NEW YORK, June 29, 2026, 12:10 EDT
- Broadcom’s AI chip sales are expected to make up around 54% of fiscal Q3 revenue, up from about 49% in Q2.
- The stock gained around 1.5% ahead of midday trading in New York, though Benzinga noted shares remain off by about 20% for June.
- Investors are worried about margin, not demand. Reuters said CEO Hock Tan told them custom AI chips have slimmer margins than Broadcom networking switches, mainly because the chips need a lot of high-bandwidth memory.
- JPMorgan’s Harlan Sur kept his $580 target on the stock, still above the MarketBeat consensus around $493.
Broadcom Inc. NASDAQ:AVGO says AI chip revenue should hit $16.0 billion in its fiscal Q3, making up about 54% of expected revenue, up from 49% in the quarter ended May 3. Still, shares have stayed weak through June, down around 20% for the month, according to Benzinga.
Broadcom’s split is a signal the company is shifting away from its mixed chip-software setup, pushing harder into AI custom chips. CEO Tan said, “The momentum continues,” noting Q2 AI semiconductor revenue jumped 143% to $10.8 billion. CFO Kirsten Spears told investors operating leverage held up, with adjusted EBITDA reaching 69% of revenue for Q2 and guidance just under that at 68% for Q3. Broadcom Inc.
| Broadcom revenue mix | Q2 FY2026 actual | Q3 FY2026 outlook | Sequential change |
|---|---|---|---|
| Total revenue | $22.187 bln | ~$29.4 bln | +32.5% |
| AI semiconductor revenue | $10.8 bln | $16.0 bln | +48.1% |
| AI share of total revenue | 48.7% | 54.4% | +5.7 pct pts |
| Adjusted EBITDA margin | 68.7% | ~68.0% | about unchanged |
Reuters math using company numbers has AI revenue rising quicker than the total line. That pushes Broadcom further into OpenAI and top customers like Alphabet Inc. NASDAQ:GOOGL and Meta Platforms Inc. NASDAQ:META, but it also ties Broadcom shares more to chip yields, memory prices and where customers pick up their silicon.
Tan told Reuters last week that Broadcom’s profit margin on custom AI chips is lower than on some other chips, like networking switches, due to the big amount of high-bandwidth memory needed for AI chips. SK Hynix Inc. KRX:000660 and Samsung Electronics Co. KRX:005930 supply this memory to Broadcom, Tan said.
OpenAI’s Jalapeño chip gives the company more scale, but there’s no outside sales channel expected soon. OpenAI and Broadcom said they finished the chip in nine months, and samples have been running machine-learning work in labs. They plan to roll it out at gigawatt scale with Microsoft Corp. NASDAQ:MSFT and other data center partners. OpenAI President Greg Brockman said the chip’s goal is to “make compute more abundant.” Hardware chief Richard Ho said Jalapeño was designed to push workloads up to hardware limits. OpenAI
Reuters reported OpenAI wants the chips just for its own use. Taiwan Semiconductor Manufacturing Co. NYSE:TSM is set to make the chips, while Celestica Inc. NYSE:CLS will handle the server systems, according to Reuters.
| Company | Price before midday New York | Session change | Investor read-through |
|---|---|---|---|
| Broadcom Inc. NASDAQ:AVGO | $370.38 | +1.5% | AI-specific chips, networking, VMware assets |
| Nvidia Corp. NASDAQ:NVDA | $193.86 | +0.7% | Main GPU supplier for both training and inference |
| Alphabet Inc. NASDAQ:GOOGL | $351.94 | +4.3% | Heavy TPU user, exposed to supply issues |
| Marvell Technology Inc. NASDAQ:MRVL | $266.20 | -0.2% | Competes in custom silicon |
Prices at around 11:55 a.m. EDT, while U.S. cash equities were trading.
The focus for bulls has shifted to 2027. Back in March, Reuters said Broadcom was forecasting AI chip revenue of more than $100 billion for next year. D.A. Davidson’s Gil Luria described Broadcom’s outlook and 2027 guide as “very encouraging,” per the report. Reuters
The Motley Fool called the drop a buying opportunity, noting Broadcom had gained nearly 40% year-to-date at its high and was up about 9% when the story ran. The piece suggested 2027 could be big for custom AI chips, naming Alphabet, Meta, Anthropic and OpenAI as major AI partners.
Alphabet is trickier here. MarketBeat pointed to some concern that Google might shift more TPU business away from Broadcom. Still, JPMorgan’s Sur kept the $580 target and said a long-term deal with Google runs through future TPU versions up to v11. There’s also MediaTek Inc. (TPE:2454), mentioned in some reports as another possible TPU supplier.
An Insider Monkey piece distributed by Yahoo Finance put Broadcom’s new focus on AI into context. The article said CEO Hock Tan now sees AI as a bigger return driver than deals, which is a shift from Broadcom’s acquisition-heavy track record with VMware, Symantec Enterprise Security, and CA Technologies. Q2 numbers back that up: semiconductor revenue jumped 79% to $15.009 billion, while infrastructure software was up 9% to $7.178 billion.
Investors aren’t questioning AI demand now. The real test is if Broadcom can hold adjusted EBITDA margins around the high-60% mark as AI chips make up over half of sales and more memory-focused accelerators get added to the lineup. OpenAI said it plans to put out a technical report on Jalapeño’s performance in the next few months.
