AVGO -- FQ2 FY2026 Earnings Review
Most Recent Quarter: FQ2 FY2026 (ended May 3, 2026, reported after close June 3, 2026)
FQ2 Revenue
$22.2B
+48% YoY | Beat Street by ~$80M | Above guide
AI Semiconductor Rev
$10.8B
+143% YoY | $30B AI bookings in qtr
Non-GAAP EPS
$2.44
+54% YoY | Beat consensus $2.40
FQ3 Revenue Guide
$29.4B
+84% YoY | AI semi $16B (+200%+)
Verdict: A clean beat-and-raise, but the bar was the story. Record $22.2B revenue (+48%) and AI semis +143% to $10.8B cleared the print; the signal was forward, not backward. AI bookings hit $30B in a single quarter against $10.8B shipped, visibility now extends to 2028 (vs 2027 a quarter ago), Q3 is guided to $29.4B (+84%) with AI semis $16B, and management reaffirmed FY26 AI of ~$56B and FY27 of $100B+. Six named XPU/networking customers and a $35B Apollo-funded XPU platform underwrite the curve.
Market reaction — beat, sold: Shares fell roughly 14% in after-hours despite the beat and raise. After a ~93% one-year run into a record-high close (~$479, ~$2.27T market cap) at ~42x forward / ~26x FY27 EPS, the print was “good but priced-in.” The Q3 gross-margin guide to ~74% (TPU/ASIC mix dilution, not structural) and an in-line-to-slightly-above headline gave profit-takers the excuse. Nothing in the fundamentals deteriorated — this was a valuation reset, not a thesis break.
Key Metrics Trends -- Quarterly (6 Quarters, AI-disclosure era)
| Metric | Q1 FY25 (Feb'25) | Q2 FY25 (May'25) | Q3 FY25 (Aug'25) | Q4 FY25 (Nov'25) | Q1 FY26 (Feb'26) | Q2 FY26 (May'26) |
|---|---|---|---|---|---|---|
| Consolidated Revenue | $14,916 | $15,004 | $15,952 | $18,015 | $19,311 | $22,187 |
| YoY | +24.7% | +20.2% | +22.0% | +28.2% | +29.5% | +47.9% |
| Semiconductor Solutions | $8,212 | $8,408 | $9,166 | $11,072 | $12,515 | $15,009 |
| YoY | +11.1% | +16.7% | +26.0% | +34.5% | +52.4% | +78.5% |
| AI Semiconductor | $4,100 | $4,400 | $5,200 | $6,500 | $8,200 | $10,800 |
| YoY | +77% | +46% | +63% | +76% | +106% | +143% |
| Non-AI Semiconductor | $4,112 | $4,008 | $3,966 | $4,572 | $4,315 | $4,209 |
| Infrastructure Software | $6,704 | $6,596 | $6,786 | $6,943 | $6,796 | $7,178 |
| YoY | +46.7% | +24.8% | +17.0% | +19.2% | +1.4% | +8.8% |
| Free Cash Flow | $6,013 | $6,411 | $7,024 | $7,466 | $8,010 | $10,262 |
| FCF Margin | 40.3% | 42.7% | 44.0% | 41.4% | 41.5% | 46.3% |
| GAAP Diluted EPS | $1.14 | $1.03 | $0.85 | $1.74 | $1.50 | $1.91 |
| Non-GAAP Diluted EPS | $1.60 | $1.58 | $1.69 | $1.95 | $2.05 | $2.44 |
| YoY | +45% | +44% | +36% | +41% | +28% | +54% |
Source: Broadcom press releases & 8-K financial tables (FQ2 FY2026, May 3, 2026 quarter), FMP income/cash-flow statements and segment data, and earnings-call transcripts (FQ1 FY25–FQ2 FY26). AI semiconductor revenue and YoY figures are management-stated; non-AI semiconductor is derived (Semiconductor Solutions less AI). Non-GAAP gross/operating/EBITDA margins per company reconciliation.
