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AVGO Q3 Earnings Beat Estimates, Revenues Rise on Strong AI Demand
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Key Takeaways
Broadcom's Q3 revenues jumped 85.5% to $29.59B, while non-GAAP EPS rose 96.4% to $3.32.
AVGO's AI semiconductor revenues soared 221% to $16.7B, fueled by strong XPU and networking demand.
Broadcom raised fiscal 2026 AI semiconductor revenue guidance to $58B, up 186% year over year.
Broadcom (AVGO - Free Report) reported third-quarter fiscal 2026 non-GAAP earnings of $3.32 per share, up 96.4% year over year and 3.11% above the Zacks Consensus Estimate.
Revenues surged 85.5% year over year to $29.59 billion and beat the consensus mark by 0.41%. Strong custom AI accelerator and networking demand drove the quarterly results. AI semiconductor revenues jumped 221% year over year to $16.7 billion.
AI semiconductor revenues represented 56% of total revenues. XPU shipments increased more than 3.5 times year over year and accounted for 73% of AI revenues, while AI networking revenues rose more than 2.5 times.
Broadcom shipped Ironwood TPU v7 in high volume to Anthropic and Google, began production shipments of Google’s next-generation TPU v8i and shipped OpenAI’s first-generation Jalapeno custom accelerator. AVGO expects Meta’s MTIA accelerator to enter production shipments in the fourth quarter.
Semiconductor Solutions revenues surged 127% year over year to a record $20.84 billion and represented 70% of total revenues. Non-AI semiconductor revenues were $4.2 billion, up 5% year over year and flat sequentially.
The segment's operating margin rose 440 basis points (bps) year over year to 61% as revenue growth outpaced operating expense growth. Broadcom continues to invest in research and development while expanding capacity for substrates and optical components to support semiconductor demand.
AVGO's Software Business Extends Growth
Infrastructure Software revenues increased 29% year over year to $8.75 billion and contributed 30% of total revenues. Annualized recurring revenue (ARR) grew 15% year over year.
Software operating margin expanded 650 bps year over year to roughly 84%.
Broadcom also introduced VMware Private AI Cloud, aimed at letting enterprises run AI alongside existing applications while maintaining security, compliance and control over data.
Broadcom Expands Operating Profitability
Non-GAAP gross margin was $22.19 billion, translating to a 75% gross margin. The margin declined 210 bps sequentially as AI semiconductor revenues became a larger part of the sales mix.
Non-GAAP operating expenses were $2.1 billion compared with $2.04 billion a year earlier.
Non-GAAP operating income increased 92% year over year to $20.1 billion, while the operating margin reached 67.9%, reflecting operating leverage from the sharp revenue increase.
AVGO Generates Record Free Cash Flow
The company ended the quarter with $24 billion in cash and cash equivalents.
Broadcom generated $14.20 billion in cash from operations and spent $532 million on capital expenditures. Free cash flow reached a record $13.67 billion, equal to 46% of revenues.
AVGO paid $3.1 billion in dividends and reduced long-term debt by $5.6 billion during the quarter. The board also approved a quarterly dividend of 65 cents per share.
Broadcom Guides for Stronger Q4 AI Growth
For the fourth quarter of fiscal 2026, Broadcom expects revenues of approximately $34.8 billion, representing 93% year-over-year growth.
Semiconductor revenues are projected at about $26.1 billion, including $21.7 billion of AI semiconductor revenues, up 236%.
Infrastructure Software revenues are expected at roughly $8.7 billion. Broadcom forecasts a non-GAAP operating margin of about 66% and a gross margin of approximately 73% as the mix shifts further toward XPUs with higher memory content.
AVGO Raises Its Fiscal 2026 AI Revenue View
Broadcom now expects fiscal 2026 AI semiconductor revenues of $58 billion, up 186% year over year and above its prior $56 billion outlook. The company has secured supply to support approximately $115 billion of AI semiconductor revenues in fiscal 2027.
AVGO also sees fiscal 2028 AI semiconductor revenues reaching $230 billion. The company said demand exceeds its fiscal 2027 outlook, while deployment timing depends on factors including data-center readiness, leading-edge silicon, substrates and memory supply.
Zacks Rank & Stocks to Consider
Broadcom carries a Zacks Rank #3 (Hold) at present.
