Broadcom Inc. Q3 FY2026 Earnings Call - AI Revenue Doubles to $29.6B, Sets $115B FY2027 Target

Operator: Welcome to Broadcom Inc.’s third quarter fiscal year 2026 financial results conference call. At this time, for opening remarks and introductions, I would like to turn the call over to Jee Yu, Head of Investor Relations of Broadcom Inc. Please go ahead.

Jee Yu, Head of Investor Relations, Broadcom Inc.: Thank you, Cherie, and good afternoon, everyone. Joining me on today’s call are Hock Tan, President and CEO, Amie Thuener, Chief Financial Officer, and Charlie Kawwas, President, Semiconductor Solutions Group. Broadcom distributed a press release and financial tables after the market close describing our financial performance for the third quarter fiscal year 2026. If you did not receive a copy, you may obtain the information from the investor section of Broadcom’s website at broadcom.com. This conference call is being webcast live and an audio replay of the call can be accessed for one year through the investor section of Broadcom’s website. During the prepared comments, Hock and Amy will be providing details of our third quarter fiscal year 2026 results, guidance for our fourth quarter of fiscal year 2026, as well as commentary regarding the business environment. We’ll take questions after the end of our prepared comments.

Please refer to our press release today and our recent filings with the SEC for information on risk factors that could cause our actual results to differ materially from the forward-looking statements made on this call. In addition to U.S. GAAP reporting, Broadcom reports certain financial measures on a non-GAAP basis. A reconciliation between GAAP and non-GAAP measures, to the extent possible, is included in the tables attached to today’s press release. Comments made during today’s call will primarily refer to our non-GAAP financial results. I will now turn the call over to Hock.

Hock Tan, President and CEO, Broadcom Inc.: Well, thank you, Jee, and thank you everyone here for joining us today. 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. This brought our consolidated revenue to $29.6 billion, which was up 86% year-on-year. Operating income grew even faster at 92% year-on-year, with operating margin at a record 68% of revenue, reflecting strong operating leverage. Q3 demand was simply hot and we’re just getting started. Our six XPU customers are accelerating the adoption of custom accelerators and AI semiconductor revenue more than tripled year-over-year to $16.7 billion. During the quarter, we delivered Ironwood TPU v7, version 7 in high volume to both Anthropic and Google.

At the same time, we began production shipments of the next generation TPU v8i for Google. This new TPU generation has been designed with more memory and bandwidth compared to Ironwood and just like Ironwood, is optimized for inference workloads. In performance, it is comparable, if not surpasses the Vera Rubin GPU. Just to reiterate the major technology challenges of developing these complex accelerators, Broadcom is now shipping the TPU v8i ahead of the MediaTek v8t, which in fact was initiated earlier. In Q3, we also shipped Jalapeño, OpenAI’s first generation custom accelerator, which outperforms Grace Blackwell GPU for inference workloads. Overall, our XPU shipments for the third quarter were up over 3.5x year-on-year and represented 73% of AI revenue during the quarter. Our AI networking revenue was up over 2.5x year-on-year.

This strong momentum continues into Q4. During the quarter, we expect to accelerate shipments of Ironwood to Anthropic. We also expect to ramp up high volume shipments of the TPU v8i to Google. Shipments of Jalapeño for OpenAI will continue, and for Meta, we expect production shipments of their custom MTIA accelerator optimized for inference and recommendation at scale. In Q4, we expect both XPUs and AI networking revenue to triple year-on-year. Together, we expect these deployments to drive our Q4 AI revenue to $21.7 billion, which is up 236% 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-on-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. We expect their need for compute infrastructure to inflate even more in 2027 and 2028. They are all growing with XPUs to achieve superior performance, cost, and power. Let me now walk you through each of their journey, each of our customers’ journey towards using XPUs at scale to run their frontier models worldwide. Workloads, sorry. Our engagement with Google has never been stronger. This has been recently strengthened by a long-term agreement to develop and supply future generations of TPUs and AI networking. Under this agreement, we’re planning to deliver multi-tens of billions of dollars of TPUs annually over the next several years.

