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For the past three months, the biggest number attached to Broadcom ( AVGO -2.75% ) was CEO Hock Tan's forecast of more than $100 billion in artificial intelligence (AI) semiconductor revenue for fiscal 2027. On Wednesday evening's earnings call, he replaced it. The new fiscal 2027 target is about $115 billion.
And for the first time, Tan put a number on fiscal 2028: $230 billion, about four times the $58 billion of AI revenue Broadcom now expects for the current fiscal year. Both years, he told analysts, come with the supply already secured. The forecasts landed on top of a record quarter.
In the fiscal third quarter of 2026 (the period ended Aug. 2), revenue rose 86% year over year to $29.6 billion, and net income more than tripled to $13.1 billion. Still, doubling AI revenue twice more in two years is a promise about manufacturing as much as about demand. Image source: The Motley Fool.
Two more doublings Broadcom now expects $58 billion of AI semiconductor revenue in fiscal 2026, up 186% from about $20 billion last year. "In 2027, we have secured the supply to again double AI revenue to approximately $115 billion," Tan said on the call. And demand, he added, "actually exceeds this outlook." He extended the same line to fiscal 2028, with what he called line of sight to $230 billion.
"Here again, we have secured the supply to meet this outlook," he said. AI semiconductor revenue was $10.8 billion in the fiscal second quarter. Not only did it jump to a record $16.7 billion in the fiscal third quarter, up 221% year over year, but guidance also calls for $21.7 billion in the fiscal fourth -- each quarter $5 billion to $6 billion bigger than the one before it.
However, the bulk of the outlook rests on six custom accelerator (XPU) customers. That is a short list for a number this size, I'd argue. What would delivering $230 billion take?
Zoom out, and $230 billion of AI revenue in fiscal 2028 works out to an average of nearly $58 billion a quarter. For perspective, Broadcom as a whole (semiconductors and software combined) just reported a record $29.6 billion quarter. Two years from now, the AI line alone would need to average almost double that.
The physical version of that math is measured in gigawatts of data center capacity. Anthropic alone is expected to deploy 5 gigawatts of TPU chips in 2027, with line of sight to another 10 gigawatts after that. Broadcom designs those custom accelerators with Google parent Alphabet .
Deliveries like those are why Broadcom has been locking up manufacturing capacity years in advance, down to building its own chip substrate plant in Singapore. Secured supply isn't deployed supply What "secured the supply" commits is the part Broadcom controls. The company has lined up the leading-edge wafers, high-bandwidth memory, and substrates needed to build the chips.
What it can't commit is everything after those chips ship. "[E]ven as we ship the chips, are they going to be deployed on a timely basis?" Tan said. Land and power dictate when a customer's data center capacity turns on, he said, and any piece of the chain may become the bottleneck.
Of course, an outlook is not revenue in hand, either. Tan's fiscal 2027 target itself just moved, three months after he last reiterated it. But with demand running ahead of the forecast, the main risk isn't the orders -- it's whether everything gets built and deployed on time.
Premium Feature Moneyball Superscore 90 /100 Today's Change ( -2.75 %) $ -10.08 Current Price $ 357.16 Shares slipped in extended trading Wednesday, then recovered as the call went on. At about $345 as of this writing, down sharply Thursday morning, the stock trades at about 18 times the earnings analysts expect for fiscal 2027, the $115 billion year. That risk looks worth taking at this price, I think.
Tan also said the company is on target to exceed $30 in earnings per share in fiscal 2028. If he is right, today's buyer is paying about 12 times those earnings. For a company expected to keep doubling its largest business, that arguably looks cheap.
Ultimately, I've viewed the growth stock as a hold in recent weeks because the big forecast still had to show up in reported numbers. Wednesday's report moved the forecast up instead. Sure, deployment timing could make a quarter or two look ordinary along the way, and six customers is still a short list.
But with supply secured and demand running ahead of the fiscal 2027 outlook, I'd buy Broadcom stock here.
Source: The Motley Fool
