Broadcom (AVGO) Stock: AI Revenue Jumps 106% in Q1 as Morgan Stanley Lifts Price Target

TLDR

Broadcom reported Q1 revenue of $19.3 billion, up 29% year over year — a new record
AI revenue jumped 106% to $8.4 billion, beating its own expectations
Q2 guidance set at $22 billion revenue, with AI revenue forecast of $14.8 billion
Morgan Stanley raised its price target to $470 from $462, keeping an Overweight rating
Analysts project Broadcom could hit $120 billion in AI revenue in fiscal 2027

Broadcom (AVGO) closed 4.8% higher at $322.77 on March 5, the day after the company posted its fiscal Q1 2026 results. The stock has since pulled back slightly and remains down year to date.

Broadcom Inc., AVGO

Total revenue came in at $19.31 billion, a record, and beat analyst estimates of $19.18 billion. Adjusted EPS of $2.05 also topped the consensus of $2.03.

AI revenue was the standout number — $8.4 billion, up 106% year over year and above what the company itself had expected going in.

Custom AI ASIC revenue led the charge, surging 140%. AI networking revenue climbed 60%, with the company flagging that networking growth is expected to accelerate materially in Q2, driven by its Tomahawk Ethernet switch and SerDes products.

Adjusted EBITDA rose 30% year over year to $13.1 billion, with margins coming in at 68% of revenue. Gross margins landed at 77%, down from 79.1% a year ago but holding steady.

AI Chip Revenue in Focus

Total semiconductor solutions revenue rose 52% year over year to $12.5 billion. Non-AI chip revenue, however, only grew 4% — pointing to where the real momentum is.

Infrastructure software revenue edged up 1% to $6.8 billion. VMware revenue inside that segment grew 13%.

CEO Hock Tan addressed speculation on the earnings call that large language model developers could cut out chip suppliers like Broadcom and build their own silicon. His response was blunt: “You need the best silicon design team around. You need cutting-edge SerDes, very advanced packaging. We’ve been doing this for more than 20 years. I would say we are by far way out there, and we will not see competition in customer-owned tooling for many years to come.”

CFO Kirsten Spears noted the company returned $10.9 billion to shareholders in Q1 — $3.1 billion in dividends and $7.8 billion in buybacks. The company also announced a fresh $10 billion share repurchase program through the end of 2026.

Morgan Stanley Raises Price Target

Morgan Stanley analyst Joseph Moore raised his price target on AVGO to $470 from $462, keeping an Overweight rating. Moore called the quarter “strong,” pointing to AI-driven upside and improved long-term visibility.

He noted that margin concerns have eased, networking outperformed, and the FY27 AI setup remains compelling as ASIC programs continue to scale.

Broadcom guided for Q2 revenue of approximately $22 billion, implying 47% year-over-year growth. AI revenue for Q2 is forecast at $14.8 billion — up 76% year over year.

The company has told analysts its five largest custom AI chip customers are progressing well, and that it can generate more than $100 billion in AI chip revenue in fiscal 2027 alone. The Morgan Stanley team puts that figure even higher, estimating approximately $120 billion, and sees room for further upward revisions.

AVGO currently trades at around 32 times fiscal 2026 earnings estimates and roughly 22.5 times fiscal 2027 consensus.