Update shared on05 Sep 2025
Fair value Increased 44%Broadcom Blows Past Q3 Expectations
- Revenue: $15.95B (+22% YoY) vs. $15.8B consensus
- Adj. EPS: $1.69 vs. $1.66 consensus
- Q4 Guide: $17.4B revenue outlook, ahead of ~$17B estimates
- AI Momentum: $5.2B AI revenue in Q3 (+63% YoY), tracking to $6.2B in Q4
- Big Win: Secured a $10B AI chip order, reinforcing visibility into FY2026
Spotlight on XPUs: Broadcom’s Secret Weapon
XPUs are Broadcom’s custom AI accelerators—bespoke silicon (akin to ASICs) designed for hyperscalers like Google, Meta, ByteDance, and now OpenAI. They’re optimised for peak efficiency, cost savings, and scalability—exactly what massive AI training farms demand.
Market Opportunity: A Multi-Billion Dollar Runway
- Serviceable Addressable Market (SAM): Broadcom pegs the AI XPU + networking market at $60B–$90B by FY2027, driven by deployments from three core hyperscalers, each targeting 1M-unit XPU clusters across a unified fabric.
- Upside Optionality: If Microsoft or Amazon adopt XPUs, TAM could expand even further.
Why XPUs Win with Hyperscalers
- Custom at Scale – XPUs lower total cost of ownership vs. off-the-shelf GPUs, while letting hyperscalers dictate specs.
- 3.5D Packaging Breakthrough – Broadcom’s XDSiP System-in-Package (stacking compute dies, IO, and HBM) ships in 2026, unlocking massive performance and bandwidth gains.
- Network Integration – XPUs come paired with Broadcom’s Tomahawk Ultra and Jericho networking silicon. Networking revenue could rise to 15–20% of AI silicon sales (from today’s 5–10%).
The Investment Case
Broadcom’s XPU franchise has the potential to reshape AI compute economics, cementing its position as a hyperscaler-first silicon partner. The setup is highly bullish, with surging AI demand, differentiated packaging, and sticky networking integration. Execution risks remain (delivery cadence, customer concentration), but the growth story is compelling and underappreciated.
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