AI Semiconductor Acceleration -- the core of the thesis
| AI Semiconductor | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | Q1 FY26 | Q2 FY26 |
|---|---|---|---|---|---|---|
| Revenue ($M) | $4,100 | $4,400 | $5,200 | $6,500 | $8,200 | $10,800 |
| QoQ growth | — | +7.3% | +18.2% | +25.0% | +26.2% | +31.7% |
| % of total revenue | 27% | 29% | 33% | 36% | 42% | 49% |
AI semiconductor revenue has accelerated every quarter for six straight quarters — from $4.1B to $10.8B — and now represents 49% of total revenue (vs 27% six quarters ago). Networking was ~40% of AI revenue this quarter (management expects this to normalize toward ~30%). Management guides AI semis to $16B in Q3 (+200%+ YoY), ~$56B for FY26 (+~180%), and reiterated $100B+ for FY27.
Beat / Miss vs Consensus & Guidance
| Metric (Non-GAAP) | Consensus | Guidance | Actual | vs Cons. | vs Guide |
|---|---|---|---|---|---|
| Revenue | $22,110M | $22,000M | $22,187M | +0.3% | +0.8% |
| Diluted EPS | $2.40 | — | $2.44 | +1.7% | — |
| Semiconductor Rev | — | $14,800M | $15,009M | — | +1.4% |
| AI Semiconductor Rev | — | $10,700M | $10,800M | — | +0.9% |
| Infra Software Rev | — | $7,200M | $7,178M | — | -0.3% |
| Adj. EBITDA Margin | — | ~68% | 69.0% | — | +100bps |
| Operating Margin | — | ~67% | 67.3% | — | +30bps |
Consensus per ~37-analyst Street estimates (revenue $22.11B, non-GAAP EPS $2.40, up from $2.16 ninety days prior). Guidance per the FQ1 FY26 call. AVGO does not guide a headline EPS number.
FQ3 FY2026 Guidance
| Q3 FY26 Guide | Q2 FY26 Actual | Q3 Guide | Implied YoY | Implied QoQ |
|---|---|---|---|---|
| Consolidated Revenue | $22,187M | $29,400M | +84% | +32.5% |
| Semiconductor Revenue | $15,009M | $20,500M | +124% | +36.6% |
| AI Semiconductor | $10,800M | $16,000M | +200%+ | +48.1% |
| Non-AI Semiconductor | $4,209M | $4,500M | +12% | +6.9% |
| Infrastructure Software | $7,178M | $8,900M | +31% | +24.0% |
| Operating Margin | 67.3% | ~67% | flat | flat |
| Gross Margin (mix) | 77.1% | ~74% | — | -310bps |
AI Franchise -- Multi-Year Customer Commitments
| AI Customer / Program | Commitment Disclosed | Timing |
|---|---|---|
| Google (TPU + networking) | Multi-generation LTA; “very substantial” $ commitment | Ongoing |
| Anthropic | 1+ GW TPU compute 2026; +5 GW next-gen | 2026 → 2027 |
| OpenAI | 1.3 GW in 2027; part of 10 GW by 2029 | Production late 2026 |
| Meta (MTIA X) | 3 GW through 2028; 1 GW initial order | Ships H2 2027 |
| 2 other XPU customers | $6B purchase orders to date | Late 2026 → 2027 |
| AI XPU Platform (Apollo/Blackstone) | 20+ GW capacity; $35B first tranche | Through 2030 |
Disclosed on the FQ2 FY26 call and recent 8-Ks. Broadcom plans to ship ~10 gigawatts of XPU compute in 2027 (back-half weighted), setting up a “substantially larger” 2028.
