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This Month's Featured Article
The Path to $230 Billion: Broadcom Outlines the Next Phase of Its AI Growth StorySubmitted by Leo Miller. Publication Date: 9/3/2026. 
Key Points
- Broadcom beat quarterly sales and earnings estimates, but its next-quarter revenue guidance fell slightly short of analyst expectations.
- The company issued new long-term AI semiconductor guidance, forecasting $115 billion in revenue in fiscal year 2027 and $230 billion in fiscal year 2028.
- Broadcom said Anthropic and OpenAI are on track to surpass Alphabet as its largest XPU customers, even as its partnership with Alphabet remains strong.
- Special Report: Anthropic could turn SpaceX regret into round two
Broadcom's (NASDAQ: AVGO) latest earnings report was among the most revealing the company has posted in recent quarters. Another quarter of explosive AI sales growth stood out, but the quarter itself was far from the biggest story.
Management also provided key statistics and insights that give investors a much more complete understanding of the dramatic growth ahead. The more important takeaway came later, when management outlined how much AI semiconductor demand it believes it can serve over the next two fiscal years. Broadcom Beats, But Next-Quarter Guidance Falls ShortBroadcom released its financial results approximately an hour before its earnings call began. The headline numbers alone elicited a negative reaction from the market, with Broadcom shares falling as much as 5% in after-hours trading. Broadcom posted sales of $29.6 billion, an 86% increase year over year (YOY). This slightly exceeded analyst estimates of $29.43 billion. The company’s earnings per share came in at $3.32, a 96% YOY increase, beating estimates of $3.22. The likely cause of Broadcom’s decline after releasing its report was its guidance for the next quarter. Broadcom said it expects to generate sales of $34.8 billion, slightly below estimates of $35 billion. Still, Broadcom solidly surpassed its own guidance for AI semiconductor sales of $16 billion. The company generated segment revenue of $16.7 billion, up 221% YOY. Next quarter, the company expects even more astonishing growth, guiding for $21.7 billion in sales, or a 236% YOY increase. Considering these factors, Broadcom increased its full-year AI semiconductor sales guidance to $58 billion, up from $56 billion. However, this figure still pales in comparison with what Broadcom expects in the years ahead. Broadcom Provides Long-Awaited AI Semiconductor Sales GuidanceThe tide began to turn as CEO Hock Tan gave his presentation. Management gave investors the clarity they sought, offering concrete AI guidance not only for fiscal year 2027 (FY2027) but also for FY2028. In FY2027, the company said it had secured enough supply to generate $115 billion in annual AI semiconductor revenue. This figure implies nearly a doubling of its AI semiconductor revenue and represents a notable increase from the company’s previous guidance of “more than $100 billion.” Importantly, Tan directly said that Broadcom’s AI demand exceeds what this outlook implies, meaning that supply is limiting growth. In this context, it makes sense why Broadcom did not previously raise its AI semiconductor guidance. The company was likely unsure how much supply of key components it would be able to secure and, consequently, how many chips it could deliver to customers. One of the most likely supply constraints Broadcom is facing is high-bandwidth memory (HBM), which remains in tight supply. The company says it will work to secure more supply, implying upside to its forecast if successful. Meanwhile, Broadcom expects AI semiconductor sales to double again in FY2028, reaching $230 billion. This figure alone, without considering Broadcom’s non-AI semiconductor or software businesses, is 3.6 times higher than Broadcom’s total revenue in fiscal year 2025. These comments quickly shifted the market’s interpretation of Broadcom’s results. Within minutes, the stock moved from down 3% to up 3%. Anthropic Set to Supplant Alphabet as Broadcom’s Top AI CustomerBroadcom shed considerable light on its relationships with its six XPU customers, providing several important statements on this front. First, the company noted that its engagement with Alphabet (NASDAQ: GOOGL) has “never been stronger.” This came even as the company specifically said MediaTek (OTCMKTS: MDTKF) was developing Alphabet’s Tensor Processing Unit (TPU) v8t, substantiating recent rumors. On the other hand, Broadcom is responsible for the TPU v8i. The v8i is the next-generation, inference-specific variant of the TPU v8. This is particularly positive to see, as analysts expect inference workloads to increasingly grow their share of AI workloads compared with training workloads. Overall, Broadcom says it intends to “deliver multi tens of billions of dollars of TPUs annually” to Alphabet. These comments somewhat mitigate concerns that Broadcom is losing share within Alphabet’s TPU program. Additionally, even if the company is losing share at Alphabet, the negative impact is likely to lessen over the coming years. Broadcom noted that Anthropic is on track to become its largest XPU customer, while OpenAI is on track to become its second-largest XPU customer. This would presumably knock Alphabet down to its third-largest customer over time, after it held the top spot for years. In turn, Broadcom should be less reliant on maintaining a massive share of Alphabet’s TPU program. Broadcom’s AI Growth Story Is Just Getting StartedAll in all, Broadcom shares were down slightly at the conclusion of after-hours trading. The stock likely would have received a meaningful boost if its FY2027 AI semiconductor guidance had been higher, as the figure was somewhat underwhelming. However, supply constraints provide a reasonable explanation for why Broadcom chose the number it did. Nonetheless, Broadcom continues to forecast massive AI growth over multiple years, with $230 billion in AI chip sales expected in FY2028. This supports a healthy outlook for the stock. . |
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