Earnings Highlights: Broadcom (AVGO) | Q2 FY26 — US$30B of AI Orders in One Quarter Pushes Optical Visibility Out to 2028

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AI semiconductor revenue hit US$10.8 billion for the quarter, up 143% YoY — but that's not the number to remember. The number to remember is that orders "booked" this quarter exceeded US$30 billion, nearly three times shipments over the same period. Three months ago Broadcom's visibility only reached 2026; now it extends straight to 2028.

When order visibility stretches from "one quarter" to "three years," this is no longer a business cycle — it's a capacity schedule locked in ahead of time.

For the optical communications supply chain, the real point of this call isn't the XPU, but how Broadcom spelled out the "copper for scale-up, optics for scale-out" roadmap more clearly than anyone, and the identity it claimed for itself: the de facto standard for CPO.

1. Executive Takeaway: Three Signals to Remember First

1. Demand is defined by "orders," not "shipments": AI semiconductor shipments were US$10.8 billion this quarter, but AI orders over the same period exceeded US$30 billion. Management said outright that semiconductor visibility now "extends to 2028," backed by real POs, not a verbal TAM.

2. Optics' place is clear: in scale-out, not scale-up: Broadcom hands in-rack scale-up to co-packaged copper and 200G/400G SerDes, and cross-rack scale-out to the Jericho fabric and CPO. Optical communications' revenue leverage sits in the latter.

3. Broadcom calls itself the CPO "de facto standard": 1.6T DSPs, CW and EML lasers — management used "de facto standard" to describe its position in CPO. For pricing power across the optical component supply chain, this line matters more than the financials.

This signal is fully consistent with our observation in The Same Week Marvell and NVIDIA Nailed Down CPO's First Commercial Year (W23): three companies, in the same week, said the same thing three times.

2. Financials: Every Line Is a "Record"

Nearly every key metric this quarter set a company record for Broadcom:

- Consolidated revenue: record US$22.2 billion, up 48% YoY, above guidance

- Operating margin: record 67.3%, up 200 bps YoY

- Adjusted EBITDA: record US$15.2 billion, 69% of revenue, above the 68% guidance

- Consolidated gross margin: 77.1%, down 230 bps YoY — management stressed this is "mix dilution" from a higher semiconductor share, not structural deterioration

- Free cash flow: record US$10.3 billion, 46% of revenue

By segment:

- Semiconductors: record US$15.0 billion, up 79% YoY; semiconductor operating margin 62%, up 460 bps YoY; of which AI semiconductors US$10.8 billion, up 143% YoY, 49% of total revenue

- Non-AI semiconductors: US$4.2 billion, up 6% YoY, with orders above US$6 billion, which management sees as proof that "cyclical recovery is underway" - Infrastructure software: US$7.2 billion, up 9% YoY, ARR up 17% YoY; software gross margin 93%, operating margin about 79%

An easily overlooked detail: inventory days rose from 68 in Q1 to 86. That's not unsold product — management is "stocking up ahead" for accelerated AI shipments in the second half. In a shortage cycle, building inventory on purpose is an offensive signal, not a warning sign.

3. Business Highlights: The Passage That Makes Clear "Where Optics Goes"

For the first time, Broadcom cleanly split its networking portfolio by "scale-up vs scale-out":

- Scale-up (in-rack) runs on copper: built on industry-leading 200G and 400G SerDes, driving "co-packaged copper," paired with Ethernet and PCIe switches, to link XPUs/GPUs within the rack.

- Scale-out (cross-rack) runs on optics: Jericho 3 and Jericho 4 fabrics support the world's largest deployments; and when extending across data centers, CPO (co-packaged optics) takes the stage.

On switches, Tomahawk 6 (a 100 TB Ethernet switch) has been shipping for over a year, and the next-generation 200 TB switch taped out this quarter. That cadence means scale-out bandwidth is set to double again.

As for optics, management's own words are worth copying down: in CPO — co-packaged optics, 1.6T DSPs, CW and EML lasers — Broadcom is "the de facto standard in the industry." This self-positioning echoes the OFC 2026 panel where Broadcom laid out its scale-out and scale-up optical interconnect blueprint, and gives financial context to our earlier breakdown of Broadcom's 200G VCSEL and NPO Power-Saving Path.

