Broadcom's AI segment growth and strong free cash flow position the company to hit $30 EPS by 2028, even as the firm navigates high customer concentration and rising interest rates.
Broadcom is positioned as a critical infrastructure provider for the AI buildout, with its AI semiconductor revenue surging 221% YoY to $16.7B in Q3. The company's Jalapeno custom accelerator chips offer hyperscalers a cost-effective alternative to standard GPUs, which is increasingly vital as rising borrowing costs force companies to optimize compute efficiency. With management guiding for $230B in AI revenue by FY28 and targeting $30+ EPS, the company's strong free cash flow and debt reduction strategy provide a robust buffer against macroeconomic headwinds.
Broadcom's Jalapeno chips are purpose-built for specific LLM workloads, allowing them to run frontier AI tasks at half the cost of a standard GPU.
The company maintains a strong balance sheet with $23.98 billion in cash, generates massive free cash flow, and actively pays down long-term debt, such as the $5.6 billion retired in Q3.
Broadcom reported a massive 221% year-over-year jump in AI semiconductor revenue to $16.7 billion in Q3. CEO Hock Tan projects fiscal 2028 AI revenue to reach $230 billion, driven by demand for custom chips that offer superior cost-efficiency over standard GPUs for hyperscalers.
Broadcom's custom accelerators, such as the Jalapeno chip, allow hyperscalers to run frontier AI workloads at half the cost of traditional GPUs, providing a critical advantage as borrowing costs rise.
The company faces significant customer concentration risk, as a small group of hyperscalers including Google, Meta, OpenAI, and Anthropic drive the majority of the XPU roadmap.