Broadcom, one of many largest gamers in semiconductor manufacturing, is heading nearer to reporting its first-quarter earnings on March 4. And Wall Avenue’s focus will likely be to find out whether or not the booming AI infrastructure buildout can be translating into regular income.
Inventory performance-wise, it has been blended; whereas down 3% 12 months so far, Broadcom’s inventory value is up 50% over the 12 months. Traders proceed to observe whether or not the earlier AI momentum will maintain in opposition to rising margin considerations in Q1.
Given the earnings season underway, with some hyperscalers similar to Meta and Amazon already reporting massive capital expenditure numbers, owing to their AI pursuits, analysts are additionally rising their estimates amid the altering panorama.
Financial institution of America analyst Vivek Arya, in a notice shared with me, raised the financial institution’s long-term outlook for AI knowledge facilities, projecting the entire addressable marketplace for AI knowledge middle system spending to achieve roughly $1.4 trillion by 2030, up from its earlier estimate of $1.2 trillion.
Broadcom inventory is down 3% 12 months so far.
Photograph by SOPA Pictures on Getty Pictures
The rise is pushed by hyperscalers’ rising capital expenditures and the fast deployment of AI accelerators. BofA expects the information middle methods market to develop 64% 12 months over 12 months in 2026, with AI methods growth nearer to 100% 12 months over 12 months, pushed by these deployments.
Consequently, key suppliers to the sport, similar to Broadcom, are additionally set to growth as demand for his or her merchandise grows.
Broadcom races forward within the AI push
In its latest This fall report, Broadcom delivered strong outcomes, setting expectations for the upcoming Q1. The corporate reported $18 billion in income, up 28% 12 months over 12 months, with a GAAP internet revenue of $8.5 billion.
The income was pushed largely by a surge in AI semiconductor gross sales and traction throughout hyperscalers. The Non-GAAP EPS was $1.95, with $7 billion in free money circulate as Broadcom boosted its quarterly dividend by 10% to $0.65 per share.
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For its Q1, the corporate guided $19.1 billion in income, signaling continued development from the earlier quarter.
This is the reason expectations are elevated, however so is the scrutiny of underlying margins.
BofA sees Broadcom as a significant beneficiary of customized AI silicon, notably Google’s Tensor Processing Items (TPUs).
A few of Broadcom’s main merchandise embrace routers, ASICs (Utility-Particular Built-in Circuits), wi-fi options, fiber-optics options, and enterprise software program options.
The agency expects Broadcom to ship roughly 3.5 million TPU models in 2026, which may broaden to three.6-3.8 million. The typical promoting costs for these TPUs will even enhance, and as shoppers transition from older to newer era TPUs, it is going to assist enhance Broadcom’s income.
This demand alone is sufficient to drive Broadcom’s AI compute income to roughly $59 billion in 2026 and greater than $140 billion by the tip of the last decade, as hyperscaler adoption continues to broaden.
This ramp-up additionally led BofA to extend its income estimates for the semiconductor producer and options supplier.
- EPS for fiscal 12 months 2026 at $10.77, up 4%
- EPS for FY 2027 at $14.64, up 2%
- EPS for FY 2028 at $16.99, up 1%
Margins stay a key debate
Whereas income estimates are rising, profitability stays a query.
BofA lowered its profitability expectations for Broadcom. The reason being the combo of product ranges, with Broadcom’s legacy semiconductor merchandise extra worthwhile than its customized ASICs, which may result in decrease near-term revenue margins whilst cargo volumes enhance.
BofA barely modified its outlook on Broadcom’s gross margin to 72.1%/70.4%/70.9% for FY26/27/28E, which is barely under Avenue estimates.
Citi Analyst Atif Malik seconds BofA’s claims on gross margin and lowered its value goal from $480 to $458, preserving a purchase score. Malik argues that considerations round gross margins, competitors from various accelerators, and software program publicity at the moment are largely priced into the inventory, driving the lower cost goal.
However Citi sees Broadcom outperforming within the second half of 2026, pushed by elevated demand and higher visibility, as AI deployments are anticipated to maneuver from pilot phases to scaled manufacturing throughout this era.
Associated: Broadcom may maintain its eye-popping 2026 dividend hike