Networking made up about 40% of AI revenue this quarter, but management set a ceiling itself: this share is "probably about as high as it gets" and will normally fall back to around 30%. For Taiwanese suppliers, this is a key parameter for judging the optical module-to-switch mix — 40% is a special case of "cluster buildout," not a new normal.

4. Management Outlook: Guidance and a Certainty Ranking of the Wording

Next quarter (Q3 FY26) guidance:

- Consolidated revenue: US$29.4 billion, up 84% YoY

- Semiconductor revenue: about US$20.5 billion, up 124% YoY; of which AI semiconductors US$16.0 billion, up more than 200% YoY - Software revenue: about US$8.9 billion, up 31% YoY

- Operating margin: about 67%, flat QoQ

- Consolidated gross margin: down to about 74% (again stressed as mix dilution, not structural)

For the longer-term AI semiconductor trajectory, distinguish the certainty of management's wording:

- FY2026 full-year AI semiconductors about US$56 billion, up about 180% YoY (derived from "second half twice the first half" — high certainty)

- FY2027 AI semiconductors "over US$100 billion" — management used "reiterate," meaning it's a target already given publicly and reconfirmed this quarter, not a new raise

- FY2028 "will grow significantly from 2027" — this is "expectation" grade: clear direction but no number

The subtext of the wording is clear: 2026 is "calculable," 2027 is "locked in," 2028 is "visible but not yet committed."

5. Supply Chain and Customer Clues: A Business Sold by the Gigawatt

The most "industry map"-like part of the call was the gigawatt commitments of six core customers named one by one (partly reconstructed from the spoken transcript):

- Google: signed a long-term agreement in April covering multiple generations of TPUs and AI networking; the relationship is "strategic and substantial"

- Anthropic: securing more than 1 GW of Broadcom TPU compute in 2026; in April signed another 5 GW of next-generation TPU compute starting in 2027 - OpenAI: silicon IP delivered, volume production online by end of 2026; a 1.3 GW contractual commitment for 2027, part of the previously announced "10 GW by 2029" deal

- Meta: announced in April a multi-generation MTIA XPU partnership, deploying 3 GW by end of 2028; the first 1 GW order is booked, shipping from 2H27

- Two other customers: shipments begin at end of 2026 and accelerate in 2027, with combined orders of US$6 billion already received

Adding these up, 10 GW of shipments are planned for 2027 (unchanged from last quarter and back-half weighted, setting up a steeper slope into 2028). To support this compute, Broadcom has teamed up with financiers such as Apollo and Blackstone to build an "AI XPU platform" targeting more than 20 GW deployed by 2028, with the first US$3.5 billion tranche already launched by Apollo.

Worth noting is the line "content per gigawatt will keep rising." Management said content value per GW will rise as XPUs go multi-die, embed CPU cores and stack more HBM — demand amplification in the same direction for the HBM, advanced packaging and optical connectivity supply chains. This "token consumption → compute demand → optical connectivity revenue" transmission chain is exactly the theme we kept stressing in Jensen Huang at GTC Taipei Frames Optical Interconnect as the Critical Path to Revenue.

6. What to Watch Next Quarter: Three Metrics

1. Whether networking's share of AI revenue really falls back to 30%: this is the thermometer for whether optical module/switch demand is a "structural ramp" or a "one-time alignment." If it holds above 35%, that's an upside surprise for optics.

2. The actual pull-in cadence of CPO and EML lasers: Broadcom calls itself the CPO de facto standard, but "DSP + CW + EML" only lands when it converts into real upstream orders for EML and InP. Next quarter, watch shipments, not slogans.

3. Where gross margin settles after dipping to 74%: TPUs/ASICs pull margin down while networking props it up; the balance point of this tug-of-war will determine the valuation multiple the market is willing to give Broadcom.

Broadcom placed optical communications at the core of scale-out, and also drew with its own hand the reality that scale-up is still copper's domain. For Taiwanese suppliers, the real opportunity isn't "competing with Broadcom on XPUs," but finding their place on the scale-out optical path it has drawn. We already discussed this pattern — copper for scale-up, optics positioning in scale-out — in our breakdown of Marvell's FY27 Q1 earnings call: this quarter, the two leaders' messaging fully converged onto the same blueprint.

*This article is for technology and industry trend analysis only and does not constitute investment advice.*