Broadcom Inc (AVGO) reported a record Q2 2026 revenue of $22.2 billion, reflecting a 48% increase year-on-year. Key highlights include: - AI semiconductor revenue surged to $10.8 billion, marking a 143% increase. - Operating margin reached a record 67%, and adjusted EBITDA constituted 69% of revenue. - Semiconductor and infrastructure software revenues grew by 79% and 9%, respectively. - The company also showed positive free cash flow of $10.3 billion and paid $3.1 billion in cash dividends. - Guidance for Q3 revenue is anticipated at $29.4 billion, with AI semiconductor revenue expected to surpass $16 billion. Despite these successes, the gross margin decreased due to a rising proportion of lower-margin semiconductor products, and there is a significant backlog in AI semiconductor bookings. Long-term agreements with tech giants like Google indicate strong future growth potential, even with potential supply chain challenges ahead.

Oops, something went wrong

Skip to navigation Skip to main content Skip to right column

Broadcom Inc (AVGO) Q2 2026 Earnings Call Highlights: Record Revenue Driven by AI Semiconductor ...

GuruFocus News

Thu, June 4, 2026 at 1:00 AM EDT4 min read

AVGO \ -0.49%

This article first appeared on GuruFocus.

Total Revenue: $22.2 billion, up 48% year on year.
AI Semiconductor Revenue: $10.8 billion, up 143% year on year.
Operating Margin: 67%, a record high.
Adjusted EBITDA: 69% of revenue, above guidance.
Semiconductor Revenue: $15 billion, up 79% year on year.
Infrastructure Software Revenue: $7.2 billion, up 9% year on year.
Gross Margin: 77.1% of revenue, down 230 basis points year on year.
Operating Income: $14.9 billion, up 52% year on year.
Free Cash Flow: $10.3 billion, representing 46% of revenue.
Capital Expenditures: $231 million.
Cash Dividends: $3.1 billion paid to stockholders.
Inventory: $4.3 billion, with 86 days of inventory on hand.
Q3 Revenue Guidance: $29.4 billion, up 84% year on year.
Q3 AI Semiconductor Revenue Guidance: $16 billion, up over 200% year on year.
Q3 Infrastructure Software Revenue Guidance: $8.9 billion, up 31% year on year.
Q3 Gross Margin Guidance: Approximately 74%.
Non-GAAP Tax Rate Guidance for Q3: Approximately 16%.
Warning! GuruFocus has detected 7 Warning Sign with AVGO.
Is AVGO fairly valued? Test your thesis with our free DCF calculator.

Release Date: June 03, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Broadcom Inc ( NASDAQ:AVGO) reported a record Q2 revenue of $22.2 billion, up 48% year on year, driven by strong performance in AI semiconductors.
AI semiconductor revenue reached a record $10.8 billion, up 143% year on year, indicating robust demand and growth potential.
The company expects AI semiconductor revenue to double in the second half of 2026, with a forecast of $56 billion for the full year, up approximately 180% from fiscal 2025.
Broadcom Inc ( NASDAQ:AVGO) has secured long-term agreements with major tech companies like Google, Anthropic, and OpenAI, ensuring sustained business growth.
The infrastructure software segment also showed strong performance, with Q2 software revenue up 9% year on year and expected to grow by 31% in Q3.

Negative Points

Gross margin declined by 230 basis points year on year to 77.1% due to the increasing proportion of semiconductor products in the mix.
Despite strong revenue growth, the company faces pressure on semiconductor margins due to the lower margins of ASICs and TPUs.
The rapid growth in AI semiconductor revenue is causing a decline in consolidated gross margin, expected to be approximately 74% in Q3.
There is a significant backlog in AI semiconductor bookings, with $30 billion in bookings against $10.8 billion shipped, indicating potential supply chain challenges.
The company's visibility into future demand extends to 2028, but this long lead time may pose risks if market conditions change.

Story Continues

Q & A Highlights

Q: Hock, on this fiscal year, AI sort of 2x growth, second half of our first half, that would put AI revenues over $60 billion with sequential growth in fiscal Q4, but you gave us this $56 billion number. Can you help us square the numbers there? A: Hock Tan, President and CEO: The first half we shipped about $19 billion in AI revenue. If you double that for the second half, you get around $56 billion, which aligns with our guidance. For 2027, we expect continued growth, potentially exceeding $100 billion, maintaining the trajectory from the back half of 2026.

Q: Can you provide more details on the long-term agreement with Google and your confidence in maintaining share with this customer? A: Hock Tan, President and CEO: The agreement with Google is substantial in dollar terms, reflecting our strong partnership and product offerings. While we expect some diversity in their sourcing, our commitment from them is significant.

Q: Can you discuss the drivers behind the gross margin decline, particularly within semiconductors? A: Kirsten Spears, CFO: As our semiconductor business grows relative to software, there is margin compression. Within semiconductors, ASICs and TPUs have lower margins, but AI networking has rich margins, which helps offset some of the pressure.

Q: Regarding 2027, are you seeing an increase in the TAM per gigawatt as suggested by competitors? A: Hock Tan, President and CEO: The dollars per gigawatt remain relatively stable, but the number of gigawatts required is accelerating. We expect substantial growth in compute capacity demand, particularly from customers like Anthropic and OpenAI.

Q: Can you comment on your ability to secure incremental wafer and HBM supply if customer demand increases? A: Hock Tan, President and CEO: We are comfortable with our supply for 2026 and 2027 and are working on securing supply for 2028 and 2029. We have been able to meet incremental customer demand and expect this to continue.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.