Broadcom Inc. (AVGO Quick QuoteAVGO - Free Report) used its second-quarter fiscal 2026 earnings call to make a larger point than a routine beat. Management framed the quarter as further proof that AI infrastructure demand is accelerating faster than previously outlined.

The central message was not just stronger near-term results. It was that Broadcom now sees a steeper multiyear buildout across custom AI accelerators, networking and software tied to enterprise and cloud deployments.

AVGO Pushes AI Revenue Higher

President and CEO Hock Tan said fiscal second-quarter AI semiconductor revenues reached $10.8 billion, up 143% from a year ago and ahead of the company’s own outlook. He said demand for custom AI accelerators and AI networking remained exceptionally strong.

Tan also pointed to bookings of more than $30 billion in AI semiconductors during the quarter against $10.8 billion shipped. That commentary stood out because it signaled widening customer commitments rather than a one-quarter spike.

Supporting that backdrop, AVGO posted non-GAAP earnings of $2.44 per share on revenues of $22.19 billion. That topped the Zacks Consensus Estimate of $2.40 and $21.71 billion, delivering surprises of 1.82% and 0.68%, respectively.

Broadcom Inc. Price, Consensus and EPS Surprise

Broadcom Inc. price-consensus-eps-surprise-chart | Broadcom Inc. Quote

Broadcom Lifts the Near-Term Bar

Management’s fiscal third-quarter outlook was the clearest incremental takeaway from the call. Broadcom projected revenues of about $29.4 billion, up 84% year over year, with non-GAAP operating margin around 67% and adjusted EBITDA near 68% of revenues.

Tan said semiconductor revenues should reach about $20.5 billion in the fiscal third quarter, including AI semiconductor revenues of $16 billion. That implies another major step-up from the second quarter and reinforces management’s view that momentum is continuing into the back half.

CFO Kirsten Spears added that fiscal third-quarter infrastructure software revenues are expected to reach about $8.9 billion, up 31% from a year ago. That made clear the company is entering the next quarter with strength in both operating segments.

AVGO Maps Out 2027 and Beyond

Tan moved beyond quarterly guidance and reiterated that Broadcom expects AI semiconductor revenues to exceed $100 billion in fiscal 2027. He also said the company expects growth to continue in fiscal 2028 based on work with six core customers.

He gave unusual detail around customer programs, including Google, Anthropic, OpenAI and Meta. Management tied those relationships to long-term agreements, multi-gigawatt deployment plans and production ramps extending through 2028 and 2029.

That framing made the call more notable than a standard earnings event. AVGO used the discussion to show investors that its AI opportunity is tied to contracted programs and infrastructure buildouts rather than only near-term market enthusiasm.

Broadcom Defends the Margin Picture

Spears said second-quarter gross margin was 77.1%, down 230 basis points year over year as semiconductors became a larger share of revenues. Even so, operating margin rose 200 basis points to 67.3% as operating expenses remained relatively flat.

She emphasized that the expected third-quarter gross margin decline to about 74% reflects revenue mix, not a structural deterioration in the semiconductor business. Higher AI semiconductor volume carries lower gross margins than software, while networking remains richer.

That distinction mattered in Q&A. When Deutsche Bank pressed on margin drivers, Spears and Tan both pushed back on the idea of a broader reset, arguing the issue is largely a mix between software, non-AI chips and rapidly growing AI products.

AVGO Highlights Software and Supply

Broadcom’s software business was not the headline, but it added an important second leg to the story. Tan said software revenues rose 9% in the second quarter, while annual recurring revenue growth held at 17%.

He linked stronger third-quarter software expectations to VMware Cloud Foundation 9.1 and robust on-prem cloud demand. Management said the release is supporting infrastructure efficiency, security and enterprise AI inferencing workloads across major processor platforms.

Supply was another investor focus. Asked by UBS about incremental wafers and HBM, Tan said the company is comfortable with supply for 2026 and 2027 and is already working on 2028 and 2029, suggesting capacity planning is keeping pace with demand.

Broadcom Leaves With a More Assertive Tone

The Q&A carried a more explicit tone than the prepared remarks on several points. Tan said visibility now runs through 2028 compared with roughly 2027 three months earlier, as customers place orders earlier to secure compute capacity and power infrastructure.

He also addressed the shape of AI revenues by noting networking represented almost 40% of AI revenues in the quarter, though he described around 30% as a more typical share over time. That helped clarify how product mix may evolve as XPU programs scale.

Coming out of the call, Broadcom’s posture was clear. Management is prioritizing AI semiconductor expansion, software crosscurrents tied to enterprise infrastructure demand and long-range capacity planning while insisting margins remain durable despite mix changes.

What Zacks Signals Suggest

AVGO carries a Zacks Rank #3 (Hold), which indicates more balanced near-term earnings estimate momentum than the stronger revision trends associated with Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy). A Zacks Rank #3 can still be held, but it does not carry the same expected outperformance profile. You can see the complete list of today’s Zacks #1 Rank stocks here.

Its Value Score of D, Growth Score of B, Momentum Score of B and VGM Score of C point to a mixed style setup. The stronger growth and momentum readings are more favorable than the value profile, while the middling VGM Score suggests the stock is not screening as a top all-around Style Score candidate at this stage. The Zacks Rank can also change as analysts revise estimates after the quarter.