Broadcom Q2 FY2026 Earnings Call: AI Bookings & Outlook | AVGO

AI semiconductor revenue $10.8B

+143% year over year

AI semiconductor bookings >$30B

Far ahead of shipments

Demand visibility 2028

Multi-year commitments

AI networking share ~40%

Of Q2 AI revenue

FY2026 AI target $56B

Maintained

FY2027 AI target >$100B

Maintained

Infrastructure software ARR +17%

Improving

Inventory $4.3B

AI supply preparation

Inventory days 86

Up from about 68

Q3 AI revenue target $16.0B

More than +200% YoY

Investment read

Broadcom's Q2 call confirmed that AI demand is running far ahead of current shipments, supported by more than $30B of AI semiconductor bookings.

Next checkpoint

Investors should watch whether AI revenue ramps toward the Q3 target of $16.0B while gross-margin compression remains mix-driven rather than structural.

Page typeEarnings call analysis

Primary new insightAI bookings above $30B

Main riskGross-margin mix

Next checkpointQ3 AI revenue: $16.0B

Call-specific evidence

What changed on the call

AI semiconductor bookings exceeded $30B versus $10.8B of Q2 AI revenue.
Demand visibility now extends through 2028.
Networking represented nearly 40% of Q2 AI revenue.
FY2026 and FY2027 AI revenue targets remain $56B and above $100B.
Q3 consolidated gross margin is expected to decline as semiconductor mix rises.
Infrastructure software ARR increased 17%.
Inventory increased to prepare for accelerating AI demand.

Management commentary

What management said

AI demand and bookings

Very strong

Management viewAI semiconductor bookings exceeded $30B versus $10.8B of Q2 AI semiconductor revenue.

Supporting evidenceBookings >$30B; AI revenue $10.8B; growth +143%.

SnowballHare readBookings support multi-quarter visibility but are not immediate revenue and increase execution dependencies.

Open primary source

Custom accelerators and AI networking

Strong

Management viewCustom accelerators and networking both drove growth; networking represented nearly 40% of Q2 AI revenue.

Supporting evidenceNetworking is already a material second AI engine.

SnowballHare readProduct breadth helps, but customer concentration remains material.

Open primary source

Long-term AI visibility

Strong visibility

Management viewOrder visibility extends through 2028 and the FY2027 AI revenue target remains above $100B.

Supporting evidenceFY2026 target $56B; FY2027 target >$100B.

SnowballHare readRevenue timing still depends on customer infrastructure, power, memory and deployments.

Open primary source

Gross margin and product mix

Mixed

Management viewConsolidated gross margin should decline as semiconductor revenue becomes a larger share, while semiconductor economics remain stable.

Supporting evidenceQ3 gross margin ~74%; non-GAAP operating margin ~67%.

SnowballHare readModel semiconductor and software margins separately; mix compression is not automatically structural deterioration.

Open primary source

VMware and infrastructure software

Improving

Management viewInfrastructure software revenue grew and management expects acceleration in Q3.

Supporting evidenceQ2 revenue ~$7.2B; growth +9%; ARR +17%; Q3 guide ~$8.9B.

SnowballHare readVMware remains the high-margin stabilizer as AI semiconductors grow faster.

Open primary source

Inventory and supply preparation

Proactive / execution risk

Management viewInventory increased as Broadcom prepared for accelerating AI demand.

Supporting evidenceInventory ~$4.3B; inventory days rose from about 68 to 86.

SnowballHare readHigher inventory is consistent with the plan but becomes risky if deployments slip.

Open primary source

Non-AI semiconductors

Improving

Management viewNon-AI semiconductor demand showed signs of recovery.

Supporting evidenceRevenue ~$4.2B, +6%; bookings above $6B.

SnowballHare readThe recovery broadens growth, though AI remains dominant.

Open primary source

Customer concentration

Commitments strong / risk remains

Management viewMulti-year commitments support the roadmap, while major customers may use multiple suppliers.

Supporting evidenceLarge customers remain important to custom-accelerator revenue.

SnowballHare readAgreements improve visibility but do not remove concentration or share-loss risk.

Open primary source

Management tone

Dimension	Assessment	Evidence
AI demand	Very confident	Bookings above $30B.
Long-term visibility	Strong	Visibility through 2028.
AI networking	Strong	Nearly 40% of AI revenue.
Gross margin	Cautious	Q3 mix expected to lower consolidated margin.
Software	Constructive	ARR +17%; Q3 acceleration expected.
Inventory	Proactive	86 inventory days for AI ramp.

