The Confidence Behind Broadcom's Strongest Guidance in History: AI Giants Compete for Chips, Google Is No Longer the Only Answer

Chip giant Broadcom has, for the first time, officially provided guidance for $230 billion in AI chip revenue for fiscal year 2028 following its latest quarterly results, promising earnings per share to exceed $30 by then. This figure not only far surpasses previous Wall Street expectations, but also prompted multiple top Wall Street investment banks to collectively maintain a “buy” rating, choosing to look past short-term misses and focus on the long-term outlook.

On the 3QFY26 (third fiscal quarter ending July 2026) earnings call, Broadcom management raised its FY27 AI revenue guidance from “over $100 billion” to $115 billion, and for the first time explicitly set a target of $230 billion AI revenue for FY28—corresponding to a data center deployment scale of approximately 20GW—while also projecting non-GAAP EPS above $30 for FY28. Following the announcement, institutions such as Goldman Sachs, HSBC, and Jefferies all maintained their buy ratings, setting target prices at $540, $560, and $550 respectively, each implying over 50% upside from the current share price of $367.24.

However, recent results themselves were not impressive. Broadcom reported $29.6 billion in revenue for 3QFY26, roughly in line with market expectations; the 4QFY26 revenue guidance is $34.8 billion, below the estimates from HSBC and Goldman Sachs, with operating margin guidance also underperforming market consensus. The core driver of the upward revaluation of Broadcom's share price is the profound change in customer composition—Anthropic and OpenAI are replacing Google as Broadcom’s largest AI chip clients. This diversification of the customer base has significantly alleviated concerns about Broadcom’s overreliance on a single client.

Broadcom’s 3QFY26 revenue was $29.6 billion, essentially in line with the company’s guidance of $29.4 billion and market consensus of $29.5 billion. Of this, AI revenue was $16.7 billion, about 4% above the guided $16.0 billion, representing a 221% year-over-year increase; Semiconductor Solutions revenue was $20.8 billion, and Infrastructure Software revenue was $8.8 billion, both roughly in line with expectations. Non-GAAP adjusted earnings per share were $3.32, higher than the market’s consensus of $3.24.

The 4QFY26 revenue guidance of $34.8 billion is below Goldman Sachs’ expectation of $36.2 billion and HSBC’s of $37.3 billion, and only roughly in line with market consensus of $35.2 billion. Adjusted operating margin is guided at 66%, below Goldman Sachs’ 67.5% and market consensus of 66.8%. Gross margin pressures stem from the rising share of custom AI chips (ASIC), and the cost drag from HBM and other memory components shipped with XPU products—guidance for 4QFY26 gross margin is about 73%, down roughly 200 basis points from 75% in 3QFY26.

According to Goldman Sachs research, although near-term margins are under pressure, Broadcom management expects operating margin to remain steady with rapid revenue growth due to fixed cost leverage, and anticipates operational leverage to partially offset gross margin dilution.

The true boost to the market comes from Broadcom's significant upgrade of its mid- to long-term outlook. FY26 full-year AI revenue outlook was raised from $56 billion to $58 billion; FY27 AI revenue guide increased to $115 billion, up from the previous "over $100 billion" description, though still below HSBC's expectation of $140.4 billion and Goldman’s prior estimate of $133 billion.

More groundbreaking was Broadcom’s first-ever FY28 AI revenue guidance of $230 billion, corresponding to about 20GW in data center deployments. This number is significantly higher than HSBC’s prior forecast of $201 billion, market consensus of $174.5 billion, and Goldman’s previous estimate of $192.9 billion. Meanwhile, FY28 non-GAAP EPS guidance above $30 also exceeds HSBC’s estimate of $28.77 and market consensus of $26.23.

According to a Goldman Sachs research report, Broadcom management stated that key supply chain components for FY27 and FY28 have already been secured, and that the main constraints underpinning the current guidance are the readiness of data center land, power, and room construction—not demand or supply. This means that as infrastructure bottlenecks are gradually alleviated, there is further potential for actual revenue to exceed guidance.

Another key highlight of this earnings release is the significant restructuring of Broadcom’s customer base. For a long time, Broadcom's ASIC business was highly dependent on Google’s TPU orders—this concentration risk was always a market concern. For the first time, management disclosed that Anthropic will become Broadcom’s largest XPU customer in FY27, and OpenAI will become the second largest in FY28, while Google will drop to third place.

Specifically: Anthropic will deploy 1GW of Ironwood (TPU v8i) this year, plans for an additional 5GW in FY27, and a further 10GW in FY28; OpenAI’s Jalapeño custom XPU began mass production shipments in 3QFY26, with deployment plans for 1.3GW in FY27 and expanding beyond 5GW in FY28, and a third-generation XPU is already under development; Meta’s MTIA custom accelerator will begin mass production in 4QFY26, with Broadcom expecting cumulative deployments of 3GW by 2028. According to HSBC research, the aggregate pipeline scale for these non-Google clients is about 18GW, which, estimating about $10 billion revenue per GW, corresponds to roughly $180 billion in non-Google ASIC revenue.

Nevertheless, Google has not exited. Broadcom has signed a long-term agreement with Google covering development and supply of future generations of TPUs as well as AI network infrastructure collaboration. Management indicated that, in the coming years, Google’s annual TPU procurement will be in the “tens of billions” of dollars. Broadcom began high-volume shipments of Ironwood TPU v7 to Google in 3QFY26 and commenced mass shipments of the TPU v8i as well.

Beyond AI chips, Broadcom’s AI networking business is also seen as a key growth driver. Management expects AI networking revenue to keep pace with XPU revenue in the coming years. Broadcom launched the industry’s first 100Tb/s Ethernet switch Tomahawk 6, and has completed tape-out of the industry’s first 200Tb/s Ethernet switch Tomahawk 7. At the same time, Broadcom is significantly expanding capacity for EML lasers, VCSELs, and continuous-wave lasers, with annual capacities of all three products doubling this year, and plans for continued expansion over the next two years to address laser demand outstripping industry supply.

On the supply chain front, Broadcom's new substrate packaging plant in Singapore will begin mass production in FY27 to alleviate substrate supply bottlenecks. Management noted that, beyond substrates, cutting-edge wafers, HBM, and system memory are all potential bottlenecks for deployment, and the company is working with supply chain partners to resolve these.

In the face of these results—which combine short-term volatility with long-term surprises—major Wall Street institutions continue to hold an optimistic stance.

According to Goldman Sachs research, the bank raised its 12-month target price for Broadcom from $525 to $540, based on 30x FY27 normalized EPS of $18, maintained its “buy” rating, and sharply raised its FY28 EPS forecast from $28.85 to $34.25 and its AI revenue projection for the same period from $192.9 billion to $240.3 billion.

HSBC lowered its target price from $600 to $560 due to downward revisions of 3% and 7% in FY26 and FY27 AI revenue forecasts respectively, but still maintains its “buy” rating. The valuation is based on a 28x FY27 P/E, implying about 53% upside. HSBC analyst Frank Lee believes strong ASIC volume growth and the upside in AI network revenue are sufficient to drive Broadcom towards the target valuation multiple.

According to Jefferies research, the bank maintains its “buy” rating and a $550 target price based on 20x CY28 EPS of $27.21, and raised its FY27 revenue forecast by about 9%. Jefferies highlights that the official $230 billion FY28 guidance was the biggest positive surprise of this earnings release, but cautions that with expectations for the next eight quarters now comparatively clear, the “discovery value” for the share price may be limited; margin dilution will also persist as the share of XPU increases and as more storage content is shipped, remaining a key market debate.