Broadcom's FY26Q2 covers February through April 2026.
Broadcom FY26Q2 Results:
Revenue reached $22.19B, up 48% year over year and 15% sequentially, slightly above the $22.12B consensus estimate.
GAAP gross margin reached 69.5%, up 1.5 percentage points year over year and 1.4 points sequentially. Operating margin was 48.6%, up 9.8 points year over year and 4.3 points sequentially. Non-GAAP operating margin rose to 67.3%, improving 2 points year over year and 0.9 points sequentially for a fourth consecutive quarterly increase.
GAAP net income was $9.31B, up 88% year over year and 27% sequentially. Non-GAAP net income reached $12.07B, up 55% year over year and above the $11.77B consensus estimate. Non-GAAP net margin improved to 54% from 53% last quarter.
Broadcom repurchased only $600M of stock this quarter despite announcing a $10B authorization last quarter, and paid $3.1B in dividends.
FQ2 Segment Results:
Semiconductor revenue, spanning networking, wireless, broadband, storage connectivity, industrial, and XPU chips, reached $15B, up 79% year over year and representing 68% of total revenue. Semiconductor gross margin was 70% and operating margin was 62%, up 4.6 percentage points. FQ3 semiconductor revenue is expected to reach $20.5B, up 124% year over year.
Infrastructure software revenue from VMware, Symantec, CA, and Brocade reached $7.2B, up 9% year over year and representing 32% of total revenue. Software gross margin was 93% and operating margin was 79%, up 3.1 percentage points. Bookings remained strong and ARR grew 17%. Rapid growth in high-core-count CPUs sold alongside GPUs is accelerating VMware, while management argues that software increasingly resembles the hardware layer and will not be displaced by AI. FQ3 software revenue is expected to reach $8.9B, up 31% year over year. Broadcom has not disclosed VMware revenue separately since FY25Q1.
FQ2 Semiconductor Detail: Since FY25Q1, Broadcom has stopped disclosing revenue by individual semiconductor line and reports only AI and non-AI semiconductor revenue.
AI semiconductor revenue reached $10.8B, up 145% year over year and 29% sequentially, accounting for 72% of semiconductor revenue. Custom XPU revenue was approximately $6.5B, doubling year over year but growing only 15% sequentially.
Four of Broadcom's six major XPU customers are publicly confirmed: Google, Meta, Anthropic, and OpenAI, with ByteDance and Apple widely rumored to be the other two. In April, Broadcom signed a long-term agreement with Google to develop and supply multiple generations of TPUs and AI networking products, while acknowledging that Google is expected to diversify some supply. Broadcom will provide more than 1 GW of TPUs to Anthropic in 2026, followed by another 5 GW of next-generation TPUs from 2027 under an April agreement. Chips have already been delivered to OpenAI, with production on schedule for late 2026. As part of the previously announced 10 GW agreement through 2029, OpenAI is contractually committed to deploy 1.3 GW in 2027. Broadcom also announced a multi-generation MTIA XPU partnership with Meta in April, targeting 3 GW by the end of 2028. The first 1 GW order, covering both XPUs and networking products, has been received for delivery beginning in the second half of 2027. Shipments to the other two customers should begin in late 2026 and accelerate in 2027, backed by $6B of purchase orders received to date.
Ethernet-based AI networking revenue, including connectivity chips, was approximately $4.2B, up 55% sequentially and equal to 40% of AI semiconductor revenue. For comparison, NVIDIA reported $14.8B of AI networking revenue, primarily through complete server systems, while Broadcom sells chips. Management expects networking to settle near 30% of AI semiconductor revenue over time.
For rack-level scale-up, Broadcom's 200G and 400G SerDes support direct-attach copper and enable co-packaged copper built around Ethernet and PCIe switches. For inter-rack scale-out, Broadcom has shipped the industry's only 100 Tb Ethernet switch, Tomahawk 6, for more than a year and plans to tape out a next-generation 200 Tb switch this quarter. The company is also the de facto standard in 1.6 Tb CPO DSPs, continuous-wave lasers, and EML lasers. Jericho 3 and Jericho 4 fabric solutions extend AI clusters across data centers and support some of the world's largest hyperscale deployments.
Non-AI semiconductor revenue reached $4.1B, up 6% year over year, while bookings exceeded $6B. The business is moving toward a full cyclical recovery as broadband, server storage, and enterprise networking grow together, partly offset by a seasonal decline in wireless.
Outlook:
Broadcom expects FY26Q3 revenue of $29.4B, up 84% year over year. Semiconductor revenue should reach $20.5B, up 124%, including $16B of AI revenue, more than triple the prior year but below the $16.36B consensus estimate. Non-AI semiconductor revenue is guided to $4.5B, up 12%, while software revenue should reach $8.9B, up 31%. Non-GAAP gross margin is expected to decline to 74%, while non-GAAP operating margin holds at 67% and adjusted EBITDA margin reaches 68%.
Management said ASICs, TPUs, and parts of the wireless portfolio carry lower gross margins, so faster TPU growth will pressure the company average. High-margin connectivity and AI networking revenue should offset part of that dilution.
AI semiconductor bookings exceeded $30B this quarter versus $10.8B of shipped revenue. Management expects FY26 AI semiconductor revenue of $56B and maintained its FY27 outlook for more than $100B of AI chip revenue, including XPUs and networking, with further growth in FY28. Chip content per gigawatt varies materially by customer. The company continues to guide to 10 GW of deployments in 2027, weighted to the second half, followed by more in 2028. Management clarified that the gigawatt orders refer to chip shipments rather than complete racks, falling short of some market expectations.
Investors have worried that cloud service providers and hyperscalers are developing in-house XPUs and TPUs through customer-owned tooling, potentially taking share from merchant ASIC suppliers. Management dismissed that risk last quarter, but this quarter acknowledged for the first time that Google is expected to diversify some supply. Broadcom also said it will not pursue the XPU-attach market in the same way as Marvell.
Broadcom is working with Apollo, Blackstone, and other major investors to build an AI XPU platform with more than 20 GW of compute capacity deployed by 2028. Apollo is leading the first phase, valued at $35B.
The awkward part of Broadcom's results is that management announced a large volume of gigawatt-scale orders without raising the FY27 AI revenue outlook above $100B. It also acknowledged Google TPU supplier diversification for the first time. Google's unprecedented $84.75B financing for AI investment increases the incentive to use more customer-owned tooling and reduce TPU costs, adding uncertainty to Broadcom's growth beyond FY28.