components for FY27 and FY28 have been secured. The main constraints on current guidance come from the readiness of data center land, power, and server room construction, rather than shortages on the demand or supply side. This means that as infrastructure bottlenecks gradually ease, actual revenue may further exceed guidance.

The rise of Anthropic and OpenAI is reshaping the customer landscape.

Another key highlight of this earnings release is the significant restructuring of Broadcom's customer structure. For a long time, Broadcom's ASIC business has been highly dependent on Google's TPU orders, and this concentration risk has always been a concern in the market. However, this time, management explicitly disclosed for the first time that Anthropic will become Broadcom's largest XPU customer in FY27, OpenAI will jump to second place in FY28, and Google will fall to third.

Specifically: Anthropic will deploy 1GW of Ironwood (TPU v8i) this year, with plans to add 5GW in FY27 and further deploy 10GW in FY28; OpenAI's Jalapeño custom XPU began mass production and shipping in 3QFY26, with plans to deploy 1.3GW in FY27 and expand to over 5GW in FY28, and the third-generation XPU is also under development; Meta's MTIA custom accelerator will begin mass production in 4QFY26, and Broadcom expects to deploy a cumulative 3GW by 2028. According to HSBC Research, the potential pipeline scale of the above non-Google customers totals approximately 18GW, which, based on a revenue of approximately $10 billion per GW, corresponds to approximately $180 billion in non-Google ASIC revenue.

Despite this, Google did not withdraw. Broadcom signed a long-term agreement with Google covering the development and supply of future TPU generations, as well as cooperation on AI network infrastructure. Management stated that Google's annual TPU purchases will reach "tens of billions of dollars" in the coming years. Broadcom began high-volume shipments of Ironwood TPU v7 to Google in 3QFY26 and started mass production and shipping of TPU v8i.

AI network and supply chain expansion are proceeding simultaneously.

Beyond AI chips, Broadcom's AI networking business is also considered a key growth engine. Management expects AI networking revenue to grow at the same rate as XPU revenue in the coming years. Broadcom has already launched the industry's first 100Tb/s Ethernet switch, the Tomahawk 6, and completed the tape-out of the industry's first 200Tb/s Ethernet switch, the Tomahawk 7. At the same time, Broadcom is significantly expanding its capacity for EML lasers, VCSELs, and continuous wave lasers, with capacity for all three product categories doubling this year. It plans to continue expanding capacity over the next two years to address the situation where laser demand exceeds industry supply.

On the supply chain front, Broadcom's Singapore substrate packaging plant will begin mass production in FY27 to alleviate substrate supply bottlenecks. Management pointed out that in addition to substrates, advanced silicon wafers, HBM, and system memory are also potential deployment bottlenecks, and they are working with supply chain partners to find solutions.

Several institutions have raised their forecasts and maintained their buy ratings.

Faced with this performance that combines short-term volatility with long-term surprises, major Wall Street institutions maintain a consistent optimistic stance.

According to Goldman Sachs research, the bank raised its 12-month target price for Broadcom from $525 to $540, based on 30x FY27 standardized earnings per share of $18, maintained its buy rating, and significantly raised its FY28 earnings per share forecast from $28.85 to $34.25, while its AI revenue forecast for the same period was raised from $192.9 billion to $240.3 billion.

HSBC lowered its target price from $600 to $560, citing a 3% and 7% reduction in its FY26 and FY27 AI revenue forecasts, respectively. However, it maintained its "Buy" rating, with the target price implying approximately 53% upside based on a 28x FY27 P/E ratio. HSBC analyst Frank Lee believes that strong ASIC sales and upside potential in AI network revenue are sufficient to support Broadcom moving towards its target valuation multiple.

According to Jefferies Research, the bank maintained its buy rating and $550 price target, based on 20x CY28 earnings per share of $27.21, and raised its FY27 revenue forecast by approximately 9%. Jefferies pointed out that the official guidance of $230 billion for FY28 was the biggest positive surprise of this earnings release, but also noted that with expectations for the next eight quarters becoming relatively clear, the upside potential for "value discovery" in the stock price has narrowed; gross margin dilution will also continue to be under pressure as the proportion of XPUs increases and storage content expands, which is one of the focal points of market debate.

Risk Warning and DisclaimerInvesting involves risk; please exercise caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Any investment decisions made based on this information are at your own risk.