We expect this growing demand in 2028 and 2029 to be fulfilled through successive generations of the increasingly complex TPUs we are developing today with Google. Our partnership with Google will continue to sustain because we have the strongest IP portfolio in semiconductor design, including industry-leading SERDES, chip-to-chip interconnect, leading-edge HBM and SRAM integration, and simply differentiated advanced packaging. Most of all, we have consistently, I should say, delivered the fastest time to market for TPUs from product definition to production without the need for resmits. We believe these are very deep moats for any competitor to cross. Moving on to Anthropic. 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. Together with OpenAI, we are deep in development of the next generation XPU beyond Jalapeño, which is approaching tape-out. 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 addition, we are in development with OpenAI on their third generation XPU. As OpenAI announced last week, Jalapeño outperforms the Grace Blackwell Ultra in performance per watt, latency, throughput, and power, and is actually comparable to very robust GPUs in running OpenAI workloads.

The lesson here is when you co-develop a chip that is optimized for your particular LLM workloads, you will outperform any GPU. Like TPUs, Jalapeño demonstrates that it can also run other frontier models, and you can do all this at half the cost of a GPU. Our partnership with Meta to deliver multiple generations of MTIA XPUs remains on track. Between now and the end of 2027, we will be delivering three generations of MTIA accelerators to Meta. Across these three generations, we have line of sight to deploy 3 gigawatts through 2028. Our content in AI, as you know, goes beyond XPUs. We are the leader in AI networking, and we continue to extend our lead.

In Ethernet switching for scale up and scale out, we were first to market with our 100 terabit Tomahawk 6, and we just taped out Tomahawk 7, the industry’s first 200 terabit per second Ethernet switch. For scaling in, we continue to be the leader in every generation of PCI Express switching. We are now the leader in leading-edge optical DSPs and are rapidly expanding our capacity and market position as a leader in EMLs, VCSELs, and CW lasers for optical interconnects. In sum, we continue to invest and invest heavily to provide the broadest and most leading-edge AI portfolio. In fact, our AI networking revenue is expected to grow just as fast as XPUs over the next few years. Reflecting our excellent progress with this key group of LLM customers, here is our outlook for our AI semiconductor revenue.

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. In 2028, we expect the trajectory of growth to continue. 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. This AI revenue guidance through 2028 is being provided to give you the trajectory of our growth. That demand for compute continues to be extremely strong. As a result, I got 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. Broadband and server storage together were up, partially offset by a decline in wireless.

In Q4, we forecast non-AI semiconductor revenue to be approximately $4.3 billion, again up 5% sequentially. 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. We announced VMware Private AI Cloud, giving enterprises a secure, cost-effective platform to build and run AI alongside their existing applications. It brings together AI infrastructure, security, and compliance and the tools to build and operate trusted AI agents, all while protecting enterprise data. VCF, VMware Cloud that is also making it easier for customers to repatriate workloads from public cloud to private cloud, where they can gain greater control and significantly improve infrastructure economics. Enterprise consumption of AI is, in fact, opening a new opportunity for our infrastructure software business.

To sum it all, for Q4 2026, we expect consolidated revenue to grow to $34.8 billion, up 93% year-on-year. We expect Q4 AI revenue to be $21.7 billion, up 236% year-on-year, and we expect operating margin to be approximately 66% of revenue. With that, let me turn it over to

Amy.

Amie Thuener, Chief Financial Officer, Broadcom Inc.: Thank you, Hock. Let me now provide additional detail on our Q3 financial performance. Consolidated revenue was a record $29.6 billion for the quarter, up 86% year-on-year. 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%. Q3 operating income was a record $20.1 billion, up 92% from a year ago. 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. Aligned with this, Q3 non-GAAP EPS of $3.32 was up 96% year-on-year. Now I will review the P&L for our two segments, starting with semiconductors. Revenue for our Semiconductor Solutions segment was a record $20.8 billion, up 127% year-on-year, and represented 70% of our total revenue.

