Hock Tan: Anthropic set to be Broadcom's top chip client

Broadcom's position rests on building with its customers rather than selling off the shelf. A custom accelerator is designed around one customer's workloads, and the networking chips linking thousands of them together come from the same supplier. Once a cloud company builds its systems around a design, switching means starting over. Software adds a second anchor: infrastructure software revenue grew 29% to $8.75 billion in fiscal Q3, helped by VMware Cloud Foundation, and most new software contracts no longer include termination-for-convenience provisions.

The mix is shifting toward AI. Semiconductors were 70% of fiscal Q3 revenue, up from 57% a year earlier, as that segment rose 127%. Total revenue climbed 86% to $29.6 billion. Adjusted EPS was $3.32, up 96%, while GAAP EPS was $2.68, up 215% — the gap reflects items like acquisition-related amortization and stock-based compensation, and since GAAP grew faster, the direction holds either way. Free cash flow hit a record $13.7 billion, or 46% of revenue.

The open question is whether the premium multiple is fair given how concentrated that growth is. With top five customers at about 55% of revenue, up from about 40%, the story leans on a small set of buyers, and Anthropic's expected rise to largest customer in 2027 ties the outcome to one of them. The stock fell 4.8% in one session recently after Anthropic's CEO argued for a slower pace of model development, even as Tan said long-term AI revenue targets hadn't changed — so the test is whether that pace, and the customer mix, hold.