Broadcom's $16 billion AI target puts custom silicon cycle in focus ahead of Sept. 2 earnings
The custom silicon cycle enters a critical test this week. Broadcom (NASDAQ: AVGO) is set to report fiscal third-quarter results after the close on September 2, carrying CEO Hock Tan's guidance for AI semiconductor revenue to…
Key takeaways
- Broadcom reports fiscal Q3 results after the close on September 2, with CEO Hock Tan guiding AI semiconductor revenue to exceed $16 billion, over 200% year-over-year growth.
- In fiscal Q2 (ended May 3), Broadcom posted revenue of $22.18 billion (up 48%), net income of $9.31 billion (up 88%), and EPS of $1.91 (up 85%), with AI semiconductor revenue of $10.8 billion (up 143%).
- Broadcom designs custom ASICs to customer specifications, distinguishing it from Nvidia and AMD, and has helped design Alphabet's Tensor Processing Units for about a decade.
- Alphabet raised its projected 2025 capital expenditure from $185 billion to $200 billion, signaling continued demand for custom compute.
- An Alphabet–Marvell warrant deal, giving Google rights to up to 58.9 million Marvell shares at $206.58 (roughly $12.2 billion), rattled Broadcom shares in April.
The custom silicon cycle enters a critical test this week. Broadcom (NASDAQ: AVGO) is set to report fiscal third-quarter results after the close on September 2, carrying CEO Hock Tan's guidance for AI semiconductor revenue to exceed $16 billion, a figure he said would represent growth of over 200% year-over-year.
The company's fiscal second quarter, which ended May 3, delivered revenue of $22.18 billion, up 48% year-over-year, with net income of $9.31 billion, up 88%. Earnings per share came in at $1.91, up 85% from the second quarter of 2025. Tan described the period as producing record revenue, operating profit, and free cash flow, driven by AI semiconductor revenue from custom accelerators and networking. AI semiconductor revenue in Q2 reached $10.8 billion, up 143% year-over-year and above the company's own forecast. Tan said he expects that momentum to carry into Q3, where the $16 billion target sits.
Broadcom occupies a distinct lane from Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD). Rather than general-purpose processors, it designs application-specific integrated circuits, ASICs, built to individual customer specifications and typically produced at lower cost. The natural read-through to the broader capex cycle runs through Alphabet (NASDAQ: GOOGL): Broadcom has worked with Alphabet for roughly a decade designing Google's Tensor Processing Units, and Alphabet has since begun selling TPU systems to third-party customers alongside deploying them internally. Alphabet recently raised its projected capital expenditure for the year from $185 billion to $200 billion, a signal that the demand environment for custom compute is not easing.
The Marvell variable
Against that backdrop, Alphabet and Marvell Technology (NASDAQ: MRVL) announced an arrangement that rattled Broadcom shares in April. Marvell issued a warrant giving Google the right to acquire up to 58.9 million Marvell shares at $206.58 per share, a potential stake valued at roughly $12.2 billion. A Marvell SEC filing described the agreement as covering products that "attach to the (TPU) ecosystem," tied to commercial milestones and including a memory processing unit component. Marvell shares are up 147% year to date.
William Kerwin of Morningstar told Reuters the deal is a "big win" for Marvell but should be read as Alphabet expanding its network of chipmaking partners "rather than a competitive displacement of Broadcom." On balance, September 2's AI revenue number will settle that question. Broadcom carries into that report a year-to-date stock gain of 6%, against 12% for the S&P 500.
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