AI Semiconductor Demand Fuels Revenue: Custom Silicon Secures Growth (AVGO Q2 2026 Earnings Call)
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Broadcom achieved a record financial performance in the second quarter of fiscal 2026 as surging demand for custom artificial intelligence processors and networking solutions propelled bookings and revenues to historic highs.
Surging AI Silicon Sales Propel Revenue to Record Highs
Broadcom generated record consolidated revenue of $22.2 billion in the second quarter of fiscal 2026, representing a 48% year-on-year increase. This performance was driven by accelerating shipments of artificial intelligence semiconductors. Additionally, strong operating leverage helped lift the consolidated operating margin to a record 67.3%.
Strong Bookings and AI Expansion Lift Next Quarter Outlook
For the third quarter, Broadcom projects consolidated revenue of $29.4 billion. Chief Executive Officer Hock Tan stated that this forecast represents an 84% year-on-year expansion. This revenue growth is supported by recovering demand for traditional non-AI chips.
To support accelerating shipments, management expects third-quarter AI semiconductor revenue of $16.0 billion. Chief Financial Officer Kirsten Spears forecast that the consolidated gross margin will decline to approximately 74% due to this product mix. However, the consolidated operating margin is projected to remain stable at 67%.
Multigigawatt Hyperscaler Agreements Establish Multiyear Compute Pipelines
Broadcom secured over $30.0 billion in quarterly bookings for AI semiconductors, indicating strong customer demand. To support this growth, a long-term agreement with Google was established to supply multiple generations of custom processors. For Anthropic, Broadcom is providing access to over 1 gigawatt of compute capacity during the current year.
Executives Address Margin Mix and Long-Term Shipment Projections
In response to analyst questions, Chief Executive Officer Hock Tan explained that gross margin compression reflects a shift toward lower-margin AI semiconductors. Chief Financial Officer Kirsten Spears emphasized that the company operates in the chip business only and does not manufacture server racks. Responding to JPMorgan analyst Harlan Sur, Tan stated that AI semiconductor revenue is on track to exceed $100.0 billion in fiscal year 2027.