Investor questions

Key analyst questions

Why are bookings much larger than shipments?

Direct

Why it mattersWhy bookings exceeded $30B while Q2 AI revenue was $10.8B.

Management responseCustomers plan chips, memory, power and data-center capacity far in advance; bookings are not for immediate shipment.

SnowballHare readBookings improve visibility but must not be treated as near-term recognized revenue.

Open source

Is the gross-margin decline structural?

Direct

Why it mattersWhether lower consolidated margin means weaker AI economics.

Management responseManagement attributed the decline mainly to a higher semiconductor mix and XPU/networking mix, not structural semiconductor deterioration.

SnowballHare readTrack semiconductor and software margins independently.

Open source

Can custom-chip customers diversify suppliers?

Direct

Management responseManagement acknowledged multiple suppliers may be used while emphasizing long-term dollar commitments.

SnowballHare readCommitments support visibility but do not eliminate share-loss risk.

Open source

Why was the FY2027 target not increased?

Partially answered

Management responseManagement said execution is at least on track but it will not reset the long-term target every quarter.

SnowballHare readThe unchanged target may show discipline, but limits visible incremental upside.

Open source

How important is AI networking?

Direct

Management responseNetworking represented nearly 40% of Q2 AI semiconductor revenue.

SnowballHare readNetworking is already a material second AI revenue stream.

Open source

Demand conversion

AI bookings and visibility

Metric	Current evidence
AI bookings	>$30B
Q2 AI revenue	$10.8B
Bookings / quarterly revenue	>2.7x
Visibility	Through 2028
FY2027 target	>$100B

Bookings are not equivalent to recognized revenue.

SnowballHare: Conversion depends on supply, memory, power and customer deployment readiness.

Product mix

Custom accelerators and networking

Metric	Current evidence
Custom accelerators	Major AI growth driver
Networking share	Nearly 40% of Q2 AI revenue
Customer commitments	Multi-year
Supplier diversification	Possible

SnowballHare: Product breadth helps, but customer-owned architecture choices remain a risk.

Profitability

Gross margin and product mix

Metric	Current evidence
Q2 consolidated gross margin	77.1%
Q3 gross-margin guidance	~74%
Q2 operating margin	67.3%
Q3 operating-margin guidance	~67%

SnowballHare: Operating-margin stability is the cleaner near-term execution test.

Software stabilizer

VMware and infrastructure software

Metric	Current evidence
Q2 software revenue	~$7.2B · +9%
ARR growth	+17%
Q3 revenue guidance	~$8.9B · +31%

SnowballHare: Software provides recurring revenue and margin support as AI semiconductors grow faster.

Supply preparation

Inventory and supply

Metric	Current evidence
Inventory	~$4.3B
Inventory days	86
Previous inventory days	~68
Main reason	AI demand preparation

SnowballHare: Track inventory days against actual shipment and revenue conversion.

Forward outlook

Guidance dashboard

Metric	Guidance	Prior-year base	Status	Investor interpretation
Total revenue	~$29.4B	Q3 FY2026	Guided	~84% year-over-year growth.
Semiconductor revenue	~$20.5B	Q3 FY2026	Guided	~124% year-over-year growth.
AI semiconductor revenue	~$16.0B	Q3 FY2026	Guided	More than 200% growth.
Infrastructure software revenue	~$8.9B	Q3 FY2026	Guided	~31% growth.
Consolidated gross margin	~74%	Q3 FY2026	Mix-pressured	Higher semiconductor mix.
Non-GAAP operating margin	~67%	Q3 FY2026	Stable	Better execution measure than gross margin alone.
Adjusted EBITDA margin	~68%	Q3 FY2026	Strong	Operating leverage remains strong.

Quarterly change

What changed this quarter

Improved

AI revenue increased 143%.
AI bookings exceeded $30B.
Visibility extended through 2028.
Networking reached nearly 40% of AI revenue.
Software ARR increased 17%.
Q3 AI revenue guidance reached $16B.

Deteriorated

Q3 consolidated gross margin is expected to decline.
Inventory days increased from about 68 to 86.

Unresolved

Bookings conversion timing.
Customer concentration.
Whether FY2027 materially exceeds $100B.
Whether margin pressure remains mix-driven.
Customer power and data-center deployment constraints.

