Broadcom vs Microsoft. Both Are Winning the AI Race. Only One Is Priced Like It

"Broadcom's Q1 FY2026 earnings report landed on March 4, 2026, with revenue of $19.311 billion, up 29.47% year over year. AI semiconductor revenue hit $8.40 billion, growing 106%. CEO Hock Tan called the growth "driven by robust demand for custom AI accelerators and AI networking" and guided Q2 AI revenue to $10.70 billion. VMware kept the software side flat at $6.796 billion, growing just 1%. The chip side is driving results."

"Microsoft reported Q3 FY2026 on April 29, 2026 with revenue of $82.886 billion, up 18.3%, and EPS of $4.27. Azure and cloud services grew 40%, and the AI run rate hit $37 billion, up 123%. Commercial RPO of $627 billion nearly doubled, signaling a backlog that extends this cycle. Microsoft spent $30.876 billion in a single quarter, up 84.39%. Some funds are buying Broadcom switches and accelerators."

"Broadcom repurchased $7.8 billion in Q1 alone. Microsoft is funneling cash into capacity the $627 billion RPO suggests is presold. The market has rewarded the capex spender: AVGO is up 32.32% since its earnings report, while MSFT has slipped 3.93%."

"Watch whether Broadcom converts Tan's $100 billion in AI sales by 2027 ambition into reality, especially after the Google TPU and networking supply agreement through 2031. Keep an eye on Microsoft's Azure growth rate. If 40% holds while capex moderates, operating leverage flips quickly."

Broadcom reported Q1 FY2026 revenue of $19.311 billion, up 29.47% year over year, with AI semiconductor revenue of $8.40 billion growing 106%. AI networking and custom AI accelerators drove the results, while VMware revenue stayed nearly flat at $6.796 billion. Broadcom guided Q2 AI revenue to $10.70 billion and repurchased $7.8 billion in the quarter. Microsoft reported Q3 FY2026 revenue of $82.886 billion, up 18.3%, with EPS of $4.27. Azure and cloud services grew 40%, and the AI run rate reached $37 billion, up 123%. Commercial RPO of $627 billion nearly doubled, and Microsoft spent $30.876 billion, up 84.39%, to expand capacity.

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