Broadcom Results: AI Soars by 106%, but Software Division Stagnates at +1%
Broadcom released its first-quarter fiscal 2026 results on Thursday, showcasing a record revenue growth of 29% to $19.3 billion, driven entirely by its artificial intelligence semiconductors which surged by 106% year-over-year. However, this growing dependence on AI reveals a often overlooked downside: the infrastructure software division, once a diversification engine, is stagnating at +1% growth.
Explosive Growth in AI Semiconductor Segment
The figures released on Wednesday, March 4 confirm the explosion of the AI semiconductor segment at Broadcom. Q1 AI revenue reached $8.4 billion, up 106% year-over-year, even surpassing internal forecasts. For the second quarter, management anticipates an even more pronounced acceleration, projecting AI revenue of $10.7 billion. At the group level, total revenue reached $19.3 billion in Q1, up 29%, with a spectacular Q2 guidance of $22 billion, representing a 47% year-over-year increase. The semiconductor segment revenue jumped 52% to $12.5 billion, accelerating its share of the business mix to 65% of the total.
Software Division Shows Minimal Growth
However, the press release reveals a telling detail: while the AI semiconductors were breaking growth ceilings, the infrastructure software division only advanced by 1% to reach $6.8 billion in Q1. This division, which accounted for 45% of revenue a year ago, now only represents 35% of the mix. Broadcom thus sees its diversification eroding in favor of an almost exclusive exposure to the cyclical demand for AI accelerators. The free cash flow remains impressive at $8.0 billion (41% of revenue), but cash reserves contracted to $14.2 billion from $16.2 billion at the end of the previous quarter, partly due to a $7.8 billion share buyback program deployed in Q1.
Profitability Remains Strong
In terms of profitability, adjusted EBITDA reached $13.1 billion in Q1, representing 68% of revenue, up 30% year-over-year. Management confirms maintaining this 68% margin into Q2 despite the anticipated revenue acceleration. GAAP net income stands at $7.3 billion (+34%), while diluted EPS is $1.50 on a GAAP basis. Broadcom announced on Thursday a new $10 billion share buyback program running through the end of 2026, extending its capital return policy to shareholders. The quarterly dividend is maintained at $0.65 per share. Management provided no annual guidance beyond Q2, leaving investors facing an uncertain horizon regarding the sustainability of this spectacular growth.