Investment thesis

Thesis tracker

Investment question	Current evidence	Status
Is AI demand accelerating?	Bookings >$30B; revenue +143%.	Confirmed
Is visibility improving?	Visibility through 2028.	Confirmed
Is networking a second AI engine?	Nearly 40% of AI revenue.	Confirmed
Can software support margins?	ARR +17%; Q3 growth expected.	Improving
Is margin pressure structural?	Management says mix-driven.	Watch
Can inventory convert into revenue?	Inventory days rose to 86.	Unproven
Is customer concentration manageable?	Commitments are strong; diversification risk remains.	Watch

Next quarter

What to watch next

Indicator	Current baseline	Next check	Source
AI semiconductor revenue	$10.8B · +143%	Q3 target of ~$16.0B	Primary source
Total revenue	$22.187B	Q3 guidance of ~$29.4B	Primary source
Semiconductor revenue	~$15.0B · +79%	Q3 target of ~$20.5B	Primary source
Infrastructure software	~$7.2B · +9%	Q3 target of ~$8.9B	Primary source
AI bookings	>$30B	Conversion into shipments	Primary source
Demand visibility	Through 2028	New customer commitments	Primary source
Consolidated gross margin	77.1%	Q3 outlook near 74%	Primary source
Operating margin	67.3%	Q3 target near 67%	Primary source
Inventory	$4.3B / 86 days	Conversion into AI revenue	Primary source
Free cash flow	$10.3B	Cash conversion during the AI ramp	Primary source
FY2026 AI target	$56B	Execution against the annual target	Primary source
FY2027 AI target	>$100B	Evidence of upside beyond target	Primary source

Primary documents

Sources and documents

Official earnings release: VerifiedOfficial webcast: VerifiedManagement commentary: AvailableStructured analyst Q&A: AvailableFull transcript: Not storedConsensus: Not verifiedPrice reaction: Not verified

Earnings release · 2026-06-03Broadcom Q2 FY2026 Earnings ReleaseQ2 FY2026 Official webcast · 2026-06-03Broadcom Q2 2026 Earnings Conference CallQ2 FY2026 SEC filing · 2026-06-04Broadcom Form 10-Q for the period ended May 3, 2026Q2 FY2026

FAQ

Reader questions

How large were Broadcom's Q2 FY2026 AI semiconductor bookings?

Broadcom said bookings exceeded $30B.

How far does Broadcom's AI demand visibility extend?

Management said visibility extends through 2028.

What is Broadcom's FY2026 AI revenue target?

The target remains $56B.

What is Broadcom's FY2027 AI revenue target?

Management expects more than $100B.

Why does Broadcom expect gross margin to decline?

A higher semiconductor mix relative to higher-margin software lowers consolidated gross margin.

How much of Broadcom's AI revenue came from networking?

Networking represented nearly 40% of Q2 AI semiconductor revenue.

What did Broadcom say about VMware growth?

Software revenue grew 9%, ARR grew 17%, and Q3 growth is expected to accelerate.

What is Broadcom's Q3 AI revenue guidance?

Broadcom expects approximately $16B.

What should AVGO investors watch next?

Watch AI revenue, bookings conversion, demand visibility, margin mix, software growth, inventory, free cash flow and customer concentration.

Broadcom's Q2 call confirmed that AI demand is running far ahead of current shipments, supported by more than $30B of AI semiconductor bookings.

AI demand and bookings

Custom accelerators and AI networking

Long-term AI visibility

Gross margin and product mix

VMware and infrastructure software

Inventory and supply preparation

Non-AI semiconductors

Customer concentration

Management tone

Why are bookings much larger than shipments?

Is the gross-margin decline structural?

Can custom-chip customers diversify suppliers?

Why was the FY2027 target not increased?

How important is AI networking?

Improved

Deteriorated

Unresolved

Reader questions

How large were Broadcom's Q2 FY2026 AI semiconductor bookings?

How far does Broadcom's AI demand visibility extend?

What is Broadcom's FY2026 AI revenue target?

What is Broadcom's FY2027 AI revenue target?

Why does Broadcom expect gross margin to decline?

How much of Broadcom's AI revenue came from networking?

What did Broadcom say about VMware growth?

What is Broadcom's Q3 AI revenue guidance?

What should AVGO investors watch next?

Related earnings notes