Broadcom (AVGO)

Custom AI silicon + networking (Broadcom) — the hyperscaler-ASIC + AI-networking alternative to NVIDIA

AI exposure 58% — derived from reported segment revenue, not asserted.

Where it sits

Silicon Layer → Semiconductor Devices · figures rebased to Q3 FY2026, reported 2026-09-02

Custom AI accelerators (XPUs) are 41.2% of revenue after the Q3 FY2026 rebase — no longer a plurality but a clear largest business, so placement rule 2 puts the primary in Semiconductor Devices. The rest is tagged separately: Enterprise & Business Software at 18.5%; Ethernet AI networking under Network Switching & Hardware at 15.2%; Analog, Logic & Mixed-Signal ICs at 14.0%; Data & Infrastructure Software at 7.4%; Cybersecurity at 3.7%.

Also tagged: emerging in Connectivity → Network Switching & Hardware; secondary in Software Stack → Enterprise & Business Software; emerging in Silicon Layer → Analog, Logic & Mixed-Signal ICs; emerging in Software Stack → Data & Infrastructure Software; emerging in Software Stack → Cybersecurity.

Reported segments

• Semiconductor Solutions — 70.4% of revenue
• Infrastructure Software (VMware, mainframe, security) — 29.6% of revenue

Broadcom ($29.591B Q3 FY2026, +86% YoY). Semiconductor Solutions 70.4% ($20.839B, +127%) = primary B1 Semiconductor Devices, and it is now mostly AI: the release discloses $16.7B of AI semiconductor revenue, 80% of the segment and 56% of the company, up 221% YoY. On the call management split that between custom XPU accelerators at 73% (41.2% of total revenue, shipments up over 3.5x) and Ethernet AI networking at 27% (15.2% of total, up over 2.5x) — networking fell from about 40% of the AI mix a quarter earlier, not because it shrank but because XPUs grew faster. The residual non-AI…

How the 58% is built

• Semiconductor Solutions — 70.4% of revenue × 80% AI-driven (disclosed). Broadcom discloses AI semiconductor revenue directly: $16.7B of the $20.839B segment in Q3 FY2026, or 80%, split on the call between custom XPUs at 73% and Ethernet AI networking at 27%
• Infrastructure Software (VMware, mainframe, security) — 29.6% of revenue × 5% AI-driven (estimate). VMware, mainframe and security are a recurring enterprise annuity essentially independent of AI capex, with only incidental AI-workload attach

Investment read

Moat. Disclosed rather than inferred: $16.7B of AI semiconductor revenue in a single quarter, 80% of the semiconductor segment, on custom accelerator programmes co-designed with six named hyperscale customers plus the Tomahawk and Jericho Ethernet silicon underneath most AI fabrics. The VMware repricing added an annuity customers could not decline. Non-GAAP operating margin of 67.9% is what that combination collects.

Bottleneck / pricing power. Among the strongest in the Atlas: 75.0% non-GAAP gross margin and a 67.9% operating margin, with Q4 guided to hold roughly 66% while revenue grows another 93% YoY. Sequential AI revenue growth of 54% in one quarter, into guidance of $21.7B for the next, is allocation rather than selling.

Role in the AI stack. The custom-ASIC and AI-networking layer — the hyperscalers' route around NVIDIA.

Connected companies

• Arm Holdings (ARM) — AVGO is supplied by: CPU IP licensed into custom accelerators (e.g. OpenAI/Broadcom CPU)
• Taiwan Semiconductor (TSM) — AVGO is supplied by: wafer fab (ASICs)
• Synopsys (SNPS) — AVGO is supplied by: EDA + design IP
• Arista Networks (ANET) — AVGO supplies: Tomahawk/Jericho switch silicon
• Microsoft (MSFT) — AVGO supplies: VMware Cloud Foundation powering Azure VMware Solution (license-portability model since Oct 2025)
• Alphabet (GOOGL) — AVGO supplies: TPU co-design + supply (7 generations since 2014)
• Monolithic Power Systems (MPWR) — AVGO is supplied by: high-density power management for AI ASIC boards
• Cisco Systems (CSCO) — AVGO supplies: Tomahawk/Jericho switch silicon into Cisco systems
• Amazon (AMZN) — AVGO supplies: merchant switch silicon (Tomahawk) for AWS self-built network gear; Trainium ASIC work is Marvell/Annapurna, not Broadcom
• Meta Platforms (META) — AVGO supplies: custom accelerator (MTIA) co-design + networking
• Amkor Technology (AMKR) — AVGO is supplied by: advanced packaging for custom AI ASICs
• Nokia (NOK) — AVGO supplies: merchant switch/routing silicon for IP networks
• NVIDIA (NVDA) — AVGO competes with: Merchant GPU vs custom ASIC — hyperscalers can route accelerator spend to Broadcom-designed silicon
• Advanced Micro Devices (AMD) — AVGO competes with: Merchant accelerator vs custom ASIC for the same hyperscaler workloads

Others in Semiconductor Devices

• NVIDIA (NVDA)
• Advanced Micro Devices (AMD)
• Arm Holdings (ARM)
• Qualcomm (QCOM)
• Marvell Technology (MRVL)
• Intel (INTC)

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