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    AVGO
    Earnings call· Feb 2026(Q1 FY26)

    Broadcom Q1 FY26 earnings call AVGO

    Mar 4, 2026 Source

    Executive summary

    Broadcom Inc. Q1 FY26 — AI Semiconductor Revenue Surges, FY27 AI Revenue Projected Over $100B

    Broadcom delivered record Q1 FY26 results, driven by exceptional growth in AI semiconductors and strong profitability. The company is accelerating its custom AI XPU deployments with six key customers, leading to a significantly raised outlook for AI revenue in 2027. Management is confident in its strategic positioning in both custom silicon and networking, securing long-term supply and driving operating leverage.

    Highlights

    5

    • Total revenue reached a record $19.3 billion, up 29% year-on-year, exceeding guidance.

    • AI semiconductor revenue grew 106% year-on-year to $8.4 billion in Q1, accelerating to 140% year-on-year to $10.7 billion in Q2 guidance.

    • Consolidated adjusted EBITDA hit a record $13.1 billion, representing 68% of revenue, demonstrating significant operating leverage.

    • Company projects AI revenue from chips to exceed $100 billion in 2027, with secured supply chain through 2028.

    • Returned $10.9 billion to shareholders in Q1 through $3.1 billion in dividends and $7.8 billion in share repurchases.

    Concerns

    1

    • Days of inventory on hand increased to 68 days in Q1 from 58 days in Q4, in anticipation of accelerating AI semiconductor growth.

    Guidance & targets

    16
    CategoryTargetConfidence
    Consolidated revenue
    approximately $22 billion
    high materiality
    High
    Consolidated revenue growth
    47% year-on-year
    high materiality
    High
    Semiconductor revenue
    approximately $14.8 billion
    medium materiality
    High
    Semiconductor revenue growth
    76% year-on-year
    medium materiality
    High
    AI semiconductor revenue
    $10.7 billion
    high materiality
    High
    AI semiconductor revenue growth
    140% year-on-year
    high materiality
    High
    Infrastructure Software revenue
    approximately $7.2 billion
    medium materiality
    High
    Infrastructure Software revenue growth
    9% year-on-year
    medium materiality
    High
    Consolidated adjusted EBITDA
    approximately 68% of revenue
    high materiality
    High
    AI revenue from chips
    in excess of $100 billion
    high materiality
    High
    Anthropic TPU compute capacity
    in excess of 3 gigawatts
    medium materiality
    High
    Meta next-generation XPU compute capacity
    multiple gigawatts
    medium materiality
    High
    OpenAI first-generation XPU compute capacity
    over 1 gigawatt
    medium materiality
    High
    Total AI XPU compute capacity
    getting close to 10 gigawatts
    high materiality
    High
    Non-GAAP tax rate
    approximately 16.5%
    low materiality
    High
    Non-GAAP diluted share count
    approximately 4.94 billion shares
    low materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Semiconductor Solutions
    Record revenue driven by AI, with strong operating leverage.
    Gross margin: 68%Gross margin change YoY: +30 bpsOperating margin change YoY: +260 bpsR&D as % of revenue: 8%
    		$12.5 billion52%—60% operating margin
    Infrastructure Software
    Revenue in line with guidance, with strong gross and operating margins. VMware continues to show robust growth and bookings.
    Gross margin: 93%Operating margin change YoY: +190 bpsVMware revenue growth YoY: 13%VMware ARR growth YoY: 19%
    		$6.8 billion1%—78% operating margin

    Operational metrics

    18
    Total Revenue
    $19.3 billion29% year-on-year
    Q1 FY26

    Record consolidated revenue for the quarter.

    Consolidated Adjusted EBITDA
    $13.1 billion
    Q1 FY26

    Record adjusted EBITDA, exceeding guidance of 67%.

    Gross Margin
    77%
    Q1 FY26

    Consolidated gross margin for the quarter.

    Consolidated Operating Expenses
    $2 billion
    Q1 FY26

    Total operating expenses for the quarter, including R&D.

    Operating Income
    $12.8 billion31% from a year ago
    Q1 FY26

    Record operating income for the quarter.

    Operating Margin
    66.4%increased 50 basis points year-over-year
    Q1 FY26

    Consolidated operating margin, reflecting favorable operating leverage.

    Semiconductor Operating Expenses
    $1.1 billion
    Q1 FY26

    Reflects increased investment in R&D for leading-edge AI semiconductors.

    Infrastructure Software Operating Expenses
    $979 million
    Q1 FY26

    Operating expenses for the Infrastructure Software segment.

    Capital Expenditures
    $250 million
    Q1 FY26

    Capital expenditures incurred in the quarter.

    Inventory
    $3 billion
    Q1 FY26

    Inventory balance at the end of the first quarter, securing components for AI demand.

    Days of Inventory on Hand
    68 dayscompared to 58 days in Q4
    Q1 FY26

    Increased in anticipation of accelerating AI semiconductor growth.

    Cash Dividends Paid
    $3.1 billion
    Q1 FY26

    Cash dividends distributed to stockholders.

