Broadcom's fiscal Q3 2026 results (September 2) — AI revenue up 221%, stock down anyway
Broadcom reported fiscal third quarter 2026 results after the close on September 2, 2026 and the shares fell the following day. Revenue was 29.59 billion dollars, up 86 percent from a year earlier and ahead of the 29.36 billion analysts expected, while adjusted earnings per share of 3.32 dollars beat a 3.24 dollar consensus. AI semiconductor revenue reached 16.7 billion dollars, up 221 percent year on year and accounting for 56 percent of total revenue. The company guided full-year AI semiconductor revenue to 58 billion dollars and said it has line of sight to 115 billion in fiscal 2027 and 230 billion in fiscal 2028. The stock nevertheless fell 4 to 6 percent on September 3. Two numbers explain it: fourth quarter revenue guidance of 34.8 billion dollars fell short of the 35.03 billion consensus, and gross margin is guided to 73 percent against 78 percent a year earlier, because custom accelerators and high bandwidth memory carry lower margins than the traditional mix
The three lines
- Results — revenue 29.59bn dollars (+86%), AI semiconductors 16.7bn (+221%), both above consensus
- Guidance — Q4 revenue of 34.8bn dollars, 0.7 percent below the 35.03bn consensus
- Margin — Q4 gross margin guided to 73 percent versus 78 percent a year earlier, on mix shift
Key questions
- What did Broadcom report for fiscal Q3 2026?
- **It beat on every published line.** Fiscal third quarter revenue was **29.59 billion dollars**, up **86 percent** year on year, against a consensus of 29.36 billion. Adjusted earnings per share of **3.32 dollars** beat the 3.24 expected. Operating income on the company's presentation was **20.1 billion dollars**, up 92 percent, for a **68 percent** operating margin. The dominant line inside that is **AI semiconductor revenue of 16.7 billion dollars**, up **221 percent** year on year and **56 percent of total revenue**. Crossing half is the significant part: Broadcom has been a communications, networking, storage and infrastructure software company, and more than half its revenue now comes from AI. That did not happen in one quarter — two years of change crossed a threshold in this one. **The stock still fell 4 to 6 percent the next day, because the market was reading two forward-looking numbers rather than these.**
- Why did the stock fall on good results?
- **First, guidance missed by 0.7 percent.** Fourth quarter revenue guidance of **34.8 billion dollars** represents 93 percent year-on-year growth, but consensus was **35.03 billion**. The gap is 230 million dollars — **0.7 percent**. That a 93 percent growth guide can knock a stock down because it fell 0.7 percent short of expectations tells you where this share price sits: **near-flawless execution was already priced in**, so meeting a high bar is not enough; each quarter has to beat it. **Second, margins are compressing.** Fourth quarter gross margin is guided to **73 percent** against **78 percent** a year earlier, and the third quarter figure fell **2.1 percentage points** sequentially. This is not an execution error or price competition — it is **a change in what is being sold**. Within Broadcom's AI revenue, custom accelerators (customer-specific chip designs) and high bandwidth memory content are growing as a share, and they carry lower margins than the traditional networking business. The company described the effect as mechanical. **Margin dilutes as revenue grows.**
- Is the 230 billion dollar 2028 figure credible?
- **Broadcom presented it as contracted visibility rather than a forecast — with caveats worth naming.** The path given is AI semiconductor revenue of **58 billion dollars** in fiscal 2026 (up 186 percent), **115 billion** in fiscal 2027 and **230 billion** in fiscal 2028: roughly **350 billion dollars** of AI silicon shipped to **six hyperscaler customers** over two years. Three things to weigh. **First, customer concentration.** With six buyers, one deferring capex or moving to in-house design moves the whole projection. **Second, this is already happening.** On August 26 Marvell fell **8.2 percent** despite a reported 120 billion dollar arrangement with Google, because revenue recognition starts in 2029 (see "What custom AI chips (ASICs) are"). The lag between a large contract and recognised revenue is a standing risk in this sector. **Third, Broadcom cited expanding business with Anthropic and OpenAI.** Model companies designing their own silicon is both the opportunity and the threat — outsourced design is revenue, full vertical integration is a lost customer. OpenAI unveiled its own chip, Jalapeño, on August 27.
Broadcom published fiscal third quarter 2026 results after the close on September 2, 2026. Every figure beat consensus. On September 3 the stock fell 4 to 6 percent.
That combination is a working description of how AI semiconductor stocks are currently priced. Results are history; the share price is reading guidance and margin.