AI semiconductor revenue of $16.7 billion represented 56% of total revenue, up from 49% in Q2. Gross margin for our Semiconductor Solutions segment was approximately 76%. Operating expenses of $1.2 billion reflected investments in R&D, with OPEX representing 6% of segment revenue. Operating margin of 61% was up 440 basis points year-on-year as revenue growth of 127% outpaced operating expenses, which grew 22% year-on-year. Moving on to infrastructure software. Revenue of $8.8 billion was up 29% year-on-year and represented 30% of our total revenue. Gross margins for infrastructure software was 94% in the quarter, and operating expenses were over $900 million. Q3 software operating margin was up 650 basis points year-on-year to approximately 84%. Moving on to the balance sheet. We ended the third quarter with $24 billion of cash, compared to $19.6 billion in the prior quarter, up $4.3 billion sequentially.

We ended the third quarter with inventory of $4.5 billion to support our strong semiconductor demand. Moving on to cash flow. Free cash flow in the quarter was a record $13.7 billion and represented 46% of revenue. We spent $532 million on capital expenditures in the quarter. Turning to capital allocation. In Q3, we paid stockholders $3.1 billion of cash dividends based on a quarterly common stock dividend of $0.65 per share. In Q3, we also paid down $5.6 billion of long-term debt. Subsequent to quarter end, we paid down an additional $1.5 billion of senior notes upon maturity. The weighted average coupon rate and years to maturity of our gross principal fixed rate debt of $59.6 billion is 4% and 7.4 years, respectively.

In June, we established the AI XPV platform in partnership with Apollo and Blackstone to enable more than 20 gigawatts of compute infrastructure for OpenAI and Anthropic by the end of 2028. We closed the first $35 billion tranche in June for Anthropic’s one gigawatt deployment, which is already underway. While future tranches will include unique features tailored to specific lab and investor needs, our core strategy remains consistent. First, we are empowering two of our most strategic customers, the leading AI labs, to bridge the gap between their current cash flow and the significant upfront investments required for their businesses. Our XPUs enable cost-effective, sustainable growth at multiples of their infrastructure costs. Second, this XPV platform enables highly investable customers and facilitates execution where demand is already locked in.

And third, we review any strategic financings through a commercial as well as balance sheet lens, consistent with our existing capital allocation framework. Through the XPV platform, we partner with sophisticated third-party financial partners to independently underwrite and capitalize the assets rather than providing the direct financing ourselves. Where necessary, we may provide modest residual value guarantees, which are contingent liabilities we view as low risk, supported by the strong profitability trajectory of these labs and the sustaining value of the underlying assets. Moving on to guidance. Our guidance for Q4 is for consolidated revenue of $34.8 billion, up 93% year-on-year. We forecast semiconductor revenue of approximately $26.1 billion, up 136% year-on-year. Within this, we expect Q4 AI semiconductor revenue of $21.7 billion, up over 236% year-on-year. We expect Q4 infrastructure software revenue of approximately $8.7 billion, up 25% year-on-year. Moving on to margins.

As the proportion of AI revenue accelerates in Q4, we expect our Q4 consolidated gross margin to be approximately 73%, down from 78% a year ago. As we have discussed previously, this reflects the increasing mix of XPUs with their increasing memory content, which is diluting our consolidated gross margin. Regardless, we expect Q4 operating margin to be approximately 66%, flat from a year ago, because our strong revenue growth drives substantial operating leverage. We expect the non-GAAP tax rate for Q4 and fiscal year 2026 rate to be approximately 16% due to the impact of the global minimum tax and the geographic mix of income compared to that of fiscal year 2025. We expect the Q4 non-GAAP diluted share count to be approximately 4.94 billion shares, excluding the impact of potential share repurchases.

In Q4, we expect capital expenditures of $1.4 billion as we invest in capacity for semiconductors. As Hock mentioned in his remarks, we expect AI revenue to double again to approximately $115 billion in fiscal 2027 and double again in fiscal 2028 to $230 billion. This AI revenue guidance is being provided to you to give you the trajectory of our growth, and we do not intend to update it on a quarterly basis. That concludes my prepared remarks. Operator, please open up the call for questions.

Operator: Thank you. As a reminder, to ask a question, you will need to press 11 again. Due to time restraints, we ask that you please limit yourself to one question. One moment while we compile the Q&A roster. That will come from the line of Joseph Moore with Morgan Stanley. Your line is open.

Joseph Moore, Analyst, Morgan Stanley: Great. Thank you, and congratulations on the results. You talked about the business doubling next year, and you said demand could be higher than that. Can you talk about the supply around that and what are the supply bottlenecks and what are the variables that could drive that number higher if you’re able to resolve them?

