Broadcom Inc

Q2 headline results were extremely strong (and margins held up): Total revenue reached a record ~$22.2B, up 48% YoY, driven by AI semiconductors. Operating margin ~67% (record) and Adjusted EBITDA ~$15.2B (~69% of revenue), both above guidance. Free cash flow ~$10.3B (46% of revenue)—also a record. - Good: strong profitability + cash generation alongside rapid revenue scaling - Surprising/nuanced: gross margin eased (to ~77.1%, down ~32 bps YoY) even though operating margin improved, suggesting mix effects rather than structural deterioration.

AI semiconductor momentum is the core growth engine; backlog/bookings indicate lead-time-driven demand: Semiconductor revenue was ~$15B (+79% YoY). AI semiconductor revenue was ~$10.8B (+143% YoY), above outlook. AI bookings ~$30B vs $10.8B shipped (very large bookings/ship ratio), implying customers are placing orders early due to manufacturing/HBM/power/interconnect lead times. Visibility reportedly extends to 2028 (vs closer in prior quarters). - Opportunity: large near-term and out-year supply planning credibility - Risk to watch: bookings can be sensitive to execution/power/networking readiness; large lead times can also mean timing risk.

Forward guidance is aggressive and clearly AI-led (Q3 + full-year + 2027): - Q3 2026 consolidated revenue: ~$29.4B (+84% YoY) - Q3 semiconductor: ~$20.5B (+124% YoY); Q3 AI semis: ~$16B (+200%+ YoY) - Q3 infrastructure software: ~$8.9B (+31% YoY) - Q3 margins: Operating margin guided to ~67% (stable), but gross margin ~74% (down) due to mix shift as AI semiconductor share rises - FY2026 AI semiconductor revenue: ~$56B (~180% growth vs FY25) - FY2027 AI semiconductor revenue: reiterated “in excess of $100B” with ~10 GW shipment expectation; management expects continued acceleration with back-half loading in 2027. - Good: tight operating margin stability despite mix headwinds - Negative/mix risk: gross margin pressure is acknowledged as likely to persist with AI mix.