View the Zacks #1 Rank List
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AVGO Q3 Earnings Beat Estimates, Revenues Rise on Strong AI Demand
Key Takeaways
Broadcom (AVGO - Free Report) reported third-quarter fiscal 2026 non-GAAP earnings of $3.32 per share, up 96.4% year over year and 3.11% above the Zacks Consensus Estimate.
Revenues surged 85.5% year over year to $29.59 billion and beat the consensus mark by 0.41%. Strong custom AI accelerator and networking demand drove the quarterly results. AI semiconductor revenues jumped 221% year over year to $16.7 billion.
Broadcom Inc. Price, Consensus and EPS Surprise
Broadcom Inc. price-consensus-eps-surprise-chart | Broadcom Inc. Quote
AVGO’s AI Semiconductor Growth Accelerates
AI semiconductor revenues represented 56% of total revenues. XPU shipments increased more than 3.5 times year over year and accounted for 73% of AI revenues, while AI networking revenues rose more than 2.5 times.
Broadcom shipped Ironwood TPU v7 in high volume to Anthropic and Google, began production shipments of Google’s next-generation TPU v8i and shipped OpenAI’s first-generation Jalapeno custom accelerator. AVGO expects Meta’s MTIA accelerator to enter production shipments in the fourth quarter.
Semiconductor Solutions revenues surged 127% year over year to a record $20.84 billion and represented 70% of total revenues. Non-AI semiconductor revenues were $4.2 billion, up 5% year over year and flat sequentially.
The segment's operating margin rose 440 basis points (bps) year over year to 61% as revenue growth outpaced operating expense growth. Broadcom continues to invest in research and development while expanding capacity for substrates and optical components to support semiconductor demand.
AVGO's Software Business Extends Growth
Infrastructure Software revenues increased 29% year over year to $8.75 billion and contributed 30% of total revenues. Annualized recurring revenue (ARR) grew 15% year over year.
Software operating margin expanded 650 bps year over year to roughly 84%.
Broadcom also introduced VMware Private AI Cloud, aimed at letting enterprises run AI alongside existing applications while maintaining security, compliance and control over data.
Broadcom Expands Operating Profitability
Non-GAAP gross margin was $22.19 billion, translating to a 75% gross margin. The margin declined 210 bps sequentially as AI semiconductor revenues became a larger part of the sales mix.
Non-GAAP operating expenses were $2.1 billion compared with $2.04 billion a year earlier.
Non-GAAP operating income increased 92% year over year to $20.1 billion, while the operating margin reached 67.9%, reflecting operating leverage from the sharp revenue increase.
AVGO Generates Record Free Cash Flow
The company ended the quarter with $24 billion in cash and cash equivalents.
Broadcom generated $14.20 billion in cash from operations and spent $532 million on capital expenditures. Free cash flow reached a record $13.67 billion, equal to 46% of revenues.
AVGO paid $3.1 billion in dividends and reduced long-term debt by $5.6 billion during the quarter. The board also approved a quarterly dividend of 65 cents per share.
Broadcom Guides for Stronger Q4 AI Growth
For the fourth quarter of fiscal 2026, Broadcom expects revenues of approximately $34.8 billion, representing 93% year-over-year growth.
Semiconductor revenues are projected at about $26.1 billion, including $21.7 billion of AI semiconductor revenues, up 236%.
Infrastructure Software revenues are expected at roughly $8.7 billion. Broadcom forecasts a non-GAAP operating margin of about 66% and a gross margin of approximately 73% as the mix shifts further toward XPUs with higher memory content.
AVGO Raises Its Fiscal 2026 AI Revenue View
Broadcom now expects fiscal 2026 AI semiconductor revenues of $58 billion, up 186% year over year and above its prior $56 billion outlook. The company has secured supply to support approximately $115 billion of AI semiconductor revenues in fiscal 2027.
AVGO also sees fiscal 2028 AI semiconductor revenues reaching $230 billion. The company said demand exceeds its fiscal 2027 outlook, while deployment timing depends on factors including data-center readiness, leading-edge silicon, substrates and memory supply.
Zacks Rank & Stocks to Consider
Broadcom carries a Zacks Rank #3 (Hold) at present.
Some better-ranked stocks in the broader Zacks Computer and Technology sector are Silicon Motion Technology (SIMO - Free Report) , Sandisk (SNDK - Free Report) and Teradyne (TER - Free Report) . Each of the three stocks sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rates for Silicon Motion Technology, Sandisk and Teradyne are pegged at 53.59%, 48.16% and 54.38%, respectively.