Broadcom's Q2 FY2026: Reaffirming a $100 Billion AI Runway for FY2027
On June 4, 2026, Broadcom (AVGO) shares plunged by 12% to 15% following its fiscal Q2 2026 earnings release (quarter ended May 3, 2026). While the market reacted negatively to near-term gross margin compression and a flat full-year outlook, the underlying financial metrics and forward guidance confirm that the broader AI capex story remains highly robust.
Broadcom reported consolidated revenue of $22.2 billion (up 48% YoY), driven by $10.8 billion in AI semiconductor revenue (up 143% YoY). The company guided to $29.4 billion in consolidated revenue for Q3, with AI semiconductor revenue projected to reach $16 billion (up over 200% YoY). Most importantly, Broadcom reaffirmed its full-year FY2026 AI semiconductor revenue guide of $56 billion and reiterated expectations of more than $100 billion in AI semiconductor revenue for fiscal 2027, supported by multi-year contracts with major hyperscalers (Google, Meta, OpenAI, Anthropic). This long-term visibility aligns with the massive infrastructure spending planned by these same hyperscalers (see Hyperscaler Capex Surge: The $690 Billion AI Infrastructure Sprint).
Key Quotes
"AI semiconductor revenue – $10.8 billion, up 143% year-on-year; bookings for AI semiconductors exceeded $30 billion, providing extended demand visibility." — Broadcom Q2 2026 Earnings Transcript, The Motley Fool
"For fiscal 2027, management reiterated expectations of more than $100 billion in AI semiconductor revenue, supported by multi-year contracts and major hyperscaler customer orders." — Broadcom Q2 2026 Earnings Transcript, The Motley Fool
Interpretation
The short-term sell-off in Broadcom stock reflects high investor expectations and concerns over gross margins declining to ~74% in Q3. This decline is driven by a product-mix shift toward custom AI ASICs (which carry lower gross margins than Broadcom's core networking and software products) rather than structural pricing pressure.
In reality, Broadcom's results are highly bullish for the AI capex story. Bookings for AI semiconductors have exceeded $30 billion, and long-term contracts with the biggest players in AI (including a 20 GW AI compute partnership with Apollo and Blackstone) provide multi-year demand visibility. This demonstrates that hyperscalers are committing massive capital to both merchant silicon (Nvidia GPUs) and custom silicon (Broadcom ASICs) through 2027.