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Broadcom CEO Says Agentic AI Wont Undermine Software Business Amid Record Q2 Earnings
Broadcom Inc. (AVGO) announced record‑setting results for its fiscal second quarter on June 3, 2026, and its chief executive, Hock Tan, used the earnings call to address a growing industry concern: that agentic artificial intelligence (AI) could erode the need for traditional enterprise software.
During the call, Tan said, “We’re not seeing it.” He explained that the AI infrastructure boom is actually driving demand for parts of the software business, citing VMware as an example. VMware, which Broadcom acquired in November 2023 for $69 billion, has seen stronger demand as enterprises expand computing capacity to support AI workloads.
Tan’s remarks echo comments from Nvidia CEO Jensen Huang, who, at the Computex keynote in Taiwan on June 1, 2026, dismissed the “Saaspocalypse” narrative that AI would eliminate software companies. Huang said the opposite, noting that AI is creating new opportunities for software firms.
Broadcom’s Q2 fiscal 2026 results were among the company’s best in history. Revenue reached $22.187 billion, a 48 percent increase year‑over‑year (YoY). AI semiconductor revenue alone was $10.8 billion, up 143 percent YoY and above the company’s own forecast. Non‑GAAP diluted earnings per share were $2.44, surpassing the consensus estimate of $2.39. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose to $15.244 billion, or 69 percent of revenue, up 52 percent YoY. Free cash flow hit $10.262 billion, 46 percent of revenue, a record for the company. Non‑GAAP operating margin was 67.3 percent, up 200 basis points YoY.
Chief financial officer Kirsten Spears highlighted the growth, stating, “Q2 consolidated revenue grew 48 percent year‑over‑year to a record $22.2 billion. Adjusted EBITDA increased 52 percent year‑over‑year to a record $15.2 billion.”
The earnings announcement was followed by a sharp market reaction. AVGO shares closed up 0.49 percent at $479.23 on the day of the release, but fell 13 percent in after‑hours trading to $413.21, according to Yahoo Finance. Analysts suggest the decline reflects investor concerns about the company’s Q3 guidance and the valuation implications at current price levels, rather than the strength of the Q2 results.
The structural concern Tan referenced relates to the potential impact of agentic AI on enterprise software. If AI agents can autonomously navigate, configure, and optimize systems, the traditional hypervisor layer that VMware provides could become less critical over time. Broadcom’s own statements indicate that hyperscalers are accelerating capital expenditures for AI infrastructure, positioning the company to benefit from the growing demand for AI chips and related software.
Broadcom’s AI semiconductor segment has been a key driver of growth. Earlier in the year, the company secured a $10 billion custom‑chip deal with Anthropic, a major AI startup, underscoring the demand for specialized hardware to support large‑scale AI workloads.
The company’s acquisition of VMware has also been a strategic move to strengthen its software portfolio. VMware’s hypervisor ESXi and other virtualization products remain widely used in data centers, and the company’s End‑User Computing division was sold to KKR and rebranded as Omnissa in 2023.
In summary, Broadcom reported a record‑high Q2 fiscal 2026, with significant growth in AI semiconductor revenue and strong operating metrics. CEO Hock Tan’s statement that agentic AI is not threatening the software business was delivered amid a broader industry debate. The market’s reaction to the earnings and subsequent after‑hours decline highlights investor focus on guidance and valuation rather than on the company’s performance. Broadcom’s continued investment in AI infrastructure and its software offerings positions it to capture demand from hyperscalers and other large enterprises as AI adoption accelerates.
The company will release its Q3 fiscal 2026 guidance in the coming weeks. Investors and analysts will be watching for updates on AI chip sales, VMware licensing trends, and the company’s capital allocation strategy to assess the long‑term impact of agentic AI on its business model.
During the call, Tan said, “We’re not seeing it.” He explained that the AI infrastructure boom is actually driving demand for parts of the software business, citing VMware as an example. VMware, which Broadcom acquired in November 2023 for $69 billion, has seen stronger demand as enterprises expand computing capacity to support AI workloads.
Tan’s remarks echo comments from Nvidia CEO Jensen Huang, who, at the Computex keynote in Taiwan on June 1, 2026, dismissed the “Saaspocalypse” narrative that AI would eliminate software companies. Huang said the opposite, noting that AI is creating new opportunities for software firms.
Broadcom’s Q2 fiscal 2026 results were among the company’s best in history. Revenue reached $22.187 billion, a 48 percent increase year‑over‑year (YoY). AI semiconductor revenue alone was $10.8 billion, up 143 percent YoY and above the company’s own forecast. Non‑GAAP diluted earnings per share were $2.44, surpassing the consensus estimate of $2.39. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose to $15.244 billion, or 69 percent of revenue, up 52 percent YoY. Free cash flow hit $10.262 billion, 46 percent of revenue, a record for the company. Non‑GAAP operating margin was 67.3 percent, up 200 basis points YoY.
Chief financial officer Kirsten Spears highlighted the growth, stating, “Q2 consolidated revenue grew 48 percent year‑over‑year to a record $22.2 billion. Adjusted EBITDA increased 52 percent year‑over‑year to a record $15.2 billion.”
The earnings announcement was followed by a sharp market reaction. AVGO shares closed up 0.49 percent at $479.23 on the day of the release, but fell 13 percent in after‑hours trading to $413.21, according to Yahoo Finance. Analysts suggest the decline reflects investor concerns about the company’s Q3 guidance and the valuation implications at current price levels, rather than the strength of the Q2 results.
The structural concern Tan referenced relates to the potential impact of agentic AI on enterprise software. If AI agents can autonomously navigate, configure, and optimize systems, the traditional hypervisor layer that VMware provides could become less critical over time. Broadcom’s own statements indicate that hyperscalers are accelerating capital expenditures for AI infrastructure, positioning the company to benefit from the growing demand for AI chips and related software.
Broadcom’s AI semiconductor segment has been a key driver of growth. Earlier in the year, the company secured a $10 billion custom‑chip deal with Anthropic, a major AI startup, underscoring the demand for specialized hardware to support large‑scale AI workloads.
The company’s acquisition of VMware has also been a strategic move to strengthen its software portfolio. VMware’s hypervisor ESXi and other virtualization products remain widely used in data centers, and the company’s End‑User Computing division was sold to KKR and rebranded as Omnissa in 2023.
In summary, Broadcom reported a record‑high Q2 fiscal 2026, with significant growth in AI semiconductor revenue and strong operating metrics. CEO Hock Tan’s statement that agentic AI is not threatening the software business was delivered amid a broader industry debate. The market’s reaction to the earnings and subsequent after‑hours decline highlights investor focus on guidance and valuation rather than on the company’s performance. Broadcom’s continued investment in AI infrastructure and its software offerings positions it to capture demand from hyperscalers and other large enterprises as AI adoption accelerates.
The company will release its Q3 fiscal 2026 guidance in the coming weeks. Investors and analysts will be watching for updates on AI chip sales, VMware licensing trends, and the company’s capital allocation strategy to assess the long‑term impact of agentic AI on its business model.
