This Chip Giant's AI Revenue Grew 221% Last Quarter. It's Also Quietly Raised Its Dividend for 15 Straight Years.

AI chip giant Broadcom (NASDAQ:AVGO) is growing so fast that its dividend has become an afterthought. Its AI semiconductor revenue grew at a blistering 221% during its fiscal 2026 third quarter. Its AI-powered growth has driven a more than 330% surge in its stock price over the last three years. That has pushed down its dividend yield from more than 2% to a rather nondescript 0.7%.

However, what Broadcom lacks in current yield, it more than makes up for in dividend growth. The semiconductor and software company has hiked its dividend for 15 straight years, growing it by an astounding 9,190%. Given its low payout ratio and robust growth profile, that payout should continue to grow brisky in the future.

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The AI accelerator

Demand for Broadcom's AI accelerators, Ethernet AI switches, and other AI-related products has been accelerating. In the fourth quarter of its 2025 fiscal year, Broadcom's total revenue surged 28% to a record $18 billion, driven by a 74% increase in AI semiconductor revenue. Fast forward nine months, and its AI revenue is growing even faster. Sales of AI semiconductors rocketed 221% in its fiscal third quarter to $16.7 billion, up 54% from the prior quarter. That helped drive a massive 86% increase in total revenue to $29.6 billion.

Broadcom expects that acceleration to continue. It sees $21.7 billion in AI semiconductor revenue in its fiscal fourth quarter, up 236% year over year. That would drive its total revenue to $34.8 billion, a 93% year-over-year increase.

The company is in a strong position to continue growing briskly. This past June, financial giants Apollo and Blackstone established a landmark strategic growth platform with Broadcom. The partnership will accelerate more than 20 gigawatts of global AI deployments through 2028 using Broadcom's XPUs and networking solutions customized for leading frontier AI labs, including Anthropic and OpenAI. The initial $35 billion tranche will help facilitate more than 1 GW of compute infrastructure for Anthropic. Broadcom also expanded its partnership with Meta Platforms earlier this year, extending it through 2029.

Ample room to grow the dividend

Broadcom's robust revenue growth is driving strong free cash flow. The company generated $13.7 billion of free cash flow, or 46% of its revenue, in its fiscal third quarter. That was up 95% from the prior year period. With its dividend costing only around $3.1 billion per quarter, the company's payout ratio has fallen from 40% to 22.6%, even though its dividend per share has risen by 10% over the past year.

As a result, Broadcom is generating significant excess free cash flow. It used that money to repurchase about $8.5 billion of stock so far this fiscal year and strengthen its already fortress-like balance sheet (A- credit ratings). Its cash position has risen by $7.8 billion to $24 billion, while its total debt has fallen by $5.7 billion to $59.4 billion.

The AI chip giant's robust cash flows and strong financial profile put it in an excellent position to continue growing its dividend. While its dividend growth rate slowed to 10% last year (down from the low-to-mid-teens in recent years), I think it could reaccelerate in the coming years, potentially to the mid-teens. If Broadcom grows its dividend at a 14% annual rate for the next decade, its income yield would rise from the current level of 0.7% to over 2.4%. While there's no guarantee it will grow that fast in the future, doubling it would only push its payout ratio slightly above last year's already conservative level.

Broadcom: An AI-powered dividend growth stock

Broadcom isn't the most obvious dividend stock, given its currently low yield. However, the company has grown its payout extraordinarily quickly over the years, and this should continue. It's a great stock to help balance a more yield-heavy portfolio, as it should supply plenty of growth as it continues to capitalize on the AI megatrend.

Matt DiLallo has positions in Blackstone, Broadcom, and Meta Platforms and has the following options: long December 2028 $650 calls on Meta Platforms and short December 2028 $660 calls on Meta Platforms. The Motley Fool has positions in and recommends Blackstone, Broadcom, and Meta Platforms. The Motley Fool has a disclosure policy.