Broadcom closed its second fiscal quarter of 2026 with figures that confirm just how much artificial intelligence is changing its business profile. The company generated $22.187 billion in the quarter ended May 3, a 48% increase from the same period last year, and posted a GAAP net profit of $9.310 billion. The growth is no longer solely explained by its traditional semiconductor and infrastructure software portfolio: the engine is in custom AI accelerators and the networks connecting large data centers.
The most notable data is in the AI semiconductor division. Broadcom reported $10.8 billion in revenue from that business, a 143% year-over-year increase, surpassing its own forecast. For the third quarter, it expects that figure to rise to $16 billion, which would represent a growth of over 200% compared to the previous year. Once viewed by many investors as a diversified provider of chips and enterprise software, the company has become one of the key players in the physical infrastructure supporting AI.
However, the market didn’t react with euphoria to these results. Broadcom’s shares fell in after-hours trading despite the increase in revenues and profits, reflecting the high level of expectations already placed on any company related to AI. In this cycle, rapid growth alone is not always enough: investors want to know if the pace can be sustained, if there is enough supply, if margins hold up, and if major clients will continue their spending plans.
AI Is Now Central to Broadcom
Hock Tan, President and CEO of Broadcom, attributed the record revenues, operating profit, and free cash flow to the accelerated growth of AI semiconductors and the company’s operational leverage. Specifically, he cited demand for custom accelerators and AI networks as the two main drivers of the quarter.
This combination is important. Broadcom does not compete directly with NVIDIA in general-purpose GPUs for training and inference. Instead, it has established a strong position in custom chips, ASICs, optical networking, switching, and connectivity for large cloud customers. As hyperscalers seek to reduce dependence on standard solutions and develop their own accelerators, Broadcom gains relevance as an engineering partner, supplier, and network provider.
The company had already announced in October 2025 a collaboration with OpenAI to deploy 10 GW of custom AI accelerators, clearly indicating the market’s direction: major labs and platforms want hardware tailored to their models, data centers, and per-token costs. In this context, Broadcom occupies a different position compared to vendors of general-purpose chips.
| Q2 FY 2026 Metric | Result | Year-over-year Change |
|---|---|---|
| Total Revenue | $22.187 billion | +48% |
| GAAP Net Income | $9.310 billion | +88% |
| Non-GAAP Net Income | $12.074 billion | +55% |
| Adjusted EBITDA | $15.244 billion | +52% |
| GAAP Diluted EPS | $1.91 | +85% |
| Non-GAAP Diluted EPS | $2.44 | +54% |
| Free Cash Flow | $10.262 billion | +60% |
| AI Semiconductor Revenue | $10.8 billion | +143% |
Margins also attract attention. Adjusted EBITDA reached $15.244 billion, representing 69% of revenues. Operating cash flow was $10.493 billion, and after just $231 million in capital expenditures, free cash flow stood at $10.262 billion, equivalent to 46% of quarterly sales. This is a very high cash generation for a company combining semiconductors, infrastructure software, and significant debt following the VMware integration.
Semiconductors Surge and VMware Sustains Software
By segments, Semiconductor Solutions posted $15.009 billion in revenue, a 79% increase year-over-year, now accounting for 68% of total. Infrastructure Software contributed $7.178 billion, up 9%, representing 32% of sales. The strongest growth comes from chips, but software continues to provide stability and margins.
The VMware integration remains a key aspect of the software segment. Since its acquisition, Broadcom has restructured VMware’s commercial strategy, focusing more on large customers, private cloud, virtualization, security, and enterprise platforms. While this business does not grow as fast as AI, it helps Broadcom maintain a recurring revenue base and diversify income beyond the semiconductor cycle.
Yet, the chip market now dominates the narrative. AI data centers need accelerators, networks, optical components, switching, packaging, memory, and low-level software. Broadcom benefits from this complexity because it participates in multiple layers of the supply chain. It doesn’t just sell a single piece; it supplies components that enable AI racks to operate with greater bandwidth and lower latency.
The forecast for the third quarter further emphasizes this trend. Broadcom expects approximately $29.4 billion in revenue, an 84% year-over-year increase. It also anticipates non-GAAP operating margins near 67% and adjusted EBITDA around 68%. These figures are unusual even within the current AI cycle.
Stock Market Reaction Shows High Expectations
The paradox lies in the market reaction. Reuters reported that Broadcom’s shares fell sharply after the results, despite the company raising guidance and showing very high AI growth. The explanation lies in expectations: some analysts had forecast an even more aggressive outlook for AI chips, and any deviation is seen as prudence in a stock that had already priced in significant optimism.
This is the new characteristic of the AI market. Companies must not only grow; they must surpass forecasts that already assume massive spending on data centers. NVIDIA, Broadcom, Marvell, AMD, TSMC, SK Hynix, Micron, and others are under this scrutiny. Investors no longer ask if there’s demand for AI, but how much, for how long, with what margins, and with what risk of customer concentration.
Broadcom also highlighted usual risks in its statement: dependence on large customers, semiconductor industry cycles, trade restrictions, geopolitical tensions, supply chain issues, cybersecurity, debt, and the evolution of its software business. These are standard warnings, but in this case, they carry real weight. Much of the AI growth comes from major buyers with huge investment plans and demanding schedules.
The company ended the quarter with $19.628 billion in cash and equivalents, up from $14.174 billion at the previous quarter’s close. It also announced a quarterly dividend of $0.65 per share, payable on June 30 to shareholders registered as of June 22. This signals financial discipline amid a very intense expansion cycle.
Broadcom has become one of the main beneficiaries of the transition to large-scale AI. While it doesn’t occupy the same space as NVIDIA, it plays an equally critical role: customizing accelerators and providing the network infrastructure that moves data within increasingly dense data centers. Its results demonstrate that AI is no longer just a promise on its income statement; it is the core that is redefining the company’s size, valuation, and expectations.
Frequently Asked Questions
How much did Broadcom earn in Q2 FY 2026?
Broadcom earned $22.187 billion, a 48% increase compared to the same period last year.
How much revenue did Broadcom generate from AI semiconductors?
The company reported $10.8 billion in AI semiconductor revenue, a 143% rise year-over-year. For the third quarter, it expects to reach $16 billion.
What role does VMware play in these results?
VMware is part of the Infrastructure Software segment, which contributed $7.178 billion this quarter. While it grows more slowly than semiconductors, it helps sustain margins and diversify revenues.
Why did the stock decline even though results were so strong?
Because market expectations around AI are very high. Despite growth and positive guidance, some investors expected an even stronger forecast for AI chips.
via: Broadcom