Hock Tan, President and CEO, Broadcom Inc.: Well, Joe, that’s a loaded question. Whatever I tell you guys go out and print a bigger number. I think that’s funny. We’re very careful, and to be honest, we try to be conservative. So we’re giving you an outlook, and 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. If circumstances change and our ability to scale more supply change, of course we will uplift. But at this point, that’s our best outlook.

By the way, the same thinking applies to 2028 when we give you that outlook of $230 billion. This is real demand, we believe, based on what data center sites, locations are ready 2028 with respect to our customers, the size of what we have, and against the supply chain we have in leading-edge wafers, substrates, and HBM memory. This is again, a carefully structured outlook that we believe we can achieve.

Joseph Moore, Analyst, Morgan Stanley: Great. Thank you.

Operator: One moment for our next question. That will come from the line of Blayne Curtis with Jefferies. Your line is open.

Blayne Curtis, Analyst, Jefferies: Hey, guys. Thanks for taking my question. I actually want to follow up on Joseph’s on supply, big key point. Can you just talk about from either a substrate or interposer co-ops replacement, has any XPUs decided to use your Singapore capacity, and how does that fit into that supply picture you put together?

Hock Tan, President and CEO, Broadcom Inc.: Well, we are going to start deploying our Singapore fab for substrates, by the way, starting fiscal 2027. That would, I guess, address a key part of our supply bottlenecks. Anything else?

Operator: One moment.

Blayne Curtis, Analyst, Jefferies: Maybe you can. Go.

Hock Tan, President and CEO, Broadcom Inc.: Traditional question.

Blayne Curtis, Analyst, Jefferies: No, I was going to give another one because that was short answer. Just one clarification quickly. The Google number you gave, and then you said 10 gigawatts for Anthropic. It’s not one number, right? The 10 gigawatts is just for Anthropic?

Hock Tan, President and CEO, Broadcom Inc.: 10 gigawatts is just for Anthropic.

Blayne Curtis, Analyst, Jefferies: Thanks, Hock.

Operator: One moment for our next question. That will come from the line of Harlan Sur with JPMorgan. Your line is open.

Harlan Sur, Analyst, JPMorgan: Yeah. Good afternoon. Thanks for taking my question. Hock, your customers are driving their XPUs, their GPUs higher in performance. The networking bandwidth is also scaling accordingly, right? Your customers are now moving from 100 gigabits per second per lane to 200 gigabits per second per lane, from Tomahawk 5 to Tomahawk 6. We have heard that Tomahawk 6 ramp has been the fastest ramp of any of your switching families. We have also heard that you guys are almost sold out for Tomahawk 6 for next year. I am not sure if you can give us an update on that. It is also good to see the team kicked out its next-gen Tomahawk 7 with 200 gig SERDES. Out of your six frontier model-based XPU customers, how many of them are using Tomahawk scale-out networking?

Can you also just give us an update on the adoption of your Tomahawk Ultra scale-up platform as well?

Hock Tan, President and CEO, Broadcom Inc.: Charlie will take this question. He knows everything here.

Charlie Kawwas, President, Semiconductor Solutions Group, Broadcom Inc.: Thank you, Hock. Thanks, Harlan, as well. You are right. Our Tomahawk 6 has been a phenomenal success. It started, really first in scale-out, as you mentioned. It is available both in 100 gig and 200 gig SERDES. So we actually have two versions of Tomahawk 6. Both are very successful, and both are deployed in pretty much all of the AI hyperscalers that are building XPUs with us, and even those that are not using our XPUs are using the Tomahawk 6, both 100 gig and 200 gig. With respect to Tomahawk Ultra, we have quite innovated ahead of the market here by enabling scale-up using low latency Ethernet.

The adoption also on this device has surprised us, and we are starting to see it deployed, starting actually this quarter and in FY 2027, coming up in scale-up applications.

Hock Tan, President and CEO, Broadcom Inc.: Just to amplify what Charlie is saying with Tomahawk Ultra, is that we are enabling now scaling up within cluster of a GPU, XPU in a rack on basically Ethernet for the first time. Tomahawk Ultra will perform just as well as anything else that exists prior to that, before being able to do it on Ethernet, particularly with respect to loss and latency.

