Broadcom Inc. (AVGO) — Q3 FY2026 Earnings Call Transcript

Call date: September 2, 2026

Source: StockAnalysis full transcript (Quartr); cross-checked with Broadcom IR earnings release.

Q3 2026 — September 2, 2026

Operator: Welcome to Broadcom Inc.'s third quarter fiscal year 2026 financial results conference call. At this time, for opening remarks and introductions, I would like to turn the call over to Ji Yoo, Head of Investor Relations of Broadcom Inc. Please go ahead.

Ji Yoo (Head of Investor Relations, Broadcom): Thank you, Cherie, and good afternoon, everyone. Joining me on today's call are Hock Tan, President and CEO, Amie Thuener, Chief Financial Officer, and Charlie Kawwas, President, Semiconductor Solutions Group. Broadcom distributed a press release and financial tables after the market closed describing our financial performance for the third quarter fiscal year 2026. If you did not receive a copy, you may obtain the information from the Investor section of Broadcom's website at broadcom.com. This conference call is being webcast live and an audio replay of the call can be accessed for one year through the Investor section of Broadcom's website. During the prepared comments, Hock and Amie will be providing details of our third quarter fiscal year 2026 results, guidance for our fourth quarter of fiscal year 2026, as well as commentary regarding the business environment. We'll take questions after the end of our prepared comments.

Please refer to our press release today and our recent filings with the SEC for information on risk factors that could cause our actual results to differ materially from the forward-looking statements made on this call. In addition to U.S. GAAP reporting, Broadcom reports certain financial measures on a non-GAAP basis. A reconciliation between GAAP and non-GAAP measures, to the extent possible, is included in the tables attached to today's press release. Comments made during the call will primarily refer to our non-GAAP financial results. I will now turn the call over to Hock.

Hock Tan (President and CEO, Broadcom): Well, thank you, Ji, and thank you everyone here for joining us today. We delivered an exceptional quarter with revenue, operating income and free cash flow all exceeding prior records. Driving this was our Q3 AI semiconductor revenue, which grew 221% year-on-year and up 54% sequentially. This brought our consolidated revenue to $29.6 billion, which was up 86% year-on-year. Operating income grew even faster at 92% year-on-year, with operating margin at a record 68% of revenue, reflecting strong operating leverage. Q3 demand was simply hot and we're just getting started. Our six XPU customers are accelerating the adoption of custom accelerators and AI semiconductor revenue more than tripled year-over-year to $16.7 billion. During the quarter, we delivered Ironwood TPU v7, version 7 in high volume to both Anthropic and Google.

At the same time, we began production shipments of the next generation TPU v8i for Google. This new TPU generation has been designed with more memory and bandwidth compared to Ironwood and just like Ironwood, is optimized for inference workloads. In performance it is comparable, if not surpasses the Vera Rubin GPU. Just to reiterate the major technology challenges of developing these complex accelerators, Broadcom is now shipping the TPU v8i ahead of the MediaTek version v8t, which in fact was initiated earlier. In Q3, we also shipped Jalapeño, OpenAI's first generation custom accelerator, which outperforms Grace Blackwell GPU for inference workloads. Overall, our XPU shipments for the third quarter were up over 3.5x year-on-year and represented 73% of AI revenue during the quarter. Our AI networking revenue was up over 2.5x year-on-year.

This strong momentum continues into Q4. During the quarter, we expect to accelerate shipments of Ironwood to Anthropic. We also expect to ramp up high-volume shipments of the TPU v8i to Google. Shipments of Jalapeño for OpenAI will continue, and for Meta, we expect production shipments of their custom MTIA accelerator optimized for inference and recommendation at scale. In Q4, we expect both XPUs and AI networking revenue to triple year-on-year. Together, we expect these deployments to drive our Q4 AI revenue to $21.7 billion, which is up 236% year-on-year. Based on this Q4 guidance, we expect our fiscal 2026 AI revenue to be $58 billion for the year, up 186% year-on-year and above our prior guidance of $56 billion. We are continuing to see exponential growth in demand from our XPU customers.

We believe the vast majority of compute demand for AI workloads today originates from this concentrated group that develops state-of-the-art frontier models. We expect their need for compute infrastructure to increase further in 2027 and 2028. They are all growing with XPUs to achieve superior performance, cost and power. Our engagement with Google has never been stronger. This has been recently strengthened by a long-term agreement to develop and supply future generations of TPUs and AI networking. Under this agreement, we're planning to deliver multi-tens of billions of dollars of TPUs annually over the next several years.

We expect this growing demand in 2028 and 2029 to be fulfilled through successive generations of the increasingly complex TPUs we are developing today with Google. Our partnership with Google will continue because we have a strong IP portfolio in semiconductor design, including industry-leading SerDes, chip-to-chip interconnect, leading-edge HBM and SRAM integration, and differentiated advanced packaging. We have consistently delivered fast time to market for TPUs from product definition to production without the need for respins.

