Broadcom (AVGO) Earnings Date & Reports

Key Takeaways

• Revenue reached a record $22.19 billion, up 48% year-over-year and ahead of the consensus estimate of approximately $22.13 billion.
• Non-GAAP earnings per share (EPS) came in at $2.44, beating analyst expectations of $2.40 and rising 54% from the prior-year period.
• AI semiconductor revenue surged to $10.8 billion, jumping 143% year-over-year and exceeding the company's own forecast, driven by custom AI accelerators and networking chips.
• Infrastructure software revenue of $7.18 billion grew 9% year-over-year but fell short of the roughly $7.32 billion Wall Street had projected.
• Q3 AI semiconductor guidance of $16 billion disappointed, coming in below the approximately $17.2 billion analysts had anticipated, triggering a sharp post-earnings sell-off.
• Shares dropped roughly 12–13% following the report, as elevated pre-earnings expectations and AI guidance that didn't exceed the highest forecasts overshadowed broad top-and-bottom-line beats.

Earnings Context and Why It Matters

Broadcom has cemented itself as one of the most important names in the artificial intelligence infrastructure buildout. Its custom AI accelerators — also known as application-specific integrated circuits (ASICs) — and high-performance networking silicon sit at the core of hyperscale data centers operated by Google, Meta, OpenAI, and Anthropic. Heading into this report, investor optimism was running hot: AVGO shares had rallied roughly 55% during the second quarter alone, adding hundreds of billions in market capitalization. That run-up raised the stakes considerably. For a company that has increasingly become a bellwether for enterprise AI spending, this earnings release was seen as a critical checkpoint on whether the AI investment cycle still has room to accelerate — or whether the market had priced in too much too quickly.

Reported Results

Broadcom reported second-quarter fiscal 2026 revenue of $22.19 billion, a 48% increase from $15.00 billion in the same period a year earlier. The result edged past the Wall Street consensus estimate of approximately $22.13 billion. Non-GAAP diluted EPS came in at $2.44, up 54% year-over-year and ahead of the $2.40 consensus. On a GAAP (Generally Accepted Accounting Principles) basis, net income reached $9.31 billion, translating to diluted EPS of $1.91.

Semiconductor solutions revenue, which now represents 68% of the total business, surged 79% year-over-year to $15.01 billion. Within that segment, AI-related semiconductor sales were the standout, reaching a record $10.8 billion — a 143% year-over-year leap that exceeded the company's internal forecast. Networking represented nearly 40% of total AI revenue during the quarter. Infrastructure software revenue climbed 9% to $7.18 billion, supported by strong bookings and 17% growth in annual recurring revenue (ARR), though the figure came in modestly below analyst estimates of around $7.32 billion.

Profitability remained robust. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) rose 52% year-over-year to $15.24 billion, representing a 69% margin and surpassing the company's guidance of 68%. Free cash flow hit a record $10.26 billion, or 46% of revenue, after just $231 million in capital expenditures. The company ended the quarter with $19.63 billion in cash and equivalents.

For the third quarter of fiscal 2026, Broadcom guided for total revenue of approximately $29.4 billion, implying 84% year-over-year growth and coming in above the consensus estimate of roughly $28.25 billion. However, the company's outlook for AI semiconductor revenue of $16 billion — while representing over 200% year-over-year growth — fell short of the $17.2 billion figure that many analysts had penciled in. Non-GAAP operating margin is expected to hold at approximately 67%, with adjusted EBITDA margins around 68%.

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Market Reaction and Investor Sentiment

Despite delivering record revenue, record operating profit, and record free cash flow, Broadcom shares fell approximately 12–13% in the trading session following the June 3 earnings release. The sell-off reflected a classic case of elevated expectations colliding with good-but-not-great results. In the seven trading days leading up to the report, AVGO had surged more than 15%, piling roughly $300 billion onto its market capitalization and leaving little room for error.

Two factors weighed most heavily on the stock. First, the Q3 AI semiconductor revenue guide of $16 billion — while extraordinary in absolute terms — landed below the Street's roughly $17.2 billion target. Second, CEO Hock Tan did not raise the company's full-year fiscal 2026 AI revenue target, reiterating the existing forecast of approximately $56 billion and the fiscal 2027 target of "in excess of $100 billion." For a stock that had been priced for continuous upward revisions, the absence of a guidance raise was treated as a disappointment. The modest miss in infrastructure software revenue added a secondary pressure point, though it was the AI guide that dominated the post-earnings narrative.

Forward Outlook and Key Factors to Monitor

Looking ahead, Broadcom's growth trajectory remains firmly tied to the pace of AI infrastructure investment among its largest customers. Management disclosed that AI semiconductor bookings exceeded $30 billion during the quarter — nearly triple what the company shipped — signaling that demand continues to outstrip supply. Customer visibility has now extended through fiscal 2028, compared with roughly 2027 three months earlier, as hyperscale customers place orders earlier to lock in compute capacity and power infrastructure.

The company's expanding roster of core custom chip customers — now standing at six, including Google, Anthropic, OpenAI, and Meta — provides a multi-year revenue runway. Long-term agreements tied to multiple generations of TPUs (Tensor Processing Units, Google's custom AI chips) and custom XPUs (a category of specialized AI processors) underpin management's confidence. However, investors will be watching closely to see whether the company can eventually raise its fiscal 2027 AI revenue target above the $100 billion threshold, a figure that has become a key psychological marker for the stock.

On the margin front, the shifting revenue mix deserves attention. As AI semiconductors become a larger share of total revenue, consolidated gross margins are expected to decline — management guided for approximately 74% in Q3, down from 77.1% in Q2 — though operating margins are projected to remain stable at 67% due to strong operating leverage. The infrastructure software segment, anchored by VMware Cloud Foundation 9.1 and enterprise AI inferencing workloads, is expected to reaccelerate to roughly $8.9 billion in Q3, representing 31% year-over-year growth. Supply chain readiness also remains a key variable, though management has expressed confidence in secured wafer and substrate capacity through 2027 and is already planning for 2028 and 2029 requirements.

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