    Share Repurchases
    $7.8 billion
    Q1 FY26

    Amount spent on share repurchases during the quarter.

    Total Capital Returned to Shareholders
    $10.9 billion
    Q1 FY26

    Combined dividends and share repurchases.

    Cash Balance
    $14.2 billion
    end of Q1 FY26

    Cash and equivalents at the end of the first quarter.

    Share Repurchase Program Authorization
    $10 billionadditional authorization
    through end of CY26

    Board authorized an additional amount for the share repurchase program.

    VMware Total Contract Value Booked
    exceeded $9.2 billion
    Q1 FY26

    Strong bookings for VMware in the quarter.

    VMware Annual Recurring Revenue (ARR) Growth
    19%year-upon-year
    Q1 FY26

    Sustaining ARR growth for VMware.

    Industry KPIs

    10
    MetricValueDetails
    Lead times—
    Ai data center revenue$8.4 billionUSD
    Market share commentarygaining share
    Bookings net order intakeexceeded $9.2 billionUSD
    Advanced packaging revenue—
    Design wins socket pipeline6customers
    Inventory channel inventory$3 billionUSD
    Node platform ramp schedule—
    End market segment revenue mix—
    Strategic supply agreements customer prepaymentssecured

    Orderbook & backlog

    1
    VMware Total Contract Value Bookedexceeded $9.2 billionQ1 FY26

    Sustaining an ARR growth of 19% year-upon-year.

    Product announcements

    2
    ProductTypeDetails
    Tomahawk 7 switchroadmap
    400G SerDesroadmap

    Q&A highlights

    7

    Clarification on the $100B+ AI chips revenue (ASICs vs. networking) and management's perspective on investor pessimism regarding hyperscaler ROI given the rapid growth.

    Hock Tan clarified that the $100B+ AI revenue refers to silicon content (XPUs, switch chips, DSPs). He explained that demand is driven by a few strategic customers (hyperscalers and LLM developers) creating platforms, with increasing need for compute capacity for both training and inference. He emphasized that these customers are creating custom accelerators and networking architectures, leading to sustained demand.

    “I'm focusing on the fact that these are pretty much all based on chips, whether they are XPUs, whether they are switch chips, DSPs, these are silicon content we're talking about.”

    asked by Blayne Curtis · answered by Hock Tan

    2 min read6 chapters

    Detailed Narrative

    01

    AI XPU Strategy and Customer Engagements

    Broadcom is deeply engaged with six strategic customers for custom AI XPU development, emphasizing multi-year partnerships and supply agreements. The company provides unmatched technology in SerDes, silicon design, process technology, advanced packaging, and networking, enabling optimal performance for differentiated LLM workloads. This strategic approach ensures high-volume production with accelerated time-to-market and high yields, securing capacity for 2026 through 2028.

    02

    AI Networking Leadership

    The company is gaining significant share in AI networking, with Q1 revenue growing 60% year-on-year and projected to accelerate to 40% of total AI revenue in Q2. Broadcom's Tomahawk 6 switch (100 terabit per second) and 200G SerDes are capturing demand from hyperscalers, with the next-generation Tomahawk 7 (double performance) expected in 2027. The ability to use direct attached copper for scale-up networking with 200G and future 400G SerDes offers a cost and power advantage over optical alternatives.

    03

    Infrastructure Software Resilience

    The Infrastructure Software segment, including VMware, continues to demonstrate strong performance, with Q1 revenue of $6.8 billion and Q2 forecast of $7.2 billion, up 9% year-on-year. VMware revenue grew 13% year-on-year, with strong bookings and 19% ARR growth. Management highlights VMware Cloud Foundation (VCF) as an essential software layer for integrating diverse hardware components in data centers, crucial for scaling complex generative AI workloads and not disrupted by AI.

    04

    Supply Chain Security and Visibility

    Broadcom has proactively secured critical components, including T-glass, substrates, and high-bandwidth memory, through 2028. This foresight, combined with deep strategic engagements with customers who share their multi-year roadmaps, provides the company with strong visibility into future demand and the confidence to project AI revenue exceeding $100 billion in 2027. The company's ability to assure supply in times of constrained capacity is a key differentiator.

    05

    Operating Leverage and Capital Returns

    The company achieved exceptional profitability with Q1 consolidated adjusted EBITDA reaching $13.1 billion, or 68% of revenue, reflecting significant operating leverage. Broadcom returned $10.9 billion to shareholders in Q1 through $3.1 billion in cash dividends and $7.8 billion in share repurchases. An additional $10 billion share repurchase authorization was announced, effective through calendar year 2026, underscoring commitment to shareholder returns.

    06

    Evolution of AI Accelerator Architecture

    Broadcom observes a trend towards more customized XPU designs tailored for specific LLM workloads, departing from general-purpose GPU designs. Customers are increasingly developing specialized chips for both training and inference simultaneously, recognizing the strategic importance of rapid productization and monetization of LLMs. This specialization allows for greater efficiency, lower cost, and reduced power consumption compared to general-purpose solutions, driving long-term demand for custom silicon.

    AI-generated summary of the company’s earnings call. Not investment advice.