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VCF is Becoming Broadcom's Growth Engine: More Upside Ahead?
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Key Takeaways
Broadcom's VCF demand helped Infrastructure Software revenue rise 9% to $7.2 billion in fiscal Q2.
VCF 9.1 unifies AI inference, Kubernetes and virtualized workloads across NVIDIA, AMD and Intel platforms.
Standard Chartered is standardizing on VCF across 54 markets, with nearly 70% of infrastructure migrated.
Broadcom’s (AVGO - Free Report) VMware Cloud Foundation (VCF) is becoming a major growth engine for the Infrastructure Software business. Demand for VCF 9.1 remains strong as enterprises increasingly deploy on-premises private clouds to support AI inference, Kubernetes and traditional virtualized workloads on a common platform. This momentum helped Infrastructure Software revenues increase 9% year over year to $7.2 billion in the second quarter of fiscal 2026, with Broadcom projecting an acceleration to approximately $8.9 billion, up 31% year over year, in the third quarter of fiscal 2026.
Broadcom is positioning VCF as the operating platform for enterprise AI. The latest VCF release supports heterogeneous computing across NVIDIA (NVDA - Free Report) , AMD and Intel platforms, allowing enterprises to run AI inference, Kubernetes and traditional virtualized workloads on a unified private cloud. Customers deploying VCF for private cloud modernization are also adopting AI workloads. This enables AVGO to sell additional software capabilities around automation, security, networking and AI infrastructure management. This is increasing customer spending while strengthening long-term annual recurring revenue, which grew 17% year over year in the second quarter of fiscal 2026.
Standard Chartered recently selected VCF to modernize its global IT infrastructure, reinforcing the growing enterprise adoption of Broadcom’s flagship private cloud platform. The bank is standardizing its infrastructure on VCF to support secure, software-defined private cloud operations across 54 markets. With nearly 70% of its infrastructure already migrated, the deployment enables faster infrastructure provisioning, stronger zero-trust security and greater operational resilience for mission-critical banking services.
The Standard Chartered deployment strengthens Broadcom’s long-term software prospects by showcasing VCF’s ability to win large, multi-year enterprise transformation projects in highly regulated industries. As more global enterprises adopt VCF to modernize private cloud environments while preparing AI-ready infrastructure, Broadcom is well positioned to expand recurring software revenues, increase annual recurring revenue and strengthen the Infrastructure Software segment as a durable growth driver, alongside its AI semiconductor business.
AI & VMware to Drive AVGO’s Top-Line Growth
Broadcom expects AI semiconductor revenues to reach approximately $56 billion in fiscal 2026, up roughly 180% year over year, and exceed $100 billion in fiscal 2027. Long-term agreements with Google, Meta, OpenAI and Anthropic provide strong visibility into future demand for custom AI accelerators and networking products.
Broadcom’s AI semiconductor business builds the hardware infrastructure, while VCF provides the software layer enterprises need to deploy and manage AI applications securely. This combination allows AVGO to participate across the AI stack — from silicon and networking to enterprise software — creating multiple avenues for sustained revenue growth and reducing dependence on any single business segment.
AVGO Faces Tough Competition
Broadcom is facing stiff competition in the semiconductor and infrastructure software markets from NVIDIA and Cisco Systems (CSCO - Free Report) , respectively.
NVIDIA is at the center of AI computing, with its products widely used across data centers, gaming and autonomous vehicles. The company’s newer Hopper 200 and Blackwell GPU platforms are being adopted quickly as customers work to grow their AI infrastructure. Data Center revenues reached $75.2 billion in the first quarter of fiscal 2027, up 92% from a year ago and up 21% sequentially, driven by the ramp-up of Blackwell 300 products and demand for InfiniBand, Spectrum-X Ethernet and NVLink solutions.
Cisco competes with Broadcom in the AI networking infrastructure domain. Cisco provides AI networking systems built around Silicon One, Nexus switches, routers, Acacia optics and end-to-end AI fabrics. Cisco recently raised its fiscal 2026 hyperscaler AI infrastructure orders target to $9 billion (from $5 billion), highlighting strong traction in AI networking. Cisco’s strategy to deliver the entire AI networking stack by combining Silicon One, Nexus switching, Acacia optics, security, observability and AI networking software has been a key catalyst.
Broadcom shares have appreciated 11% year to date, underperforming the broader Zacks Computer and Technology sector’s return of 12.1%.
AVGO Stock Lags Sector
Image Source: Zacks Investment Research
The AVGO stock is trading at a premium, with a forward 12-month price/sales of 11.59X compared with the broader sector’s 6.6X. Broadcom has a Value Score of D.
AVGO Stock’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for fiscal 2026 earnings is pegged at $11.74 per share, up by a penny over the past 30 days, suggesting 72.14% growth from fiscal 2025’s reported figure.