Charlie Kawwas, President, Semiconductor Solutions Group, Broadcom Inc.: Yeah.

Harlan Sur, Analyst, JPMorgan: Thanks, Charlie. Thanks, Hock.

Operator: One moment for our next question. That will come from the line of Stacy Rasgon with Bernstein. Your line is open.

Stacy Rasgon, Analyst, Bernstein: Hi, guys. Thanks for taking my questions. I just wanted to verify, if I add up the gigawatts for 2027 and 2028 you have lined, I am still getting roughly 10 for 2027, about six of which are Anthropic and OpenAI, and roughly 20 for 2028, roughly 15 of which are Anthropic and OpenAI. I just want to make sure that was the case. If it is, if I sort of calculate the revenue per gigawatt, I come out with your revenue guides, I come out somewhere between $11 billion and $12 billion per gigawatt. I mean, your competitor suggested something like 40. I am just wondering, is this the right level that we should think about, for your content is, and how should that, I guess, trend as we go forward, as you said, into more generations of XPUs, again, with higher performance and higher memory, how do those trend?

I guess, first, just the gigawatt count and second, the content.

Hock Tan, President and CEO, Broadcom Inc.: Right. Stacy, you are very clever. You put two tricky questions into one. Let me take it. Let me parse it one by one. Yes, you can count the number of gigawatts we are outlining. Not every one, because we have focused on. To be fair, we have six customers. Four of them are just simply going to be huge. We outline, and we walk through with you guys their journey into deploying XPUs. As I said, it is a journey. Google has been doing it for the last 10 years. Others, OpenAI, last two, three years. Meta, last three years. Each one is doing it differently, and we like to take you guys through it. More importantly, what it means in their deployment at XPU for these three years, 2026, 2027, 2028. We lay down and you are right, Stacy. You add up the gigawatts.

We are showing where they are headed. What we didn’t tell you specifically when we came up to the final number is how many of these gigawatts do actually come up for actual deployment, because deployment doesn’t just include getting the chips out there. Before you get the chips out there, you got to get the data center shell in place and ready for literary production. We are talking about fiscal years. What we are saying is as you add up the gigawatts, we are not saying that over the next two years, 2027, 2028, that there are 30 gigawatts that will go into production and therefore we ship it.

We think we judge it conservatively to be somewhat less, but we see the demand that if they can get it all in place and our products and we can ship those chips racks in place. It will be 30 gigawatts between the customers we have, the six customers we have. Question is, will all 30 come into production within these two fiscal years? We are giving you a judged number of $115 billion of chips to these guys in FY 2027, another $230 billion in FY 2028, which would add up, I know, to about $350 billion. So another way of saying is, we believe with a pretty high degree of confidence, we will ship $350 billion of AI semiconductors to these customers in the next two years. That’s the best way to look at it.

It doesn’t necessarily mean all 30 gigawatts need to have been deployed within that period. Turning to your more next interesting question. As I said, when you do an XPU, it not only performs as well if not better for your particular LLM workloads for each of our customers, it’s also half the cost. In fact, less than half the cost. That’s, you made my point exactly.

Operator: Thank you. One moment for our next question. That will come from the line of Ben Reitzes with Melius. Your line is open.

Jack Adair, Analyst, Melius: Hi, this is Jack Adair on for Ben. Thank you for the question. Could you shed a little bit more light on the maximum off-balance sheet risk for the backstop agreements? Your last Q showed that the first tranche had maximum exposure of about $29 billion. Is this about the order of magnitude for each of the Anthropic and OpenAI gigawatts over the next few years? Could you add a little bit more color as well on the residual value and the risk associated? Thank you.

Amie Thuener, Chief Financial Officer, Broadcom Inc.: Thanks, Jack. Listen, we do not have anything to announce today on residual value guarantees or backstops, so there is nothing new to add. The numbers that you outlined around what we have already done remain true. As I mentioned in my prepared remarks, we are going to evaluate any strategic financing really on a deal-by-deal basis. We expect that any that we do in the future, they are going to have unique features, and they are going to be tailored specifically to the lab and to the investor needs. I cannot give you an overarching look at what is the max and what each one is going to look like. But we will tell you at the right time, we have nothing to announce today.

