Broadcom (AVGO) is catching the spotlight once again after the company beat estimates for revenue and earnings in its fiscal second quarter, powered by the surging demand for artificial intelligence (AI) semiconductors. Over the past year, AVGO stock has soared more than 81%, reflecting investor confidence in the company’s strategic position in the AI ecosystem.

The momentum doesn’t appear to be slowing down. Broadcom’s recent quarterly results suggest that the AI revenue will accelerate, while the strength in infrastructure software revenue will support its growth. Although shares are down as of this writing, new record highs are just ahead. 

Adding to the bullish sentiment, Wall Street analysts remain upbeat on Broadcom’s prospects. Despite broader macroeconomic uncertainties, their positive outlook suggests they see more upside ahead for the semiconductor and software giant.

Broadcom’s AI Revenue Growth to Accelerate

Broadcom is accelerating its transformation into an AI powerhouse, with its latest fiscal Q2 2025 results reflecting how AI has become a key growth catalyst for the company. The semiconductor company reported total quarterly revenue of approximately $15 billion, marking a 20% year-over-year increase. The top-line growth was primarily driven by soaring demand for AI semiconductors, complemented by solid contributions from VMware.

Semiconductor revenue hit $8.4 billion in the quarter, up 17%. Notably, the segment’s growth accelerated sequentially as it reported an 11% increase in Q1. The explosive demand for AI chips is leading to an acceleration in growth.

AI semiconductor revenue reached $4.4 billion, representing a 46% jump over the same period last year.

Digging deeper, the company’s AI networking business is witnessing massive growth. It grew by more than 170% year-over-year in Q2 and now makes up 40% of Broadcom’s AI semiconductor revenue. This segment, built around Ethernet-based networking solutions, includes flagship products like Tomahawk switches, Jericho routers, and network interface cards (NICs). These components are witnessing solid demand from hyperscalers.  

Broadcom's product base remains solid. Its latest Tomahawk 6 switch is likely to witness solid growth as the architecture delivers better performance through lower latency and reduced power consumption.

Its custom AI accelerators, or XPUs, will likely see strong demand. The company is working with three existing customers and four potential new ones to support large-scale AI deployments. The company’s management anticipates that these deployments will rely heavily on custom-designed XPUs. Looking ahead, Broadcom will benefit from rising inference demand. Management sees an acceleration of XPU demand into the second half of 2026 to meet the inference demand, providing another tailwind for Broadcom’s growth.

With this backdrop, Broadcom is projecting AI semiconductor revenue of $5.1 billion for Q3, representing a 60% year-over-year increase. This reflects a sequential acceleration in AI revenue growth. While the non-AI semiconductor business is expected to remain flat, the company anticipates improvements in broadband and enterprise networking revenues.

Infrastructure Software: A Strong Growth Engine for AVGO Stock

Broadcom’s infrastructure software business is another powerful growth engine for the company. In the second quarter, the company reported $6.6 billion in infrastructure software revenue, representing a 25% increase compared to the same period last year. This performance highlights Broadcom’s transition of enterprise customers from traditional perpetual licenses for VMware’s vSphere to the more comprehensive VMware Cloud Foundation (VCF) subscription model.

The growing adoption of VCF is driving consistent double-digit growth in annual recurring revenue (ARR) from its core infrastructure software business.

Looking ahead, the momentum is expected to continue. For the third quarter, Broadcom is guiding for infrastructure software revenue of approximately $6.7 billion, representing a projected year-over-year increase of 16%.

Conclusion

Broadcom is well-positioned to deliver solid growth as its AI chip and infrastructure software segments are firing on all cylinders. The company’s accelerating revenue from AI networking and custom accelerators reflects strong demand. Meanwhile, its infrastructure software division, buoyed by strong VMware performance and the shift to subscription-based models, provides a steady, recurring revenue base.

With analysts remaining bullish and Broadcom forecasting continued momentum into the coming quarters, AVGO stock appears well-poised to hit new highs.