Broadcom’s Fiscal Q3 Shows AI-Fueled Growth, Even as Shares Lag the Market

Broadcom Inc. (NASDAQ:AVGO) delivered a standout quarter for its fiscal third quarter of 2026, ended Aug. 2, with results announced Sept. 2 that underscore how central artificial intelligence has become to its semiconductor business. Yet the strong numbers arrive at an awkward moment for the stock, which has retreated sharply from its mid-year highs.

Shares of the chipmaker climbed through the first half of 2026 and touched a 52-week high of $495. Since then, the stock has fallen 27%, leaving it up just 4% year to date — a marked contrast with the S&P 500’s 11% gain over the same span. On the day of this writing, the stock was trading near $344.65, down 4.72% from its previous close, valuing the company at roughly $1.99 trillion.

The quarter’s fundamentals were anything but soft. Revenue jumped 86% year over year to $29.6 billion, while adjusted operating income rose 92% to $20.1 billion. Adjusted earnings per share came in at $3.32, up 96% from the year-ago quarter. Notably, revenue growth outpaced the growth in expenses, a dynamic that supports margin expansion.

Free cash flow was another highlight, ending the period at $13.7 billion, an increase of 95% year over year. The company’s AI chip operations, which supply custom silicon and networking components for data centers, are expanding at an even faster clip than the consolidated business, according to the company’s latest update.

Market context

Broadcom sits at the intersection of two of the most active themes in technology: custom AI accelerators and networking silicon for hyperscale data centers, alongside a substantial infrastructure software segment. The company operates through two units — Semiconductor Solutions and Infrastructure Software — giving it exposure across both the hardware and software layers of AI buildouts.

The gap between the quarter’s growth rates and the stock’s recent pullback has become a talking point among market observers. The 27% decline from June highs has outpaced any comparable deterioration in reported results, and shares now trail the broader market year to date despite triple-digit earnings growth in the most recent quarter.

Investors will also be weighing the durability of AI-related demand, which has driven outsized growth across the semiconductor sector, against broader macroeconomic uncertainty and the sector’s history of sharp valuation swings.

What to watch

• Broadcom’s fiscal fourth quarter earnings report, expected later this year, including updated full-year guidance.
• Disclosure on AI semiconductor revenue and backlog from hyperscale customers.
• Any commentary on custom accelerator design wins and their production timelines.
• Broader semiconductor sector sentiment as peers report quarterly results.

Source: original release