Starting with the 1 GW of Ironwood we are deploying in 2026, Anthropic is expected to deploy another 5 GW of TPU v8i in 2027. In 2028, Broadcom has clear line of sight to deliver an incremental 10 GW, even as Google grows. Anthropic is on track to become Broadcom's largest XPU customer in 2027 and sustain that in 2028. For OpenAI, Jalapeño is on track for planned deployment of 1.3 GW in 2027. Broadcom is deep in development with OpenAI on the next generation XPU beyond Jalapeño, which is approaching tape-out. In 2028, OpenAI has a line of sight to deploy over 5 GW of Jalapeño and its successor generation of XPU.

Broadcom's partnership with Meta to deliver multiple generations of MTIA XPUs remains on track. Between now and the end of 2027, Broadcom will deliver three generations of MTIA accelerators to Meta, with line of sight to deploying 3 GW through 2028. Broadcom is also the leader in AI networking. In Ethernet switching for scale-up and scale-out, Broadcom was first to market with its 100 Tb Tomahawk 6 and introduced Tomahawk 7, the industry's first 200 Tbps Ethernet switch. It continues to lead in PCI Express switching and is expanding capacity in optical DSPs, EMLs, VCSELs and CW lasers for optical interconnects.

In 2027, Broadcom has secured supply to again double AI revenue to approximately $115 billion. Demand exceeds this outlook and the company will work to improve supply. In 2028, Broadcom has line of sight for AI semiconductor revenue to double again to $230 billion. This outlook is intended to show the trajectory of growth. Broadcom is on target to exceed $30 in earnings per share in fiscal 2028.

Q3 non-AI semiconductor revenue was $4.2 billion, up 5% year-on-year and flat sequentially. Broadband and server storage increased, partly offset by wireless. Q4 non-AI semiconductor revenue is forecast at approximately $4.3 billion, up 5% sequentially. Infrastructure software revenue was $8.8 billion, up 29% year-on-year, with ARR growth of 15% year-on-year. Q4 infrastructure software revenue is forecast at approximately $8.7 billion. Broadcom announced VMware Private AI Cloud, a platform for enterprises to build and run AI alongside existing applications with security, compliance and enterprise-data controls.

For Q4 FY26, Broadcom expects consolidated revenue of $34.8 billion, up 93% year-on-year, Q4 AI revenue of $21.7 billion, up 236% year-on-year, and operating margin of approximately 66%.

Amie Thuener (CFO, Broadcom): Consolidated revenue was a record $29.6 billion, up 86% year-on-year. Gross margin was 75% of revenue, down 210 basis points sequentially as AI semiconductor revenue became a greater proportion of the mix, but above guidance of 74%. Q3 operating income was a record $20.1 billion, up 92% year-on-year. Operating margin increased 240 basis points year-on-year to 67.9%. Q3 non-GAAP EPS was $3.32, up 96% year-on-year.

Semiconductor Solutions revenue was a record $20.8 billion, up 127% year-on-year and 70% of total revenue. AI semiconductor revenue was $16.7 billion, 56% of total revenue, up from 49% in Q2. Semiconductor Solutions gross margin was approximately 76% and operating margin 61%. Infrastructure software revenue was $8.8 billion, up 29% year-on-year; software operating margin was approximately 84%.

Cash was $24 billion, inventory $4.5 billion and free cash flow a record $13.7 billion, or 46% of revenue. Capital expenditures were $532 million. Broadcom paid $3.1 billion of dividends and paid down $5.6 billion of long-term debt, followed by $1.5 billion of senior notes after quarter-end.

In June, Broadcom established the AI XPV Platform with Apollo and Blackstone to enable more than 20 GW of compute infrastructure for OpenAI and Anthropic by the end of 2028. The first $35 billion tranche for Anthropic's 1 GW deployment was closed in June. Future financings will be assessed on a commercial and balance-sheet basis, with third-party partners independently underwriting and capitalizing assets. Broadcom may provide modest residual-value guarantees where necessary.

Q4 guidance is consolidated revenue of $34.8 billion, semiconductor revenue of approximately $26.1 billion, AI semiconductor revenue of $21.7 billion, infrastructure software revenue of approximately $8.7 billion, gross margin of approximately 73%, operating margin of approximately 66%, non-GAAP tax rate of approximately 16%, and diluted share count of approximately 4.94 billion shares. Q4 capital expenditures are expected to be $1.4 billion. AI semiconductor revenue is expected to be approximately $115 billion in FY27 and $230 billion in FY28; this trajectory is not intended to be updated each quarter.

Questions & Answers

Operator: Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. Due to time restraints, we ask that you please limit yourself to one question. One moment while we compile the Q and A roster.

Joseph Moore (Analyst, Morgan Stanley): You talked about the business doubling next year, and you said demand could be higher than that. Can you talk about the supply around that and what are the supply bottlenecks, and what are the variables that could drive that number higher if you are able to resolve them?

