Broadcom, one of the largest players in semiconductor manufacturing, is heading closer to reporting its first-quarter earnings on March 4. And Wall Street’s focus will be to determine whether the booming AI infrastructure buildout is also translating into steady profits.

Stock performance-wise, it has been mixed; while down 3% year to date, Broadcom’s stock price is up 50% over the year. Investors continue to monitor whether the previous AI momentum will hold against rising margin concerns in Q1.

Given the earnings season underway, with some hyperscalers such as Meta and Amazon already reporting large capital expenditure numbers, owing to their AI pursuits, analysts are also increasing their estimates amid the changing landscape.

Bank of America analyst Vivek Arya, in a note shared with me, raised the bank’s long-term outlook for AI data centers, projecting the total addressable market for AI data center system spending to reach roughly $1.4 trillion by 2030, up from its previous estimate of $1.2 trillion.

Broadcom stock is down 3% year to date.

Photo by SOPA Images on Getty Images

The increase is driven by hyperscalers’ rising capital expenditures and the rapid deployment of AI accelerators. BofA expects the data center systems market to grow 64% year over year in 2026, with AI systems expansion closer to 100% year over year, driven by these deployments.

Consequently, key suppliers to the game, such as Broadcom, are also set to boom as demand for their products grows. 

Broadcom races ahead in the AI push

In its recent Q4 report, Broadcom delivered solid results, setting expectations for the upcoming Q1. The company reported $18 billion in revenue, up 28% year over year, with a GAAP net income of $8.5 billion.

The revenue was driven largely by a surge in AI semiconductor sales and traction across hyperscalers. The Non-GAAP EPS was $1.95, with $7 billion in free cash flow as Broadcom boosted its quarterly dividend by 10% to $0.65 per share.

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For its Q1, the company guided $19.1 billion in revenue, signaling continued growth from the previous quarter.

This is why expectations are elevated, but so is the scrutiny of underlying margins.

BofA sees Broadcom as a major beneficiary of custom AI silicon, particularly Google’s Tensor Processing Units (TPUs).

Some of Broadcom’s major products include routers, ASICs (Application-Specific Integrated Circuits), wireless solutions, fiber-optics solutions, and enterprise software solutions.

The firm expects Broadcom to ship roughly 3.5 million TPU units in 2026, which could expand to 3.6-3.8 million. The average selling prices for these TPUs will also increase, and as consumers transition from older to newer generation TPUs, it will help increase Broadcom’s revenue. 

This demand alone is enough to drive Broadcom’s AI compute revenue to roughly $59 billion in 2026 and more than $140 billion by the end of the decade, as hyperscaler adoption continues to expand. 

This ramp-up also led BofA to increase its revenue estimates for the semiconductor manufacturer and solutions provider. 

• EPS for fiscal year 2026 at $10.77,  up 4% 
• EPS for FY 2027 at $14.64, up 2%
• EPS for FY 2028 at $16.99, up 1%

Margins remain a key debate

While revenue estimates are rising, profitability remains a question.

BofA lowered its profitability expectations for Broadcom. The reason is the mix of product ranges, with Broadcom’s legacy semiconductor products more profitable than its custom ASICs, which could lead to lower near-term profit margins even as shipment volumes increase.

BofA slightly changed its outlook on Broadcom’s gross margin to 72.1%/70.4%/70.9% for FY26/27/28E, which is slightly below Street estimates.

Citi Analyst Atif Malik seconds BofA’s claims on gross margin and lowered its price target from $480 to $458, keeping a buy rating. Malik argues that concerns around gross margins, competition from alternative accelerators, and software exposure are now largely priced into the stock, driving the lower price target. 

But Citi sees Broadcom outperforming in the second half of 2026, driven by increased demand and better visibility, as AI deployments are expected to move from pilot phases to scaled production during this period. 

Related: Broadcom could sustain its eye-popping 2026 dividend hike