Broadcom is one among several US companies considered to benefit from AI infrastructure spending. True to that trend, the company posted robust financial results for its third quarter of fiscal year 2026, even as Broadcom Inc. (AVGO) stock price continued to remain under pressure. The company also provided healthy guidance for its fourth quarter of fiscal year 2026 and announced its quarterly dividend.
How Strong Were The Q3 Numbers, Really?
Revenue came in at $29.6 billion for the third quarter, up 86 percent from the prior year period. GAAP diluted EPS came in at $2.68, and non-GAAP diluted EPS at $3.32. This marked Broadcom’s strongest quarter yet, with the company itself calling out record revenue, operating profit, and free cash flow.
Cash from operations totaled $14.2 billion for the third quarter, and after capital expenditures of $0.5 billion, this resulted in $13.7 billion of free cash flow, or 46 percent of revenue. In simple terms, nearly half of every revenue dollar is flowing straight through to free cash.
The company’s cash and cash equivalents at the end of the fiscal quarter were $24 billion, compared to $19.6 billion at the end of the prior fiscal quarter.
“Demand for our custom AI accelerators and networking continues to be very strong. Q3 AI semiconductor revenue of $16.7 billion grew 221% year-over-year, and 54% quarter-over-quarter. In Q4, the momentum continues, and we expect AI semiconductor revenue to accelerate to $21.7 billion, up 236% year-over-year,” said Hock Tan, President and CEO of Broadcom, in the company release.
What Is Q4 Guidance Telling Investors?
Based on current business trends and conditions, Broadcom expects fourth quarter fiscal 2026 revenue of approximately $34.8 billion, an increase of 93 percent from the prior year period, and non-GAAP operating income of approximately 66 percent of projected revenue. That would mark an acceleration, not a slowdown, from the blistering pace already seen in Q3.
Broadcom (AVGO) expects its artificial intelligence-related sales to double next year and again the following year. Broadcom has agreements in place to enable more than 20 gigawatts in compute capacity for leading frontier AI labs, including Anthropic and OpenAI, through 2028, and is therefore dependent on these two big customers.
According to a UBS report, Broadcom provided further evidence that demand for AI infrastructure remains strong, raising its forecast for AI-chip revenue in the fiscal year ending October 2027 to about USD 115bn from more than USD 100bn previously. The company expects the figure to roughly double to USD 230bn in fiscal 2028, while third-quarter AI-chip revenue more than tripled to USD 16.7bn.
The update follows strong results from NVIDIA last week, after which its shares rose 8.7%, their best post-results performance since 2024. UBS said, without taking a stance on single securities, the results reinforce its view that robust AI investment remains an important driver of the positive equity market outlook.
What’s Really Driving This AI Rally?
But encouraging company results do not remove the risks surrounding the theme or the broader market, UBS cautions. Continued conflict in the Middle East has kept energy prices and long-dated government bond yields elevated. This matters because it can weigh on the valuations of companies whose expected profits extend further into the future.
Competition is also increasing across the AI industry, UBS adds, while uncertainty remains over which companies will ultimately capture the returns from rising investment. The bank believes investors should therefore retain exposure to the principal drivers of the market cycle, while broadening participation and managing the risk of drawdowns.
Why Spreading Your Bets Might Pay Off Now
UBS’s base case of robust AI investment, broader earnings growth, and resilient economic activity supports further equity market gains. Global AI-related capital expenditure is expected to reach around USD 900bn in 2026 and about USD 1.2tr in 2027. UBS notes the opportunity extends beyond the largest technology companies into semiconductors and hardware, software, power infrastructure, utilities, and industrials.
Broadcom, being a global technology leader that designs, develops, and supplies semiconductor and infrastructure software solutions, is already a key player in the AI sector.
Broadcom is one of the top 10 stocks in the world, but it is way behind Nvidia in terms of market cap. Broadcom’s market cap is $1.75 trillion, lagging behind Nvidia’s market cap of $5.41 trillion. Broadcom’s stock is up 3% year-to-date, 6.6% over the past year. Nvidia, by comparison, has returned 22.5% year-to-date, 37% over the past year. The numbers make clear why, despite record results, Broadcom keeps struggling to close the gap with its rival.
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