Within its latest earnings report on March 4, semiconductor giant Broadcom (NASDAQ: AVGO) provided markets with many positive pieces of news. The firm beat estimates on sales and adjusted earnings per share and announced significantly better-than-expected guidance for the next quarter. The company reneged on past statements regarding gross margin deterioration and added a sixth buyer to its custom artificial intelligence (AI) processor lineup.
Additionally, the firm said that its visibility into 2027 had “dramatically improved." CEO Hock Tan said, “We have line of sight to achieve AI revenue … in excess of $100 billion in 2027." Next quarter, Broadcom expects to generate $10.7 billion in AI revenue, which would translate to an annual run rate of $42.8 billion. Thus, achieving more than $100 billion in AI revenue in 2027 would clearly require large, continued growth in Broadcom’s AI business.
However, based on conversations in Broadcom’s earnings call, there is reason to believe that even this ambitious forecast may be conservative.
Gigawatts to AI Revenue: Analyst Adds Context Around AVGO’s Outlook
One of the key exchanges on Broadcom’s call was between Tan and Bernstein analyst Stacy Rasgon. Rasgon was attempting to generate a more precise 2027 AI revenue forecast than simply “in excess of $100 billion." To do this, he used gigawatts (GWs) as a unit of measurement. GWs describe the size of data center deployments, representing the amount of power a facility requires. Using publicly available information and some estimation, Rasgon counted the GW commitments Broadcom had secured for 2027.
“I'm trying to just count up the gigawatts … you have 3 from Anthropic, 1 from OpenAI, so that's 4. You said Meta was multiple, so at least 2. That gets me to 6. Google, I figure, should be bigger than Meta, so like at least 3, that's 9 and then you got a few others.” Given these statements, it's reasonable to assume that Rasgon’s estimate is 9 GW to 10 GW for 2027.
Rasgon then looked to translate GW’s into AI revenue, estimating the amount of sales Broadcom actually generates per GW. “I had thought that your content per gigawatt was sort of, call it, in a $20 billion per gigawatt range." Bank of America analyst Vivek Arya added another data point to support this estimate. He said that Broadcom’s 2026 1GW deployment with Anthropic would bring in $20 billion.
Should these estimates be correct, Broadcom’s 2027 AI revenue would clearly be much higher than $100 billion. 9GW to 10GW at $20 billion per GW would equate to $180 billion to $200 billion in 2027. Tan’s response pushes back on this math somewhat, but it also provides evidence that the $100 billion figure could be low.
Tan Provides Support and Pushback on Rasgon’s Estimates
Notably, Tan confirmed Rasgon’s GW estimate, saying, “If you look at it by gigawatt in '27, we are seeing it getting close to 10 gigawatts.” However, Tan also noted, “You have to realize—depending on our LLM customer … the dollars per gigawatt vary, sometimes quite dramatically … but you're right, it's not far from the dollars you're talking about.”
Clearly, Tan did not harshly push back on Rasgon’s $20 billion per GW estimate and ultimately said it's “not far off." Thus, it's not unreasonable to assume that $20 billion is a fair baseline for per GW revenue. However, Tan also acknowledges that this is not always the case, and the number can vary drastically depending on the customer.
Still, cutting this estimate in half to $10 billion per GW, at 10 GW, would lead to $100 billion in revenue. Based on this exchange, it's certainly possible that $10 billion per GW could be conservative, meaning that Broadcom’s 2027 AI revenue forecast could be conservative as well. Splitting the difference at $15 billion per GW, or $150 billion, would still provide large upside to Broadcom’s $100 billion forecast.
Supply Chain Agreements: Another Vote of Confidence for AVGO’s Outlook
Clearly, this analysis relies on several assumptions. This includes the idea that Broadcom’s customers will not pull back their planned GW deployments over the next 18 months or so. That’s certainly a risk, and one that Broadcom may be accounting for with its seemingly conservative forecast.
However, the way Broadcom is navigating its supply chain lends credibility to its outlook. The company said it has secured supplies of leading-edge wafers, high-bandwidth memory, substrates, and T-glass through 2028. These are key components that are in short supply, given the rapid data center buildout.
The long-term nature of this, which goes well beyond the 2027 forecast, strongly suggests that Broadcom is confident in demand through that period. If the company wasn’t confident in its 2027 outlook, it's hard to say they would secure capacity for a year beyond that. Notably, Melius analyst Ben Reitzes stated that Broadcom was probably the first company to secure a supply of these components through 2028. This suggests that Broadcom has an unusually high degree of visibility.
Overall, there is reason to believe that Broadcom could significantly outperform its 2027 AI sales forecast, a development that could lead to upside in shares.
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The article "Why Broadcom's $100B AI Revenue Forecast May Be Conservative" first appeared on MarketBeat.
