Broadcom cites custom AI chip demand, digests VMware

Broadcom’s latest results gave investors two numbers to hold together at once: surging AI chip sales and a much larger software base after VMware. In first-quarter fiscal 2026 results released on March 4, Broadcom said AI revenue rose 106% year over year to $8.4 billion, driven by demand for custom AI accelerators and networking. The company also said total revenue rose 29% to $19.3 billion, while infrastructure software revenue — the segment that includes VMware — reached $6.8 billion. Chief Executive Hock Tan said the company expected AI semiconductor revenue to reach $10.7 billion in the second quarter. ### Why are custom AI chips at the center of Broadcom’s story? Broadcom said on March 4 that its AI growth was driven by “robust demand for custom AI accelerators and AI networking.” That matters because Broadcom’s AI business is not centered only on general-purpose GPUs; it also designs application-specific chips and networking components for large cloud customers. Tan told analysts the company’s AI revenue growth was accelerating, and CNBC reported he said Broadcom had line of sight to AI chip revenue “in excess of $100 billion in 2027.” (broadcom.com) CNBC reported that Broadcom’s stock rose in extended trading after the earnings release as the company issued a strong forecast for the current period. Broadcom guided for about $22 billion in second-quarter revenue, according to its earnings release, a figure supported by continued AI demand and the larger contribution from software. ### How much of Broadcom now comes from VMware? (broadcom.com) Infrastructure software revenue was $6.8 billion in the quarter, Broadcom said, up 1% year over year and in line with guidance. That segment includes VMware, which Broadcom acquired in a $69 billion deal that closed in November 2023. The acquisition changed Broadcom’s mix by adding a larger recurring software business alongside semiconductors. (cnbc.com) Ad-hoc News said on May 24 that investors were weighing Broadcom as both an AI infrastructure supplier and an enterprise software owner as it continues to digest VMware. That framing tracks with the company’s own results: semiconductor growth is being led by AI, while software contributes a large cash-generating base. ### What did Broadcom’s cash flow and margins show? (ciodive.com) Broadcom said adjusted EBITDA rose 30% year over year to $13.1 billion, or 68% of revenue, in the first quarter. That margin reflected both the scale of the semiconductor business and the contribution from software after VMware. The company also declared a quarterly cash dividend of 59 cents per share in the same release. (broadcom.com) MSN wrote on May 24 that Broadcom offers investors a combination of AI exposure and a growing dividend. The company’s own release showed the dividend remained part of the capital-return story even as management emphasized AI semiconductors and software integration. (broadcom.com) ### What are investors watching next? Broadcom said it expects second-quarter AI semiconductor revenue of $10.7 billion. That guidance is the next test of whether the first-quarter jump in custom AI chips and networking can continue at the same pace. June 4 is Broadcom’s scheduled date for fiscal second-quarter earnings, according to its investor relations calendar. (prnewswire.com) Investors will be watching whether Tan updates the company’s 2027 AI revenue target, and whether VMware-related software revenue grows faster than the 1% reported in the first quarter. (investors.broadcom.com) (broadcom.com)