Broadcom (NASDAQ: AVGO) reported fiscal third-quarter 2026 results on September 2, 2026, headlined by record revenue and a step-change in the company’s AI silicon business. Yet a Q4 revenue guide that came in shy of the most aggressive consensus prints pushed the stock down more than 3% in after-hours trading.
The quarter ending August 2, 2026 was the clearest illustration yet of how quickly custom AI accelerator revenue is compounding at Broadcom — and how high the buy-side bar has moved as the stock has re-rated on that same story.
The headline numbers
Total Q3 revenue reached $29.6 billion, up 86% year-over-year from $15.95 billion in the year-ago quarter, according to the company’s 8-K exhibit filed with the SEC. GAAP net income was $13.09 billion ($2.68 diluted EPS) and non-GAAP diluted EPS was $3.32.
Free cash flow was $13.7 billion, or 46% of revenue, on operating cash flow of $14.2 billion and capital expenditures of $532 million.
| Metric | Q3 FY26 | Q3 FY25 | YoY |
|---|---|---|---|
| Total revenue | $29.6B | $15.95B | +86% |
| Semiconductor Solutions | $20.84B | $9.17B | +127% |
| Infrastructure Software | $8.75B | $6.79B | +29% |
| AI semiconductor revenue | $16.7B | n/a (est. ~$5.2B) | +221% |
| GAAP diluted EPS | $2.68 | — | — |
| Non-GAAP diluted EPS | $3.32 | — | — |
| Free cash flow | $13.7B (46% of rev) | — | — |
AI accelerator business is the story
The most closely watched line in the release was the AI semiconductor revenue disclosure. Broadcom said Q3 AI semi revenue was $16.7 billion, up 221% year-over-year, and guided Q4 AI semi to accelerate to $21.7 billion, up 236% year-over-year. That would push trailing-four-quarter AI revenue past $50 billion.
CEO Hock Tan framed the demand picture in one sentence in the release: “Demand for our custom AI accelerators and networking continues to be very strong.”
Broadcom’s AI business combines two lines that tend to get lumped together: (1) custom XPU accelerators built for hyperscaler customers — publicly known partners include Google (TPU), Meta, and ByteDance, with more recently announced OpenAI custom silicon work — and (2) high-speed AI networking silicon (Tomahawk switches, Jericho routers, PCIe/optical connectivity). Both are pulling at the same time because the same customers are scaling both the compute and the fabric that connects it.
Q4 guide: strong on paper, short of the whisper
Broadcom guided Q4 FY26 revenue to approximately $34.8 billion, an increase of 93% from the prior-year quarter, with adjusted operating margin of approximately 66% of projected revenue.
In isolation, that is a blowout number. On a rate-of-change basis, it would mark the seventh consecutive quarter of accelerating growth. The stock reaction — AVGO closed at $367.24 on September 2 and dropped to around $354 in after-hours trading, a decline of roughly 3.5% — reflects the fact that the sell-side bar and the buy-side whisper had already pushed above the printed guide. When a stock trades at the multiples AVGO trades at, the miss is the delta between guide and whisper, not between guide and prior-year comp.
Segment mix: chips take over the P&L
The composition of Broadcom’s revenue continues to shift toward silicon. In Q3 FY25, Semiconductor Solutions was 57% of revenue and Infrastructure Software was 43%. One year later, semis are 70% and software is 30%. Semis grew 127% year-over-year to $20.84 billion; the software segment (which includes the VMware business) grew a still-solid 29% to $8.75 billion, but its share of revenue is shrinking simply because the AI accelerator line is compounding so much faster.
That mix shift matters for two reasons. First, it makes the AI cycle the dominant driver of AVGO’s growth story on a look-forward basis. Second, it means the natural gross margin of the business is now more sensitive to hyperscaler ordering patterns than to the more contracted, subscription-style software revenue that VMware brought in the door.
Capital return and balance sheet
Broadcom paid $3.1 billion in dividends during Q3 at $0.65 per share (paid June 30, 2026), and did not repurchase any stock during the quarter. Cash from operations of $14.2 billion easily funded the dividend, with $532 million of capex bringing free cash flow to $13.7 billion, or 46% of revenue. The company’s guide for Q4 adjusted operating margin of approximately 66% of revenue implies continued high cash generation.
What to watch next
- Q4 AI print and Q1 FY27 setup. The $21.7B Q4 AI guide is the print that matters. A beat versus that number would reset the narrative that Q3’s guide was disappointing; a miss would extend the debate about whether the AI accelerator ramp is bumpier than the linear extrapolation implies.
- Customer concentration. Broadcom does not break out custom silicon by named customer, but the AI trajectory is driven by a small handful of hyperscalers. Any commentary on new customer wins (or on order patterns from existing ones) will move the stock.
- Networking vs XPU split. Analysts continue to ask for granularity between the custom accelerator business and the AI networking silicon. Additional disclosure would help the market model gross margin trajectory.
- VMware growth. With software share of revenue now down to 30%, the market cares less about VMware quarter-to-quarter, but any deceleration below the high-20s growth rate would raise questions about the long tail of that acquisition.
Sources
- Broadcom Inc. Q3 FY26 earnings release (SEC EDGAR EX-99.1)
- Broadcom 8-K filings list — SEC EDGAR
- Broadcom investor relations — news releases
Disclosure: This article is for informational purposes only and is not investment advice.