After hours in the U.S. stock market, Broadcom (AVGO.US) saw a significant rise, with shares increasing by nearly 6% after the earnings report was released. As of the close, the stock was priced at $317.53, up 3.69% from the previous close. The company's Q1 FY2026 performance, driven by its AI business, set new historical highs, and the strong earnings and guidance have further boosted market confidence.

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Overall Performance Steady, Revenue and Profit Rise Simultaneously

According to the earnings report, Broadcom achieved $19.311 billion in revenue for Q1 FY2026, representing a 29% year-over-year increase, setting a new record for the company and slightly exceeding market expectations. Profitability remained strong, with GAAP net income of $7.349 billion and non-GAAP net income of $10.185 billion for the quarter. In terms of profit margin, adjusted EBITDA reached $13.128 billion, maintaining 68% of revenue. Despite rapid revenue expansion, the company’s cost control and economies of scale remained steady, demonstrating robust operational resilience.

AI Semiconductors as the Core Growth Engine, Revenue Doubles Year-Over-Year

AI business was the key growth driver this quarter. Broadcom disclosed that AI-related revenue for the quarter reached $8.4 billion, a 106% year-over-year increase, significantly surpassing market expectations. AI revenue mainly came from the continued demand for custom AI accelerators and AI network chips, with major cloud computing giants as the primary source of demand. The management stated that AI revenue growth is accelerating further, and with the simultaneous ramp-up of custom ASICs and network solutions, the share of AI business within the semiconductor segment will continue to rise. The company expects Q2 AI semiconductor revenue to reach $10.7 billion, with a noticeable increase from the previous quarter.

Software Business Stabilizes, VMware Acquisition Impact Fading

The infrastructure software segment posted $6.8 billion in revenue for the quarter, reflecting a 1.4% year-over-year increase. The high growth phase driven by the VMware acquisition has largely ended, with current software business growth mostly driven by the transition to a subscription model. From a financial structure perspective, Broadcom has continued its deleveraging process, with the total debt to adjusted EBITDA ratio falling to about 2 times, essentially returning to the level before the VMware acquisition. Market concerns about the financial pressure from the VMware acquisition are gradually dissipating.

Strong Cash Flow and Shareholder Returns Maintained

On the back of strong profitability, Broadcom’s cash flow performance remained robust. Operating cash flow for the quarter was $8.26 billion, with free cash flow reaching $8.01 billion, representing a free cash flow rate of 41%. The company has also reinforced shareholder returns, returning a total of $10.9 billion to shareholders through cash dividends and stock buybacks in Q1, along with a new $10 billion stock buyback program. This high shareholder return strategy continues to be executed during the high-growth AI cycle.

Q2 Guidance Significantly Upgraded, AI Growth Confidence Strengthened

Looking ahead to Q2, Broadcom has provided a guidance for revenue of approximately $22 billion, which represents a 47% year-over-year growth, significantly exceeding market expectations. Additionally, the company expects the adjusted EBITDA margin to remain around 68%. This guidance is almost entirely driven by the AI semiconductor business, further reinforcing the management’s confidence in the continued demand for AI. With cloud providers' capital expenditure remaining high, Broadcom's custom ASIC and network solutions are still in a ramp-up phase.

Market Focus Shifts to Profitability Structure and Market Share Growth

As the AI business rapidly scales, the increasing proportion of custom ASICs has put some pressure on the overall profit margin, which has become a focal point for the market in the short term. However, management emphasized that the scale-up and product iterations are expected to gradually offset this structural impact in the medium term. Overall, Broadcom is in an upward performance phase driven by AI business. With a clear growth path and solid guidance backing it, the company now seems to be in a phase of "digesting valuation through performance" rather than simply relying on expectations to lift it further.

How to Buy Broadcom via on uSMART

After logging into the uSMART HK app, click the “Search” button in the top-right corner of the page, enter the ticker code (AVGO.US), and navigate to the details page to view transaction details and historical trends. Click the “Trade” button in the bottom-right corner, select the trade type, and submit your order after filling in the transaction conditions.

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