Hock Tan (President and CEO, Broadcom): Demand is higher, but $115 billion reflects secured supply and the question of whether chips can be deployed on a timely basis. If supply and circumstances change, Broadcom could raise the outlook. The same thinking applies to the $230 billion 2028 outlook, which reflects available data-center sites and the supply chain for leading-edge wafers, substrates and HBM.

Blayne Curtis (Analyst, Jefferies): Has any XPU decided to use Broadcom's Singapore substrate capacity, and how does it fit into the supply picture? Also, is the 10 GW number for Anthropic alone?

Hock Tan (President and CEO, Broadcom): The Singapore substrate fab begins deployment in FY27 and addresses a key supply bottleneck. The 10 GW figure is for Anthropic alone.

Harlan Sur (Analyst, JPMorgan): How are Tomahawk 6, Tomahawk Ultra and scale-out networking being adopted across the XPU customer base?

Charlie Kawwas (President of Semiconductor Solutions Group, Broadcom): Tomahawk 6 in both 100 Gb and 200 Gb SerDes is deployed at essentially all AI hyperscalers building XPUs with Broadcom, as well as some not using Broadcom XPUs. Tomahawk Ultra is beginning deployment this quarter and into FY27 in scale-up applications, including both XPU and some GPU clusters.

Stacy Rasgon (Analyst, Bernstein): How should investors reconcile the outlined gigawatts with $115 billion/$230 billion revenue and the implied revenue per gigawatt?

Hock Tan (President and CEO, Broadcom): The gigawatts describe where customers are headed, not guaranteed production timing. Broadcom expects to ship approximately $115 billion of AI semiconductors in FY27 and $230 billion in FY28—about $350 billion over two years. Content is roughly $20 billion–$30 billion per gigawatt because higher-performance chips use more power, reducing the number of chips per gigawatt.

Jack Adair (Analyst, Melius): What is the maximum off-balance-sheet risk and residual-value exposure under the backstop agreements?

Amie Thuener (CFO, Broadcom): There was no new maximum or guarantee to announce. Future strategic financings will be assessed deal by deal, with features tailored to lab and investor needs; the previously disclosed figures remain true.

Vivek Arya (Analyst, Bank of America): How could XPU mix and rising memory costs affect gross margins, and why should investors be confident Anthropic and OpenAI will take the outlined capacity?

Hock Tan (President and CEO, Broadcom): Anthropic and OpenAI are pursuing first-party compute capacity and are expected to become hyperscalers in their own right. Broadcom is helping bridge financing and technology needs. Amie Thuener: Semiconductor Solutions gross margin was approximately 67% in Q3; rising XPU mix and memory content affect gross margin, but operating leverage should sustain operating margin.

Tom O'Malley (Analyst, Barclays): What is the attach rate for Tomahawk Ultra to the custom ASICs Broadcom is developing?

Charlie Kawwas (President of Semiconductor Solutions Group, Broadcom): Customers building XPUs use Tomahawk 6 and, increasingly, Tomahawk Ultra. Scale-up solutions are being adopted in both XPU and GPU clusters because Ethernet is open and interoperable.

Will Stein (Analyst, Truist Securities): How sensitive is the outlook to land, power and data-center-shell constraints?

Hock Tan (President and CEO, Broadcom): Broadcom evaluates land, power, systems and shell readiness with each customer and reflects these constraints in its outlook; site power and shell lead times dictate deployment timing.

Joshua Buchalter (Analyst, TD Cowen): Will most of the Anthropic and OpenAI deployments be financed through XPV, and what hurdles remain?

Hock Tan (President and CEO, Broadcom): Sites will differ. Anthropic's prospective IPO could change its investment credit, while OpenAI's situation is less clear. Amie Thuener: Partners will seek financing from many sources; Broadcom may help selectively within its framework and will assess each case separately.

Jim Schneider (Analyst, Goldman Sachs): Beyond land, power and shell, what other constraints could affect FY27, including memory and substrates?

Hock Tan (President and CEO, Broadcom): Deployment is multidimensional: leading-edge silicon, substrates, HBM and system memory can all become bottlenecks at different times. Broadcom is building Singapore substrate capacity to help address this.

Vijay Rakesh (Analyst, Mizuho): How should dollars per gigawatt evolve across XPU generations, and is CapEx adding EML/CW/indium-phosphide capacity?

Charlie Kawwas (President of Semiconductor Solutions Group, Broadcom): EML, CW, VCSEL and indium-phosphide factories in the U.S. and Singapore are being expanded significantly—more than tripling year-on-year. Hock Tan: Dollars per gigawatt should remain roughly $20 billion–$30 billion as higher-performance chips consume more power; the growth opportunity is the expanding number of gigawatts.

Ji Yoo (Head of Investor Relations, Broadcom): Broadcom plans to present at the Goldman Sachs Communacopia + Technology Conference on September 8 and currently plans to report Q4/FY26 results after market close on December 9, 2026.

Operator: Thank you all for participating. This concludes today's program. You may now disconnect.