Broadcom Inc. · Q3 FY2026 call

We delivered an exceptional quarter with revenue, operating income and free cash flow all exceeding prior records. Driving this was our Q3 AI semiconductor revenue, which grew 221% year-on-year and up 54% sequentially.

Overall, our XPU shipments for the third quarter were up over 3.5 times year-on-year and represented 73% of AI revenue during the quarter. Our AI networking revenue was up over 2.5 times year-on-year.

Based on this Q4 guidance, I should say, we expect our fiscal 2026 AI revenue to be $58 billion for the year, up 186% year upon year, and above our prior guidance of $56 million.

We are continuing to see exponential growth in demand from our XPU customers. We believe the vast majority of compute demand for AI workloads today originates from this concentrated group who develops state-of-the-art frontier models.

Starting with the 1 gigawatt of Ironwood we are deploying in 2026, we expect Anthropic to deploy another 5 gigawatts of TPU v8i in 2027. In 2028, we have clear line of sight to deliver an incremental 10 gigawatts, even as we expect Google to grow for us. Anthropic is on track to become our largest XPU customer in 2027 and sustain that in 2028.

For OpenAI, Jalapeño is on track for the planned deployment of 1.3 gigawatts in 2027. […] In 2028, we have line of sight for OpenAI to deploy over 5 gigawatts of Jalapeño and its successor generation of XPU, which would make OpenAI our second-largest XPU customer.

In 2027, we have secured the supply to again double AI revenue to approximately $115 billion. Our demand actually exceeds this outlook, and we will work to improve supply. […] We have line of sight for fiscal 2028 AI semiconductor revenue growth to again double to $230 billion. Here again, we have secured the supply to meet this outlook.

As a result, I have to say, we are very much on target to exceed $30 in earnings per share in fiscal 2028.

Turning to non-AI semiconductors, Q3 revenue of $4.2 billion was up 5% year-on-year and flat sequentially. […] In Q4, we forecast non-AI semiconductor revenue to be approximately $4.3 billion

Talking about infrastructure software, Q3 revenue of $8.8 billion was up 29% year-on-year and we sustained ARR growth of 15% year-on-year. For Q4, we forecast infrastructure software revenue to stabilize at approximately $8.7 billion.

Gross margin was 75% of revenue in the quarter, down 210 basis points sequentially as AI semiconductor revenue was a greater proportion of our total revenue mix. This was better than our guidance of 74%.

Even with the decline in gross margin due to revenue mix, operating margin increased 240 basis points year-over-year to 67.9% because of the phenomenal operating leverage we are achieving.

AI semiconductor revenue of $16.7 billion represented 56% of total revenue, up from 49% in Q2.

In Q3, we also paid down $5.6 billion of long-term debt.

We closed the first $35 billion tranche in June for Anthropic's one gigawatt deployment, which is already underway.

Yeah, demand, we can ship significantly more. Question in our mind sometimes is, even as we ship the chips, are they going to be deployed on a timely basis? That's always very much in our mind when we give you that outlook. But certainly our customers want us to ship more. But we have secured supply, and we think it's the right number to put it to 115.

we're going to evaluate any strategic financing really on a deal-by-deal basis. We expect that any that we do in the future, they're going to have unique features, and they're going to be tailored specifically to the lab and to the investor needs.

First, I want to just make sure I correct what I said before, just to be super crisp. Gross margin for our Semiconductor Solutions Group segment was approximately 67% in Q3.

So what we are seeing per gigawatt is in the range of less than $30 billion, $20 billion-$30 billion per gigawatt. […] But the dollars per gigawatt will remain in the $20 billion-$30 billion level of our content.