Hock Tan, President and CEO, Broadcom Inc.: Next question.

Operator: Thank you. One moment for our next question. That will come from the line of Vivek Arya with Bank of America. Your line is open.

Vivek Arya, Analyst, Bank of America: Thanks for taking my question. Amy, I just wanted to clarify any impact on gross margins in 2027 and 2028, given this XPU mix and rise in memory cost. Hock, you mentioned the two frontier labs will be your largest AI customers. Even though Google continues to say they are supply constrained, so why are not they taking more? In many cases, these frontier labs depend on land, power, shell from their cloud service providers, sometimes NVIDIA-related entities. So how much of their use of silicon is truly their choice versus what their CSP or funding partner dictates? I am just curious, what gives you the certainty that they will give Broadcom that specific business in 2027 or 2028 when so much of their funding depends on other cloud service providers who might have a different view when it comes to the choice of silicon in that specific facility?

Hock Tan, President and CEO, Broadcom Inc.: I know. The best way to answer that, a couple of ways I have of answering that and a couple of points. Don’t forget with the rate of growth, these startups, and we’re talking about we have six customers, and we are creating these financial vehicles, as Amy described them, for just two of them. Not all. The other four customers are financially secure, stable enough to be able to fund it themselves. And we’re happy for them to do that and get them up to where they need to with sheer technology which we have in plentiful supply. With these two guys, Anthropic and OpenAI, you have two geniuses in the middle of outer Mongolia, say, and they need to go to college to fulfill where they want to.

We do what we can to help them, and part of it is creating sources of financing to help these companies with the leading-edge frontier models in the world be able to play in the same playing field and be able to offer these great technology products to the world. And that’s simply what we’re doing. It’s a great investment for us when you think about it, that every gigawatt of compute they deploy, they could achieve $30 billion of ARR, annual revenue per gigawatt. That’s a hell of a business model. So for us, that’s a great investment to focus on doing. To put that simply, that’s how we look at this simple thing. It makes economic sense for Broadcom to invest and enable these guys. Now, these guys are going to be hyperscalers in their own right.

So what they do is they want first party compute capacity, just as they want to create silicon that is very cost performance optimized, and they want to run their own data centers eventually first path, not even eventually, they want to run it as fast as they can. Short term, you’re right. They are using cloud services, third party services to deploy their models. Long term, we see these guys to be no different from a hyperscaler and will run their own data centers and be first party to offer AI, generative AI, APIs, assess models to the world. So we see that happening. It’s not speculation, it’s actually happening, and we are in the midst of enabling that.

Amie Thuener, Chief Financial Officer, Broadcom Inc.: I’m happy to take your gross margin question. First, I want to just make sure I correct what I said before, just to be super crisp. Gross margin for our Semiconductor Solutions segment was approximately 67% in Q3. To your question, gross margin really reflects revenue mix between both semiconductors and infrastructure software. And then within semiconductors, the product mix is reflected, as well as increasing memory content. As XPUs become a larger proportion of our total revenue mix, it impacts our margin. We guide one quarter at a time, so we’ll tell you each quarter what our margin’s going to look like.

Hock Tan, President and CEO, Broadcom Inc.: Yeah. It is not the first time we have told you guys that, because stop focusing on gross margin. It is what we are saying. Look at methods, operating margin at the end of the day. Because the growth in revenue far surpasses their growth in OPEX, operating spending to support their growth in revenue. So we have a lot of accretion, operating leverage, we call it, on operating margin. So we expect to be able to sustain operating margin even as mix of products dilutes the gross margin.

Operator: Thank you. One moment for our next question. That will come from the line of Tom O’Malley with Barclays. Your line is open.

Tom O’Malley, Analyst, Barclays: Thanks for taking the question. This one is for Hock and Charlie. You guys talked a bit about the Tomahawk Ultra. You are ramping a variety of ASICs over the next couple of years. How should we think about the attach rate of Tomahawk Ultra to the ASICs that you are developing? I would assume that, when a customer goes down the road with you for an ASIC, they would decide to use your networking as well. Maybe some kind of forecast as to how many of those customers are using your Tomahawk Ultra, how many are using Ethernet, just because I assume your penetration with your accelerators is going to lead to a lot of success on the networking side. Any help there would be great. Thank you.

