Broadcom's (AVGO) fiscal Q3 results beat expectations across the board, with revenue and EPS topping Street forecasts, RBC Capital said in a Thursday note.

AI revenue surged year over year and exceeded the company's own guidance, while gross margin also came in stronger than expected despite a heavier mix of custom AI chips, according to the note.

However, RBC flagged risks to that visibility chip supply, data-center readiness, and multi-supplier relationships could all affect how demand converts to revenue. Outside AI, networking grew strongly on switching and optical products, while software revenue rose 29% on steady recurring growth, the note said.

The analysts said they expect the AI chip market hitting roughly $400 billion by 2028, with custom chips taking over $100 billion as cloud providers build more in-house silicon. OpenAI's chip deployment alone could be worth $200 billion to $250 billion, concentrated between 2027 and 2029.

RBC maintained its sector perform rating on the stock, with a price target of $400.

Shares of Broadcom fell more than 5% in Thursday trading.

Price: 348.23, Change: -19.01, Percent Change: -5.18