Margins & Capital Return
| Metric (Non-GAAP) | Q2 FY25 | Q3 FY25 | Q4 FY25 | Q1 FY26 | Q2 FY26 |
|---|---|---|---|---|---|
| Gross Margin | 79.4% | 78.4% | 77.9% | 77.0% | 77.1% |
| Operating Margin | 65.3% | 67.0% | 68.0% | 67.0% | 67.3% |
| Adj. EBITDA Margin | 66.7% | 67.0% | 68.0% | 68.0% | 69.0% |
| Free Cash Flow ($M) | $6,411 | $7,024 | $7,466 | $8,010 | $10,262 |
Gross margin is gently compressing as lower-margin AI ASIC/TPU silicon grows as a share of mix (Q3 guided to ~74%), but operating leverage is offsetting it: operating margin held at ~67% (+200bps YoY) and adjusted EBITDA margin reached a record 69%. Semiconductor operating margin rose 460bps YoY to ~62%; software operating margin rose 310bps to ~79%. FCF was a record $10.3B (46% of revenue); the company paid $3.1B in dividends ($0.65/sh) and ended with $19.6B cash. Inventory days rose to 86 (from 68) deliberately, to secure supply for the H2 AI ramp.
Street Q&A -- Selected Exchanges
Q: (JPMorgan) Does the 18-month AI backlog now sit at $200B+ given all the new multi-GW programs?
A: Hock declined a precise backlog number but reaffirmed FY26 AI of ~$56B and FY27 “easily in excess of $100B,” framing FY27 as ~2x FY26 — i.e. trajectory intact, if not stronger.
Partially answered — reaffirmed framework, no new backlog figure
Q: (Jefferies) Confidence and potential share risk within the Google TPU agreement?
A: Called it a “very, very strong” multi-generational commitment in “a very substantial amount of dollars,” while candidly conceding Google will keep “diversity of sources.”
Well answered — candid on both strength and share dynamics
Q: (Deutsche Bank) Why is gross margin falling harder than the software strength implies?
A: CFO: ASIC/TPU and wireless carry lower margins; as TPUs accelerate, mix pressures consolidated GM, partly offset by rich-margin AI networking. Structurally semi margins “stable.” Urged investors to model semi and software margins separately.
Well answered — clear mix bridge
Q: (Morgan Stanley) Why $30B of AI bookings vs only $10.8B shipped — why so much backlog now?
A: Customers are ordering far ahead to secure wafers, HBM and power; visibility now extends to 2028 (vs 2027 a quarter ago). Bookings are not for immediate delivery.
Well answered — explains visibility extension
Q: (Goldman Sachs) Does AI networking stay ~40% of AI revenue?
A: Hock: 40% is a “stars aligned” peak; expects networking to settle closer to ~30% of total AI revenue as XPU volume scales.
Well answered — set the durable range
Indirect Read-Throughs & Notable Items
| Topic | Read-Through |
|---|---|
| AI compute demand | “Insatiable”; demand source is the frontier labs (OpenAI, Anthropic, Google/Gemini, Meta) — enterprise/consumer demand routes back to the same few buyers. |
| Supply chain (TSMC/HBM) | Secured supply for 2026–2027, working 2028–29; comfortable adding incremental wafer/HBM as customers pre-order. |
| Hyperscaler capex | 6 named XPU customers + 20GW platform implies AVGO sees multi-year hyperscaler/neocloud buildout, not a near-term peak. |
| VMware / software | VCF 9.1 driving “extremely strong” on-prem private-cloud adoption; ARR +17%; software guided to re-accelerate to +31% in Q3. |
| NVIDIA / AMD / Intel | VCF now supports heterogeneous compute across NVIDIA, AMD, Intel — positions VMware as neutral private-cloud layer. |
| Management change | CFO Kirsten Spears retiring June 12 after 12 years; Amy Teiner named incoming CFO. Orderly, pre-announced transition. |
Contradictions
No material contradictions found across the FQ2 FY26 transcript, press release, and prior-quarter guidance. Management corrected one analyst’s premise (the Anthropic deal is Broadcom providing TPU compute, not chips used as financing “backstop”), but this was a clarification, not an inconsistency.
Data sourced from Broadcom FQ2 FY2026 press release & 8-K financial tables, earnings-call transcripts via the Financial Modeling Prep API, and FMP fundamentals (income statement, cash flow, revenue segmentation). Consensus and market-reaction figures from public reporting. Stock price $479.23 (NASDAQ: AVGO) as of the June 3, 2026 close; review generated for the FQ2 FY2026 (quarter ended May 3, 2026) report.