Hock Tan, President and CEO, Broadcom Inc.: Go ahead, Charlie.

Charlie Kawwas, President, Semiconductor Solutions Group, Broadcom Inc.: Okay. Thank you, Hock. On the attach rate for scale up, today we are actually seeing customers who build XPUs with us deploy either Tomahawk 6, they used to deploy Tomahawk 5, now they are going to Tomahawk 6, and some of them are going to Tomahawk Ultra. If you look at where we are seeing XPUs and even GPUs, we are seeing scale-up solutions adopt both Tomahawk 6 and Tomahawk Ultra. The beauty and the reason why they are doing this, as Hock articulated earlier on, it is Ethernet based, which means it is open. Anybody can connect to it, especially with the standards that we have collaborated with the entire industry on. At this point in time, we are seeing it pretty much deployed in both XPU clusters and in some GPU clusters.

Operator: Thank you. One moment for our next question. That will come from the line of Will Stein with Truist Securities. Your line is open.

Will Stein, Analyst, Truist Securities: Great. Thanks for taking my question. Congrats on the good results and the very impressive longer term outlook you gave. Hock, I hope you can tell us a little about the constraints as it relates to land, power, and shell. You mentioned this a little earlier, but I wonder to what degree the outlook is sensitized to potential constraints in that area. Thank you.

Hock Tan, President and CEO, Broadcom Inc.: Good question, Will. Of course, we have to be realistic and when we provide our outlook, we not just look at what our end customer, one of those L Frontier models, just asks of us for compute capacity in the form of chips or in some cases even in form of racks. We are very engaged with each of them on how much LPS, land, power, and systems they have before we actually believe it will happen. This part on sites power shell has a long lead time. The construction project, you correctly indicate that. We do that. We do that, not development, but analysis with our customer, and we reflect that in the forecast outlook we are giving you today.

Will Stein, Analyst, Truist Securities: Thank you.

Operator: Thank you. One moment for our next question, and that will come from the line of Joshua Buchalter with TD Cowen. Your line is open.

Joshua Buchalter, Analyst, TD Cowen: Hey, guys. Thank you for taking my question. With XPU, I think you have $35 billion of the financing secured. As we think about the 10 gigawatts for Anthropic and the 5 for OpenAI in fiscal 2028, are you expecting most or all of this to be financed through the XPU? Can you give us any help on the timeline and hurdles required to secure financing as we look forward to those deployments getting secured? Thank you.

Hock Tan, President and CEO, Broadcom Inc.: Let me start broadly, and Amy will give you specifics. Not every site will be the same, because don’t forget, next 2 years, we’ll see things happen with Anthropic and OpenAI. It’s an open secret, Anthropic is well on its way to an IPO, and with that, its investment credit will change. OpenAI, we still don’t have less clarity, but it’s different. With that, let me pass it to Amy.

Amie Thuener, Chief Financial Officer, Broadcom Inc.: I think just to double down on that, I think in every scenario, our partners were going to be looking for financing from lots of different sources. In some cases, we may step in and help out if it makes sense to us and if it’s within our framework. In other cases, we may not. But we’re going to look at it case by case and evaluate the specific needs.

Joshua Buchalter, Analyst, TD Cowen: Thank you both.

Operator: One moment for our next question. That will come from the line of James Schneider with Goldman Sachs. Your line is open.

James Schneider, Analyst, Goldman Sachs: Thanks for taking my question. I was wondering if you could maybe address some of the other constraints that are impacting your outlook. You mentioned land, power, shell. Do you think that is the largest of the constraints that you face heading into fiscal 2027? Specifically, can you address any other supply chain constraints, whether it be memory, substrates, or other components that could be impacting your outlook, and to what extent you could expect those to get ameliorated? Thank you.

