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Broadcom Inc.
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AI Semis Scale Up, Margins Hold as Q2 Revenue Targets +47% YoY (AVGO Q1 2026 Earnings Call)

By Dr. Graph | Updated on Apr 7, 2026 | earnings

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Broadcom’s Q1 results show AI semiconductors driving rapid top-line growth while profitability remains highly scalable, with management guiding even faster Q2 consolidation revenue growth. The financial story centers on accelerating custom AI XPU deployments and expanding AI networking share, supported by secured supply through key components.

Record Q1 Revenue and Profitability, Fueled by AI Semiconductors

Broadcom delivered record performance in Q1, with total revenue reaching $19.3B (up 29% YoY) and adjusted EBITDA at $13.1B, equal to 68% of revenue. Management tied the acceleration directly to “better-than-expected growth in AI semiconductors,” driven by custom AI XPU momentum.

This profitability matters because it indicates operating leverage is holding while growth ramps, not compressing margins as revenue scales. CFO Kirsten Spears added that gross margin was 77% and operating margin rose 50 bps YoY to 66.4%, supported by strong scale and R&D investment.

Q2 Guidance Signals Acceleration, While Management Protects the Margin Model

For Q2 fiscal 2026, management guided consolidated revenue to approximately $22B (up 47% YoY) and adjusted EBITDA to approximately 68% of revenue. Hock Tan stated the ramp “is progressing very well” as custom AI XPUs move into their “next phase of deployment.”

CFO Kirsten Spears also set the guardrails for modeling by saying consolidated gross margin is expected to be flat sequentially at 77%, with Q2 adjusted EBITDA also at about 68%. This matters because it frames AI-related mix as manageable within the existing profitability framework.

AI Semiconductors Surge, Networking Becomes a Faster Share of AI Revenue

In the Semiconductor Solutions segment, revenue was a record $12.5B, up 52% YoY, driven by AI semiconductor revenue growth of 106% YoY to $8.4B. Management also forecast Q2 semiconductor revenue at $14.8B (up 76% YoY), with AI semiconductor revenue accelerating sharply to 140% YoY.

Within AI, Broadcom emphasized networking share growth, with Q1 AI networking revenue up 60% YoY and representing one-third of total AI revenue. For Q2, Hock Tan projected AI networking to rise to 40% of total AI revenue, citing Tomahawk 6 at 100 terabit per second and 200G SerDes capturing hyperscaler demand.

Management Pushes Back on COT and Supports Visibility Through 2028

During Q&A, Hock Tan directly addressed customer-owned tooling (COT) concerns, stating that when customers try to create their own chips, “they face tremendous challenges” across silicon design, SerDes, packaging, and networking cluster knowledge. He said Broadcom expects this to not meaningfully dent share “for many years to come,” emphasizing time-to-market and high-volume yield execution.

On forward demand and timing, management argued visibility is reinforced by supply commitments and deep, multiyear custom accelerator engagements. Hock Tan said Broadcom has “fully secured capacity” of key components for “’26 through ’28,” and the company has “line of sight” to achieve AI revenue from chips in excess of $100B in 2027, focused on “chips… whether they are XPUs, whether they are switch chips, DSPs.”

Disclaimer: This report is for informational purposes only and does not constitute financial or investment advice. Always conduct your own research or consult a qualified professional before investing. Past performance is not indicative of future results.

Frequently Asked Questions

What drives Broadcom’s Q2 acceleration in consolidated revenue and how is margin expected to hold?
Hock Tan said the acceleration comes as “our custom AI XPUs hit their next phase of deployment among our 5 customers.” Kirsten Spears guided Q2 consolidated gross margin to be “flat sequentially at 77%,” and Q2 adjusted EBITDA to be “approximately 68%.”
How much of Q2 AI semiconductor growth is expected to come from AI networking versus XPUs?
Hock Tan projected AI networking to grow to “40% of total AI revenue” in Q2, up from one-third in Q1. He also guided Q2 AI semiconductor revenue to be up about 140% YoY, driven by custom accelerator ramps.
Do customer-owned tooling (COT) efforts by hyperscalers threaten Broadcom’s TPU/XPU share next year?
Hock Tan said COT creates “tremendous challenges,” especially for creating XPUs that must be optimized for LLM training and inference and produced in high volume with yields. He said they “will not see competition in COT for many years to come.”
How did Broadcom secure supply visibility through 2028 and does it support growth into 2028?
Hock Tan said Broadcom “was early in being able to lock up T-glass” and has secured substrates and partner capacity. Charlie Kawwas added that Broadcom’s deep multiyear engagement with six customers supports securing components “up to '28 or beyond,” with the expectation that growth can continue based on that supply.

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