Broadcom Sees AI Chip Revenue of $56B Up 180%, Margins Slip to 77.1%
AVGO•Q2 gross margin declined 230 basis points to 77.1% due to a higher semiconductor mix, while infrastructure software revenue rose 9% year-over-year with 31% growth forecast for Q3. Broadcom projects full-year AI semiconductor revenue of $56 billion, up 180%, and anticipates exceeding $100 billion in AI revenue in 2027.
1. Q2 Financial Overview
Broadcom reported a 230 basis point decline in gross margin to 77.1% as semiconductors grew as a proportion of sales. Despite margin compression, overall revenue hit a record level driven by strong AI chip demand.
2. AI Semiconductor Outlook
The company expects AI semiconductor revenue to double in the second half of fiscal 2026, targeting $56 billion for the full year, a 180% increase from fiscal 2025. Management anticipates AI revenue could exceed $100 billion in 2027 based on current demand trajectories.
3. Infrastructure Software Performance
Infrastructure software revenue rose 9% year-over-year in Q2, and Broadcom forecasts a 31% sequential increase in Q3 software sales. This segment’s performance provides a more stable margin buffer against semiconductor pressures.
4. Supply and Long-Term Agreements
Broadcom affirmed adequate wafer and HBM supply through 2027 and is securing capacity for 2028–2029 to meet growing AI demands. A substantial long-term agreement with Google underpins confidence in maintaining key customer relationships.
