AVGO · 10-Q · 2026Q2 · Full report
Gross Margin Drivers
Broadcom Inc. · 2026-06-09 · Importance 70 · Surprise 56 · No source text
Gross margin increased in absolute terms to $15,415 million for the quarter and $28,572 million for the two fiscal quarters ended May 3, 2026 (up from $10,197 million and $20,342 million, respectively, a year earlier), driven primarily by strong product demand for AI-related semiconductor solutions. Gross margin percentage was 69% for the current quarter and two-quarter periods versus 68% in the prior-year periods; management attributes the percentage improvement mainly to revenue growth, partially offset by a higher mix of semiconductor solutions (which carries a lower gross margin than infrastructure software). The AI product mix (custom AI accelerators and AI networking) is the key driver of gross margin expansion in the period. Changes in product vs. software mix and higher semiconductor revenue are central to margin dynamics.
Key facts
- Gross margin was $15,415 million for the fiscal quarter ended May 3, 2026 compared to $10,197 million for the fiscal quarter ended May 4, 2025. source
- Gross margin was $28,572 million for the two fiscal quarters ended May 3, 2026 compared to $20,342 million for the two fiscal quarters ended May 4, 2025. source
- Gross margin as a percentage of net revenue was 69% for each of the fiscal quarter and two fiscal quarters ended May 3, 2026. source
- Gross margin as a percentage of net revenue was 68% for each of the fiscal quarter and two fiscal quarters ended May 4, 2025. source
- The increases in gross margin were primarily due to strong product demand for our AI-related semiconductor solutions. source
- Cost of products sold for the fiscal quarter ended May 3, 2026 was $4,665 million. source
- Cost of products sold for the two fiscal quarters ended May 3, 2026 was $8,706 million. source
- Cost of subscriptions and services for the two fiscal quarters ended May 3, 2026 was $1,274 million. source
Impact estimates
| metric | direction | stage | expected | basis |
|---|---|---|---|---|
| margin | positive | realized | +1.0% | Gross margin as a percentage of net revenue was 69% for each of the fiscal quarter and two fiscal quarters ended May 3, 2026. |
| margin | positive | realized | — | Gross margin was $15,415 million for the fiscal quarter ended May 3, 2026 compared to $10,197 million for the fiscal quarter ended May 4,… |
| margin | positive | realized | — | Gross margin was $28,572 million for the two fiscal quarters ended May 3, 2026 compared to $20,342 million for the two fiscal quarters… |
| operating_income | negative | realized | — | Cost of products sold for the fiscal quarter ended May 3, 2026 was $4,665 million. |
| operating_income | negative | realized | — | Cost of products sold for the two fiscal quarters ended May 3, 2026 was $8,706 million. |
| operating_income | negative | realized | — | Cost of subscriptions and services for the two fiscal quarters ended May 3, 2026 was $1,274 million. |