Broadcom May Be the Biggest Winner From Alphabet's Earnings

Alphabet raised its full-year capital expenditure guidance to $195 billion to $205 billion, roughly 8% above its prior midpoint forecast. Alphabet's Cloud revenue grew 82% year-over-year, far outpacing overall company growth and signaling stronger demand for Broadcom-developed TPUs. Alphabet attributed its CapEx increase to accelerating infrastructure demand rather than memory costs, a distinction analysts view as especially favorable for Broadcom.

Magnificent Seven giant Alphabet NASDAQ: GOOG just reported its latest financial results, but the company’s earnings have implications for more than Alphabet itself.

Broadcom NASDAQ: AVGO has some of the clearest ties to Alphabet, having helped the firm develop its tensor processing units (TPUs) for years. Amid this, Alphabet is widely considered to be Broadcom’s largest AI chip customer.

In turn, what Alphabet is seeing from a demand perspective and the spending it forecasts has meaningful consequences for Broadcom. While Alphabet shares tumbled after releasing its results, it's hard not to take the company’s numbers as positive indicators for the world’s second-largest semiconductor company.

The first notable metric to highlight is Alphabet’s capital expenditure (CapEx) and its CapEx forecasts. Alphabet’s CapEx in Q2 was $44.9 billion. This equated to an increase of 100% year-over-year (YOY) and a 26% increase quarter-over-quarter. The company notes that the vast majority of this spending went toward infrastructure to support its AI investments. Alphabet’s rapidly increasing AI infrastructure spending is a strong positive indicator for Broadcom. Much of that increased spending goes toward the TPUs Broadcom helps develop, as well as its networking chips.

More importantly, Alphabet also raised its full-year CapEx guidance. Its CapEx forecast now sits at $195 billion to $205 billion. At a midpoint of $200 billion, this is approximately 8% higher than the company’s previous midpoint CapEx guidance of $185 billion. This increase raises the ceiling of revenue that Broadcom could generate in 2026. Additionally, Alphabet is now near the top of the heap in planned hyperscaler CapEx for 2026. Amazon.com NASDAQ: AMZN expects to spend $200 billion, Microsoft’s NASDAQ: MSFT planned CapEx is $190 billion, and Meta Platforms’ NASDAQ: META is $135 billion at the midpoint. For Broadcom, having a close-knit partnership with the company tied for the highest CapEx guidance among hyperscalers is a great position to be in.

It is also important to note the reasoning behind Alphabet’s CapEx increase. The company says the increase is “primarily due to an acceleration in the delivery of capacity to meet growing demand.” “Acceleration in delivery” is the key phrase, showing that Alphabet wants more AI infrastructure, like Broadcom’s products, faster. This signals Broadcom’s revenue growth attributable to Alphabet could accelerate. This reasoning is notably different from past statements made by other hyperscalers when raising CapEx guidance. For example, in Q1, Meta raised its CapEx guidance, but said, “Most of that is due to higher component costs, particularly memory pricing.” Here, Meta indicates that much of the gain from its higher CapEx guidance will flow to memory makers, rather than companies like Broadcom. Thus, the omission of such language by Alphabet and its focus on demand instead is considerably more positive for Broadco.