Broadcom Inc. 10-Q Summary: Fiscal Q2 2026
Business Context and Reporting Period
This report covers the quarterly period ended May 3, 2026, for Broadcom Inc., a global leader in semiconductor and infrastructure software solutions. The company operates two reportable segments: Semiconductor Solutions and Infrastructure Software. The fiscal year 2026 is a 52-week year. As of May 29, 2026, there were approximately 4.76 billion shares of common stock outstanding.
Key Financial Metrics
| Metric (in millions) | Q2 2026 | Q2 2025 | YoY Change |
|---|---|---|---|
| Total Net Revenue | $22,187 | $15,004 | +48% |
| Gross Margin | $15,415 | $10,197 | +51% |
| Gross Margin % | 69% | 68% | +100 bps |
| Operating Income | $10,788 | $5,829 | +85% |
| Net Income | $9,310 | $4,965 | +87% |
| Diluted EPS | $1.91 | $1.03 | +85% |
| Cash from Operations (2Q) | $18,753 | $12,668 | +48% |
| Cash & Equivalents | $19,628 | $9,472 | N/A |
| Total Debt (Principal) | $66,720 | $67,120 | -0.6% |
Material Changes vs. Prior Period
- Revenue Growth: Total net revenue surged 48% year-over-year, driven primarily by a 79% increase in the Semiconductor Solutions segment ($15.0B vs $8.4B). This growth was fueled by strong demand for custom AI accelerators and AI networking products. Infrastructure Software revenue grew 9% to $7.2B, aided by demand for VMware Cloud Foundation.
- Profitability Expansion: Operating income increased 85% to $10.8B. Gross margin expanded to 69% of revenue, benefiting from revenue growth and product mix, partially offset by the lower-margin semiconductor mix.
- Expense Trends: R&D expenses rose 11% to $3.0B, primarily due to higher stock-based compensation from "Two-Year Equity Awards" granted in the prior fiscal year. SG&A expenses remained relatively flat.
- Capital Allocation: The company repurchased $600 million of common stock in Q2 and paid $3.1 billion in dividends. Over the two fiscal quarters, stock repurchases totaled $8.45 billion.
Outlook, Risks, and Unusual Items
- Subsequent Events (AI Backstop): On June 8, 2026, Broadcom entered into a backstop agreement with an investor partner regarding AI rack lease obligations for a customer. The maximum exposure under this backstop is $29 billion, which will increase as racks are deployed and decrease as the customer makes payments.
- Customer Concentration: Sales to one semiconductor distributor accounted for 42% of net revenue in Q2 2026. The top five end customers accounted for approximately 45% of total net revenue.
- Remaining Performance Obligations: As of May 3, 2026, remaining performance obligations were approximately $164.6 billion, including long-term contracts for custom AI accelerators. Approximately 30% is expected to be recognized in the next 12 months.
- Risk Factors: Key risks include supply chain dependence (95% of wafers from TSMC), geopolitical tensions affecting trade, potential customer default risks associated with new AI financing models, and the cyclical nature of the semiconductor industry.
Investor Verification Checklist
- AI Revenue Sustainability: Verify the durability of demand for custom AI accelerators and the extent to which revenue is driven by a single distributor (42% concentration).
- Backstop Exposure: Assess the financial impact and credit risk associated with the new $29 billion backstop agreement for AI rack leases.
- Stock-Based Compensation: Monitor the trajectory of stock-based compensation expenses, which are elevated due to the vesting of two-year awards granted in FY2025.
- Supply Chain Resilience: Evaluate the risks associated with reliance on TSMC for 95% of wafer manufacturing and potential geopolitical disruptions.
- Debt Servicing: Confirm the company's ability to service $66.7 billion in debt while maintaining aggressive capital return programs (dividends and buybacks).