Key Points
Broadcom’s AI semiconductor revenue came in at $16.7 billion last quarter, topping the $16 billion target it set in August.
Management guided to even higher AI revenue next quarter, so it's harder to argue that the company will see a slowdown in growth despite competition from Marvell.
The stock trades below its peak at a premium valuation, which I think the results make easier to justify.
Broadcom (NASDAQ: AVGO) has had a rough year on Wall Street, with shares falling 31% from their all-time high and down 4% since the beginning of 2026. The latest setback came Friday, when Intel's disappointing fourth-quarter guidance triggered a broad sell-off in semiconductor stocks.
But there's an interesting disconnect between Broadcom's stock performance and its actual business results. And I think investors should be paying attention.
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Back in August, I argued that Broadcom could be a compelling buy if its fiscal third-quarter earnings showed $16 billion in artificial intelligence (AI) semiconductor revenue, followed by guidance for continued growth.
Well, the results are in. And Broadcom delivered.
Image source: Getty Images.
Broadcom's AI business is firing on all cylinders
Broadcom reported $16.7 billion in AI semiconductor revenue for its fiscal third quarter, beating management's $16 billion target. That represented a whopping 221% increase from a year ago and 54% growth from the previous quarter.
And the outlook was even better.
CEO Hock Tan projected AI semiconductor revenue of $21.7 billion in the fourth quarter, representing 236% year-over-year growth. Overall, Broadcom reported third-quarter revenue of $29.6 billion, up 86%, and generated $13.7 billion in free cash flow. Those are outstanding numbers, particularly for a company whose stock has struggled this year.
One of my concerns in August was whether Broadcom's relationship with Alphabet could be threatened by Google's expanding partnership with Marvell Technology. Broadcom helps design Google's custom Tensor Processing Units (TPUs), which offer an alternative to Nvidia's more versatile graphics processing units.
The Marvell agreement raised questions about whether Broadcom could lose business. But the third-quarter results and fourth-quarter guidance suggest demand for Broadcom's custom AI accelerators and networking products remains exceptionally strong.
That doesn't eliminate the competitive risk. It does, however, make it much harder to defend the argument that Broadcom's growth is already faltering.
Is Broadcom stock a buy?
At 28.3 times forward earnings, Broadcom isn't exactly a bargain-bin stock. Investors are still paying a premium for its growth prospects, and any slowdown in AI infrastructure spending could put additional pressure on shares.
AVGO PE Ratio (Forward) data by YCharts
But the company's performance makes that valuation easier to justify. Broadcom exceeded the $16 billion threshold I identified in August, and management followed through with even stronger guidance. Meanwhile, the stock's decline has given investors an opportunity to buy into that growth at a lower price.
I thought Broadcom was worth buying if it delivered on its AI semiconductor targets. It did considerably better than that.
And with shares trading well below their peak, I think Broadcom is an attractive buy today.
Patrick Sanders has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Broadcom, Intel, Marvell Technology, and Nvidia. The Motley Fool has a disclosure policy.