Broadcom Earnings: AI Chip Sales Tripled. Here’s the $34.8 Billion Number Investors Need to Watch.

Broadcom Inc. (NASDAQ:AVGO) reported its Q3 results after the market closed on Wednesday, Sept. 2, 2026. Here are the headline numbers:

• Revenue of $29.59 billion -- up from $15.95 billion a year earlier
• Adjusted earnings per share (EPS) of $3.32 -- up from $1.69 per share a year earlier

While the semiconductor giant's top and bottom lines grew explosively and beat Wall Street's targets, Broadcom's revenue guidance was less-than-perfect. That's making some investors nervous.

AI chip revenue more than tripled to $16.7 billion in Q3 2026

The incredible growth -- unsurprisingly -- came primarily from Broadcom's AI business. Revenue from AI chips reached $16.7 billion, up 221% year over year and 54% from the previous quarter. Broadcom expects that figure to climb again to $21.7 billion in the fourth quarter, which would clock in at 236% year-over-year growth.

Growth was not limited to AI, however. Total semi sales grew 127% to $20.8 billion, while infrastructure software revenue rose 29% to $8.8 billion. The company brought in $14.2 billion in operating cash flow while spending just over $500 million on capital expenditures (capex). That left $13.7 billion in free cash flow (FCF).

Broadcom's $34.8 billion Q4 guidance fell short of the $35.03 billion Wall Street expected

According to data from LSEG, analysts had expected Broadcom to forecast $35.03 billion in Q4 sales. It fell short of that mark, setting forward guidance of $34.8 billion. Now, that's not a huge gap by any means. A few hundred million is small potatoes at this scale. But expectations are sky-high right now for any company in Broadcom's position.

The company makes custom AI accelerators -- chips built around a customer's particular workload -- and sells important AI networking equipment. That's made it one of the biggest beneficiaries of the AI data-center boom aside from Nvidia. Investors have come to expect earnings beats as the bare minimum and are extremely sensitive to forward guidance, wary of any signs that the AI train is slowing.

That means Broadcom can grow fourth-quarter revenue by a projected 93% and still disappoint if investors were already counting on something slightly better. And as the numbers get larger, maintaining today's growth rates becomes much harder even if demand remains healthy. And if demand weakens even a little, a stock trading with a price to earnings (P/E) ratio above 60 will take a real hit.

Right now, that doesn't look like a threat in the near term. Broadcom has an agreement to supply Alphabet's Google with custom AI processors through 2031. But the tech giant just struck a custom-chip deal with Marvell Technology last month. At this point, it's not really cause for concern, but it's something to watch. It shows that large customers don't want to depend entirely on one supplier. And over time, they may want to bring more of the work in-house.

A sub-1% guidance miss is still enough to spook investors looking for perfection

This was obviously an exceptional quarter, and I don't mean to imply a guidance miss of less than 1% undoes that. I'm just pointing out that at this point the market expects exceptional.

And now, as you look to the next round of earnings, I would pay close attention to margins. Can Broadcom maintain its pricing power as it grows?

Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Broadcom, Marvell Technology, and Nvidia. The Motley Fool has a disclosure policy.