Broadcom Tripled AI Chip Sales and the Stock Still Fell. Is AVGO the Nvidia Alternative Investors Missed?

AVGO's AI chip revenue surged 221% to $16.7 billion while management projects $230 billion in AI revenue by fiscal 2028.

NVDA dominates general-purpose AI compute at a 45 P/E, while AVGO's custom XPUs serve hyperscalers at a forward P/E near 20.

XPU co-design locks in hyperscalers because switching chips requires restarting a multi-year design cycle, creating durable switching costs.

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Broadcom ( NASDAQ:AVGO ) reported a quarter that, on the numbers, looks like one of the most consequential AI results of the year. AI semiconductor revenue reached $16.7 billion, up 221% year-on-year and 54% sequentially, and management raised the fiscal 2027 AI revenue outlook to roughly $115 billion, with fiscal 2028 pointing to $230 billion.

The post-earnings reaction was still negative, largely because the Q4 total revenue guide of about $34.8 billion landed close to, but not clearly above, consensus. The settled session closed down 0.66% at $367.24, with the sharper move happening in extended hours around the report.

Revenue came in at $29.591 billion, up 85.5% year-over-year, with non-GAAP EPS of $3.32 against a $3.2382 estimate. Operating margin expanded 240 basis points to 67.9%, and free cash flow was $13.665 billion, or 46% of revenue.

The market chose to trade the one line that disappointed: the Q4 top-line guide. That is the reasonable-sounding overreaction, because the disclosure that mattered more was the forward AI trajectory.

A custom AI accelerator, or XPU, is silicon co-designed with a specific hyperscaler for a specific model family. XPUs represented 73% of AI revenue and XPU shipments grew more than three and a half times year-on-year. Hock Tan put it directly: "When you co-develop a chip that is optimized for your particular LLM workloads, you will outperform any GPU."

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