Broadcom FY 2Q26 and FY 3Q26
For those who came to this post maybe worried that we would say anything bad about Nvidia market share and leadership position, we don’t!
We expect a 34% CAGR for the Data Center + AI Accelerator + AI Networking Industry. Even the scenario that Broadcom earn share from Nvidia, it should not disrupt the Green Team scale and dominance!
Now Broadcom reported exceptional growth in its second quarter of fiscal year 2026, driven primarily by an insatiable demand for AI semiconductors.
- Consolidated revenue for Q2 2026 reached a record $22.2 billion, representing a 48% year-over-year increase.
- Operating margin achieved a record 67%, and adjusted EBITDA hit 69% of revenue ($15.2 billion), exceeding guidance.
- Gross margin decreased by 230 basis points to 77.1% due to an increased proportion of semiconductor products in the overall revenue mix.
- Free cash flow was remarkably strong at $10.3 billion, representing 46% of total revenue.
- The company returned capital to stockholders by paying $3.1 billion in cash dividends.
Forward Guidance
- Q3 2026 Forecast: Consolidated revenue is projected to reach $29.4 billion (up 84% year-over-year).
- Full Year 2026: Total AI semiconductor revenue is expected to hit $56 billion, an approximate 180% increase from fiscal 2025.
- Fiscal 2027 and Beyond: Broadcom reiterated that AI semiconductor revenue will exceed $100 billion in 2027, with continued substantial growth expected into 2028.
II. Segment Performance
Semiconductor Solutions
- Total semiconductor revenue reached a record $15 billion, up 79% year-over-year, accounting for 68% of Broadcom’s total revenue.
- AI semiconductor revenue was the primary catalyst, hitting a record $10.8 billion (up 143% year-over-year).
- Networking components accounted for nearly 40% of the Q2 AI revenue.
- Non-AI semiconductor revenue was $4.2 billion (up 6% year-over-year).
- Bookings for non-AI semiconductors exceeded $6 billion, signaling a clear path toward a full cyclical recovery in areas like broadband, server storage, and enterprise networking.
- Q3 Semiconductor Forecast: Revenue is expected to be $20.5 billion (with AI semiconductors accelerating to $16 billion).
Infrastructure Software
- Infrastructure software revenue grew 9% year-over-year to $7.2 billion, making up 32% of total revenue.
- The segment sustained strong Annual Recurring Revenue (ARR) growth of 17% year-over-year.
- The release of VMware Cloud Foundation 9.1 is driving robust revenue growth due to high demand for on-premise cloud computing and its support for heterogeneous compute architectures.
- Q3 Infrastructure Software Forecast is expected to reach $8.9 billion.
III. Strategic AI Partnerships & Infrastructure
Broadcom highlighted massive compute power commitments (measured in gigawatts) with six core customers, emphasizing a long-term trajectory.
- Google: Broadcom secured a long-term agreement to supply multiple generations of TPUs and AI networking, ensuring sustained business for the foreseeable future.
- Anthropic: Broadcom is providing over 1 gigawatt (GW) of TPU-based compute in 2026 and signed an agreement for an additional 5 GW of next-generation compute starting in 2027.
- OpenAI: Silicon has been delivered, with production on track for late 2026, and a commitment to deploy 1.3 GW in 2027 as part of a larger 10 GW agreement by 2029.
- Meta: Broadcom announced a partnership to deliver multiple generations of MTIA XPUs, expecting to deploy 3 GW through 2028, with initial deliveries starting in the second half of 2027.
- AI XPV Platform: To finance and deploy this massive scale of compute, Broadcom launched the AI XPV platform in partnership with Apollo, Blackstone, and other investors.
- Platform Goal: The AI XPV platform aims to deploy over 20 GW of compute capacity through 2028, with the first $35 billion tranche currently being launched.
Please follow below our Estimates for Broadcom!
Thank you,
CoreValue Research