Hock Tan, President and CEO, Broadcom Inc.: Thank you, Jim. That’s a hell of a question, and you’re right in all counts. It’s a multidimensional issue. To get an AI data center deployed, we now are all more sensitive about, especially at scale, and we are now delivering at scale to our customers XPUs, AI data center built upon XPU computing accelerators. Land, power, and shell, as I indicated to a question with Will, is a big concern. More than a big concern, it dictates specific timing of when this capacity gets deployed and be available. But very much in the mix that we have to think about with our customers, and it’s a joint collaborative effort, not just one direction, is, you said it correctly, leading-edge silicon. Because for one, to get the chip produced and availability of those chips and the time it comes in.

Even deeper than that, we talk about substrates, which is a specific issue, which is leading us to build our own substrate capacity at scale in our factory in Singapore, jointly with one of our partners. Of course, we all know about memory, HBM memory, and beyond HBM memory, the system memory that goes into AI servers, which we don’t supply necessarily, but our customers have to secure, too. So all these are multidimensional problem coming from various sources, and depending on different times, each might become a bottleneck. It’s a constant interesting challenge as we work this through, which is why in some ways, I’m so glad we have only six customers to deal with.

Operator: Thank you. Our next question, that will come from the line of Vijay Rakesh with Mizuho. Your line is open.

Vijay Rakesh, Analyst, Mizuho: Yeah. Hi. Thanks, Hock and Amy. Just a quick question. Thanks for giving the visibility on FY 2027 and FY 2028 AI revenues. Just a quick question. As you go through subsequent generations of XPU, can you talk to how your dollar per gigawatt should improve into the subsequent XPU generations? Also, I saw your CapEx went up. Just wondering if you’re adding capacity on the EML CW indium phosphide side. Thanks.

Hock Tan, President and CEO, Broadcom Inc.: Well, Charlie, you want to take the CapEx issue particularly?

Charlie Kawwas, President, Semiconductor Solutions Group, Broadcom Inc.: On the CapEx side, as we have been sharing with you, Hock and I, for several quarters, we continue to invest in our factories. Substrate is what Hock talked about, which was actually going in production shortly. But also our EML CW and VCSEL factories, our indium phosphide factories, both in the U.S. as well as in Singapore, we are actually more than tripling them year-on-year. So we have already expanded the capacity for this year, and we are increasing it significantly for the next two years, and that is part of what you actually are seeing in CapEx.

Hock Tan, President and CEO, Broadcom Inc.: Yeah. And this one, I indicated in my remarks, too, which is demand for lasers, whether it is EML lasers, CW lasers, is far surpassing supply out there in the industry. So we are doing our part to double down actually on capacity, and with a fairly substantial share of this market. To us, in our interest, we enable this ecosystem of growth. On your earlier question of gigawatt, dollars per gigawatt, it is very interesting what you are saying. Because keep in mind something that is very interesting, too, which is, you are right. With every generation of XPU or GPU, the performance increases. And the silicon goes for the leading edge, more expensive to produce. And so ASPs go up per XPU and per GPU. But keep in mind, as they become higher performance, their power increase per chip, per XPU or GPU.

Which means there are less of it of a more advanced XPU in one gigawatt. So what we are seeing per gigawatt is in the range of less than $30 billion, $20 billion-$30 billion per gigawatt. And we expect that to be very sustaining in that level because the power of each chip goes up. So even as increase the price of the chip, the content in dollars is relatively stable. Just accept the fact that there is going to be a lot more gigawatts out there. But the dollars per gigawatt will remain in the $20 billion-$30 billion level of our content. But we have seen, and we expect to see an acceleration in the number of gigawatts just to address the exponential compute demand required by our customers.

Vijay Rakesh, Analyst, Mizuho: Got it. Thanks. Very interesting, Hock and Charlie. Thank you.

Operator: Thank you. That is all the time we have today for Q&A. I would now like to turn the call back over to GU for any closing remarks.

Jee Yu, Head of Investor Relations, Broadcom Inc.: Thank you, Cherie. This quarter, Broadcom will be presenting at the Goldman Sachs Communacopia & Technology Conference on Tuesday, September 8th. Broadcom currently plans to report its earnings for the fourth quarter and fiscal year 2026 after close of market on Wednesday, December 9th, 2026. A public webcast of Broadcom’s earnings conference call will follow at 2:00 P.M. Pacific. That will conclude our earnings call today. Thank you all for joining. Cherie, you may end the call.

Operator: Thank you all for participating. This concludes today’s program. You may now disconnect.