1. The reported numbers
| Item | Q3 result | Year on year | Consensus |
|---|---|---|---|
| Revenue | $29.59bn | +86% | $29.36bn |
| Adjusted EPS | $3.32 | — | $3.24 |
| AI semiconductor revenue | $16.7bn | +221% | — |
| AI share of revenue | 56% | — | — |
| Operating income (as presented) | $20.1bn | +92% | — |
| Operating margin | 68% | — | — |
The row that matters most is AI at 56 percent of revenue. Broadcom spent decades as a communications, networking and storage chip company with an infrastructure software business attached. More than half its revenue now comes from AI. This was not a single quarter's transformation — two years of change crossed a threshold in this one.
2. The first number that hurt: 0.7 percent
| Item | Company guidance | Consensus | Gap |
|---|---|---|---|
| Q4 revenue | $34.8bn | $35.03bn | −$230m (−0.7%) |
| Q4 AI revenue | $21.7bn | — | — |
| Q4 gross margin | 73% | — | — |
A guide implying 93 percent year-on-year growth knocked the stock down because it landed 0.7 percent below expectations.
That sentence is itself the information. It means near-flawless execution was already in the price. When expectations sit there, doing well is insufficient; the company has to beat a high bar every quarter. Most AI-exposed names are currently in the same position.
3. The second number: 73 percent
The more structural issue is gross margin.
| Point | Gross margin |
|---|---|
| A year earlier | 78% |
| Q3 (sequential change) | −2.1 pts |
| Q4 guidance | 73% |
Five percentage points in a year. The cause is neither competitive pressure nor discounting. It is a change in the mix of what is sold.
Broadcom's AI revenue has two broad components.
- Networking silicon — switches and interconnect linking GPUs inside a data centre. The traditional strength, and high margin.
- Custom accelerators and high bandwidth memory content — customer-specific AI chip design and supply. High revenue per unit, lower margin.
As AI revenue grows, the second component grows faster, and gross margin falls mechanically. Broadcom used exactly that word. Nothing went wrong; the structure produces this.
For investors it complicates the arithmetic, because revenue growth and margin now move in opposite directions. Doubling revenue with a falling margin does not double profit. This is why margin compression is marked more harshly than revenue growth is rewarded in a growth name.
4. The 230 billion dollar projection
The largest number in the release was not a result but an outlook.
| Fiscal year | AI semiconductor revenue | Year on year |
|---|---|---|
| 2026 | $58bn | +186% |
| 2027 | $115bn | +98% |
| 2028 | $230bn | +100% |
Roughly 350 billion dollars of AI silicon to six hyperscaler customers across fiscal 2027 and 2028. Broadcom framed this as visibility, not forecast.
Three points to weigh.
Customer concentration. Six buyers means one deferral or one shift to in-house design moves the whole projection.
The lag between contract and revenue. On August 26, Marvell fell 8.2 percent despite a reported 120 billion dollar Google arrangement, because recognition begins in 2029 (see "What custom AI chips (ASICs) are"). This gap is a standing feature of the sector.
Vertical integration by model companies. Broadcom cited expanding business with Anthropic and OpenAI. But on August 27 OpenAI unveiled its own chip, Jalapeño. Outsourced design is revenue; full internalisation is a lost customer. The same trend is currently the opportunity and the future risk.
5. The Korean angle
That HBM content is named among the causes of Broadcom's margin compression is worth separate attention from Seoul.
The high bandwidth memory sitting beside Broadcom's custom AI chips is made by SK hynix and Samsung Electronics. The input cost eroding Broadcom's margin is those two companies' revenue.
The relationship is not straightforwardly positive, though. A supplier under margin pressure pushes harder on memory pricing at the next negotiation. On September 3 neither Samsung Electronics (−0.20%) nor SK hynix (−1.05%) rebounded, with Chinese HBM3E production and prospective US semiconductor tariffs also weighing (see "KOSPI closes at 6,579.48 on September 3, 2026").
6. What is unresolved
- The decline was reported as both 4 and 6 percent. Exchange data settles it.
- The accounting basis of the 20.1 billion dollar operating income was presented inconsistently across sources — GAAP or adjusted is unclear.
- The six hyperscaler customers were not named. Google, Meta, Amazon, Microsoft, OpenAI and Anthropic are commonly assumed; the company has not confirmed.
- The next checkpoint is the actual fourth quarter gross margin. Whether 73 percent holds, or slips further, indicates the direction of this structure.
Sources
- Broadcom — Broadcom Inc. Announces Third Quarter Fiscal Year 2026 Financial Results
- CNBC — Broadcom (AVGO) Q3 earnings report 2026
- Yahoo Finance — Broadcom Falls 6% as Soft Guidance Overshadows 221% AI Revenue Surge
- Seeking Alpha — Broadcom forecasts $58B fiscal 2026 AI revenue and outlines $115B in 2027, $230B in 2028
- Investing.com — Broadcom slips as soft Q4 guide overshadows strong growth outlook
- Benzinga — Broadcom Q3 2026 Earnings Call Transcript
- US Securities and Exchange Commission — Broadcom Inc. Form 8-K, FY2026