OpenAI set to start mass output of AI chips with Broadcom: FT

OpenAI set to start mass output of AI chips with Broadcom: FT

Broadcom Inc. (AVGO) has forecasted a strong fourth-quarter revenue, driven by robust demand for its custom AI chips. The company expects fourth-quarter revenue to be around $17.4 billion, compared to analysts' average estimate of $17.01 billion [1].

The forecast is underpinned by a significant increase in AI semiconductor revenue, which is expected to reach $6.2 billion, up 66% year-on-year. This growth is attributed to the adoption of Broadcom's custom accelerators by hyperscale customers, including Google, and the increasing demand for AI in data centers and machine learning applications [1].

Broadcom has been a major beneficiary of the generative artificial intelligence boom, with its chips serving as an alternative to Nvidia's costly processors. The company's AI-related semiconductor demand has been bolstered by the launch of new networking products, such as the Tomahawk Ultra and Jericho networking chips, which aim to challenge Nvidia's dominance in the AI semiconductor industry [1].

In the third quarter, Broadcom reported record revenue of $16 billion, up 22% year-on-year, with AI semiconductor revenue reaching $5.2 billion, up 63% year-on-year. The company also secured a record backlog of $110 billion, largely driven by AI in terms of growth [2].

Broadcom's CEO, Hock Tan, highlighted the importance of networking in deploying larger clusters of compute for generative AI. He also emphasized the company's continued investment in AI and networking infrastructure, which is expected to drive its guidance for Q4 consolidated revenue to approximately $17.4 billion, up 24% year-on-year [2].

The company's gross margin was 78.4% of revenue in the third quarter, with operating income of $10.5 billion and adjusted EBITDA of $10.7 billion. Free cash flow was $7 billion, representing 44% of revenue [2].

Broadcom's shares were up 3% in extended trading, following the earnings report. They have risen over 30% so far this year, building on a more than threefold surge in the past two years [1].

Historically, AVGO has demonstrated positive price momentum following earnings beats. Backtesting from 2022 to the present shows that when the stock exceeds expectations, it typically experiences a short-term upward move, with a maximum observed return of 7.57% over a 30-day period. However, the win rate for shorter time frames is lower, indicating that while earnings beats often drive initial gains, the magnitude of returns tends to diminish over time.



References:

[1] https://www.thestar.com.my/tech/tech-news/2025/09/05/broadcom-forecasts-upbeat-fourth-quarter-revenue-as-ai-chip-demand-soars
[2] https://seekingalpha.com/news/4492548-broadcom-forecasts-17_4b-q4-revenue-as-ai-semiconductor-momentum-accelerates-with-new