On March 4, Broadcom (AVGO +4.69%) delivered yet another blowout quarter. The semiconductor and infrastructure software giant reported $19.31 billion of revenue for its fiscal 2026's first quarter. This included $8.4 billion in artificial intelligence (AI) revenue. In its December quarterly print, Broadcom had guided for $19.1 billion in first quarter revenue and $8.2 billion in AI revenue.
Here's why Broadcom remains one of the top growth stocks for investors to buy and hold for years to come.
Image source: Getty Images.
1. Broadcom is rapidly growing its AI semiconductor business
Broadcom's AI revenue is showing no signs of slowing down. The company is forecasting second-quarter fiscal 2026 AI revenue of $10.7 billion, compared with total revenue of $22 billion -- meaning AI now comprises about half of the total business. Just a year ago, it was less than 30%.
Broadcom's AI chip and networking business is growing much faster than its non-AI semiconductor and infrastructure software businesses, so the company could soon become a much more concentrated AI play.
Key partnerships are driving Broadcom's impeccable results. Broadcom has charted a multi-year roadmap to develop and service custom AI accelerators and associated hardware for five core customers, including Alphabet and Meta Platforms. Broadcom also announced a sixth customer, OpenAI, on its March 4 earnings call.
By designing separate chips for training and inference, Broadcom is helping hyperscalers reduce reliance on graphics processing units and optimize the hardware behind their distinct AI workloads.
NASDAQ: AVGO
Key Data Points
2. An AI networking powerhouse
Broadcom continues to innovate at a rapid rate. It launched its Tomahawk 6 router nine months ago, and is already forecasting a two-fold increase in performance with its Tomahawk 7 router (debuting in 2027).
While Broadcom's custom chips rightly capture the spotlight, it's a mistake for investors to downplay just how powerful Broadcom's networking business is. On its March 4 earnings call, Broadcom CEO Hock Tan said to expect AI networking components to make up 33% to 40% of total AI revenue -- noting that AI networking accounted for around 33% of Q1 fiscal 2026 AI revenue and is expected to jump to 40% in Q2.
Put another way, Broadcom's $10.7 billion in Q2 AI revenue guidance is really more like $4.3 billion in AI networking and $6.4 billion in AI chips. For context, Broadcom's AI revenue in its fiscal 2025's second quarter was $4.4 billion -- meaning the AI networking business alone is now generating what the entire AI chips plus networking business was producing just one year ago.
Although AI chips and networking are delivering almost all of Broadcom's growth right now, it still has a diversified business model. Some of the lagging parts of the business are expected to improve. Broadcom is guiding for a 9% quarter-over-quarter increase in infrastructure software revenue to $7.2 billion in Q2 of its fiscal 2026, a 27.3% quarter-over-quarter increase in AI revenue, and a 14% increase in total revenue.
3. Broadcom returns boatloads of capital directly to shareholders
In addition to its breakneck growth rate, Broadcom remains an ultra-high-margin business that generates a ton of free cash flow (FCF). In its latest quarter, Broadcom produced $7.3 billion in net income and $8 billion in FCF from $19.1 billion in revenue to support $3.1 billion in cash dividends and $7.8 billion in stock buybacks. Broadcom is able to aggressively buy back stock and grow its dividend because of its high operating margins, which were 44.3% in its latest quarter.
Broadcom yields only 0.8% because its stock price has grown faster than its dividend. But the company is highly committed to growing its payout, with several monster increases over its 15-year streak of boosting its dividend every year.
A high-conviction buy in March
Broadcom remains one of the best semiconductor stocks to buy and hold for years to come because it is capitalizing on AI growth while remaining a diversified, high-margin semiconductor and infrastructure software business.
There's truly nothing not to like about Broadcom as a company. However, Broadcom stock is on the pricey side right now. It's fetching a 29.9 forward price-to-earnings ratio, which is even higher than Nvidia (NVDA +2.59%) at 22.2 forward multiple. Broadcom could have no trouble growing into its valuation, given that Tan is forecasting $100 billion in fiscal 2027 revenue from AI chips alone, driven by 10 gigawatts of compute demand.
All told, Broadcom stands out as an elite growth stock to build a portfolio around, especially for investors looking for a slightly less concentrated AI chip stock than Nvidia.
