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The Two Key Insights From Broadcom's Earnings Call and Reasons the Stock Remains a Top Buy

The Two Key Insights From Broadcom's Earnings Call and Reasons the Stock Remains a Top Buy

101 finance101 finance2026/03/13 19:45
By:101 finance

Key Takeaways from Broadcom's Latest Earnings

Broadcom (NASDAQ: AVGO) recently delivered impressive fiscal Q1 results, but two standout points from their earnings call are particularly noteworthy for investors. These developments highlight why Broadcom is positioned as a compelling investment opportunity right now. Let’s examine these major updates in detail.

Broadcom’s Expanding AI Chip Market

Broadcom is poised to capitalize on the growing demand for artificial intelligence (AI) infrastructure. During the earnings call, the company projected that its custom AI chip revenue could surpass $100 billion by 2027. This estimate covers only AI ASIC (application-specific integrated circuit) sales and excludes revenue from AI data center networking. Broadcom anticipates significant increases in chip volume from clients such as Alphabet, Anthropic, Meta Platforms, and OpenAI.

Broadcom AI Chip Growth

To put this in perspective, Broadcom’s total revenue for fiscal 2025 was just under $64 billion, with AI contributing about $20 billion. Citigroup estimates that $14 billion of Broadcom’s AI revenue comes from ASICs. This suggests Broadcom’s AI chip sales could increase nearly sevenfold in the next two years.

AI networking revenue is also accelerating, rising 60% last quarter and expected to grow even faster in fiscal Q2. Broadcom projects that AI networking will account for 33% to 40% of its AI revenue each quarter, potentially adding $30–$40 billion in networking revenue by fiscal 2027. This points to remarkable growth across Broadcom’s AI business.

Positive Gross Margin Outlook

One concern has been that Broadcom’s ASIC segment might deliver lower gross margins, especially with rack sales of Alphabet’s tensor processing units (TPUs) expected to be less profitable. However, Broadcom’s management clarified during the earnings call that these fears are unfounded.

When asked if rack sales would reduce gross margins by 500 basis points, CEO Hock Tan dismissed the concern, stating that Broadcom’s semiconductor gross margins will remain stable, even as sales increase. This reassurance counters analyst expectations of margin pressure and signals continued financial strength for Broadcom.

Is Now the Right Time to Invest in Broadcom?

Broadcom stands out as one of the most dynamic AI-driven companies today. With its growth trajectory clearly outlined and concerns about gross margins addressed, the stock appears to be a strong candidate for investors.

Considerations Before Investing

Before making a decision, it’s worth noting that the Motley Fool Stock Advisor team recently identified their top 10 stocks for investors—but Broadcom was not among them. The selected stocks are expected to deliver substantial returns in the coming years.

  • For example, Netflix was recommended on December 17, 2004. A $1,000 investment then would now be worth $508,607.*
  • Nvidia was recommended on April 15, 2005. That same investment would have grown to $1,122,746.*

The Stock Advisor service boasts an average return of 933%, far outpacing the S&P 500’s 188%. Don’t miss out on their latest top 10 picks—join a community of investors focused on maximizing returns.

*Stock Advisor returns as of March 13, 2026.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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