Broadcom shares climbed 4% in after-hours trading on Thursday, after the company posted strong third-quarter results and confirmed a $10 billion custom chip deal with a new cloud customer.
The earnings and forecast numbers were both above analyst estimates, pushing the stock higher.
The company reported $1.69 in adjusted earnings per share, beating the $1.65 expected by LSEG analysts. Revenue hit $15.96 billion, also above the predicted $15.83 billion.
Broadcom now expects to pull in $17.4 billion in revenue for the fourth quarter, topping the $17.02 billion Wall Street expected. The company’s revenue for Q3 was also up 22% from last year. The market responded fast.
Broadcom lands new client for XPU AI chips
CEO Hock Tan said the company has secured $10 billion worth of orders for its XPU custom AI chips from a fourth cloud customer—someone new, not among the three major clients Broadcom was already working with.
“One of these prospects released production orders to Broadcom, and we have accordingly characterized them as a qualified customer for XPUs,” Tan said. He added that shipping will begin in 2026, and the deal has already bumped up Broadcom’s expected AI chip revenue for next year.
Broadcom is already known for building chips for Google and other large cloud firms. It also designs the networking and support software needed to connect AI systems. Tan said the company’s AI-related revenue reached $5.2 billion this quarter, up 63% from last year and ahead of Broadcom’s earlier forecast of $5.1 billion. He expects $6.2 billion in AI revenue in Q4.
AI is just one part of the growth. Broadcom’s semiconductor business, which includes all chip sales, reported $9.17 billion in revenue, up 57% from last year. Its infrastructure software division, which now includes VMware, brought in $6.79 billion, a 43% jump. Tan credited all three—custom AI chips, networking parts, and VMware software—for the company’s Q3 growth.
Broadcom posted net income of $4.14 billion, or 85 cents per share, compared to a $1.88 billion loss (40 cents per share) a year ago. That earlier loss was due to a $4.5 billion one-time tax expense from moving intellectual property into the U.S.
Market watches Broadcom rise as Nvidia stalls
Broadcom’s market cap now sits at over $1.4 trillion, after nearly doubling over the last year. The stock is already up 32% year-to-date as of Thursday’s close. Investors are watching closely because these developments could challenge Nvidia’s grip on the AI chip market.
Back in March, Tan had revealed Broadcom was working with three cloud clients to build custom chips. With this fourth client onboard and real orders on the table, it signals real competition. Nvidia might be in trouble down the line.
But Nvidia still holds weight. It became the first company to hit a $4 trillion market cap, and $1 trillion of that came this year alone. It currently makes up 8% of the S&P 500. That’s why investors are nervous: if Nvidia slows, what happens to the broader market?
Jay Woods, chief global strategist at Freedom Capital Markets, said Nvidia’s stock performance affects the entire index. “I think this turns away the focus on the chip story and returns the focus back to the Fed,” Woods said. He believes the next wave in the market won’t come from AI names like Nvidia or Broadcom but from what the Federal Reserve decides on interest rates.
Woods noted that Nvidia could pause or pull back a bit after its big run since April lows. “Nvidia is still trading near all time highs. … This isn’t going to be the catalyst to get us to that next level,” he said.
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