View the Zacks #1 Rank List
Image: Bigstock
VCF is Becoming Broadcom's Growth Engine: More Upside Ahead?
Key Takeaways
Broadcom’s (AVGO - Free Report) VMware Cloud Foundation (VCF) is becoming a major growth engine for the Infrastructure Software business. Demand for VCF 9.1 remains strong as enterprises increasingly deploy on-premises private clouds to support AI inference, Kubernetes and traditional virtualized workloads on a common platform. This momentum helped Infrastructure Software revenues increase 9% year over year to $7.2 billion in the second quarter of fiscal 2026, with Broadcom projecting an acceleration to approximately $8.9 billion, up 31% year over year, in the third quarter of fiscal 2026.
Broadcom is positioning VCF as the operating platform for enterprise AI. The latest VCF release supports heterogeneous computing across NVIDIA (NVDA - Free Report) , AMD and Intel platforms, allowing enterprises to run AI inference, Kubernetes and traditional virtualized workloads on a unified private cloud. Customers deploying VCF for private cloud modernization are also adopting AI workloads. This enables AVGO to sell additional software capabilities around automation, security, networking and AI infrastructure management. This is increasing customer spending while strengthening long-term annual recurring revenue, which grew 17% year over year in the second quarter of fiscal 2026.
Standard Chartered recently selected VCF to modernize its global IT infrastructure, reinforcing the growing enterprise adoption of Broadcom’s flagship private cloud platform. The bank is standardizing its infrastructure on VCF to support secure, software-defined private cloud operations across 54 markets. With nearly 70% of its infrastructure already migrated, the deployment enables faster infrastructure provisioning, stronger zero-trust security and greater operational resilience for mission-critical banking services.
The Standard Chartered deployment strengthens Broadcom’s long-term software prospects by showcasing VCF’s ability to win large, multi-year enterprise transformation projects in highly regulated industries. As more global enterprises adopt VCF to modernize private cloud environments while preparing AI-ready infrastructure, Broadcom is well positioned to expand recurring software revenues, increase annual recurring revenue and strengthen the Infrastructure Software segment as a durable growth driver, alongside its AI semiconductor business.
AI & VMware to Drive AVGO’s Top-Line Growth
Broadcom expects AI semiconductor revenues to reach approximately $56 billion in fiscal 2026, up roughly 180% year over year, and exceed $100 billion in fiscal 2027. Long-term agreements with Google, Meta, OpenAI and Anthropic provide strong visibility into future demand for custom AI accelerators and networking products.
Broadcom’s AI semiconductor business builds the hardware infrastructure, while VCF provides the software layer enterprises need to deploy and manage AI applications securely. This combination allows AVGO to participate across the AI stack — from silicon and networking to enterprise software — creating multiple avenues for sustained revenue growth and reducing dependence on any single business segment.
AVGO Faces Tough Competition
Broadcom is facing stiff competition in the semiconductor and infrastructure software markets from NVIDIA and Cisco Systems (CSCO - Free Report) , respectively.
NVIDIA is at the center of AI computing, with its products widely used across data centers, gaming and autonomous vehicles. The company’s newer Hopper 200 and Blackwell GPU platforms are being adopted quickly as customers work to grow their AI infrastructure. Data Center revenues reached $75.2 billion in the first quarter of fiscal 2027, up 92% from a year ago and up 21% sequentially, driven by the ramp-up of Blackwell 300 products and demand for InfiniBand, Spectrum-X Ethernet and NVLink solutions.
Cisco competes with Broadcom in the AI networking infrastructure domain. Cisco provides AI networking systems built around Silicon One, Nexus switches, routers, Acacia optics and end-to-end AI fabrics. Cisco recently raised its fiscal 2026 hyperscaler AI infrastructure orders target to $9 billion (from $5 billion), highlighting strong traction in AI networking. Cisco’s strategy to deliver the entire AI networking stack by combining Silicon One, Nexus switching, Acacia optics, security, observability and AI networking software has been a key catalyst.
AVGO’s Share Price Performance, Valuation & Estimates
Broadcom shares have appreciated 11% year to date, underperforming the broader Zacks Computer and Technology sector’s return of 12.1%.
AVGO Stock Lags Sector
Image Source: Zacks Investment Research
The AVGO stock is trading at a premium, with a forward 12-month price/sales of 11.59X compared with the broader sector’s 6.6X. Broadcom has a Value Score of D.
AVGO Stock’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for fiscal 2026 earnings is pegged at $11.74 per share, up by a penny over the past 30 days, suggesting 72.14% growth from fiscal 2025’s reported figure.
Broadcom Inc. Price and Consensus
Broadcom Inc. price-consensus-chart | Broadcom Inc. Quote
Broadcom currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.