Broadcom (NASDAQ:AVGO) Revenue Up 29%, AI Up 106%, A Strong AI Quarter

Big AI Revenue, Bigger Cash Generation

Broadcom had a very strong start to Q1 FY26, with total revenue reaching $19.3 billion, up 29% from $14.0 billion a year ago.

What this tells us is that AI and semiconductor demand is still running hard. We have already seen that with Nvidia, and now Broadcom is showing many of the same characteristics.

What stands out even more is that profitability is expanding faster than revenue. That is a very strong signal. It shows clear operating leverage and suggests the business is scaling efficiently as demand rises.

Adjusted EBITDA came in at $13.0 billion, up 30%, while free cash flow reached $8.0 billion. To us, that highlights just how powerful Broadcom’s model is. It is generating enormous cash while staying far more asset-light than many other mega cap tech names that are still spending heavily to chase growth.

The AI side of the business was especially impressive. AI semiconductor revenue surged 106% to $8.4 billion for the quarter, driven by custom AI accelerators and AI networking solutions.

Semiconductor solutions now make up 65% of total revenue, up from 55% a year ago. That shift matters because it shows Broadcom is becoming even more exposed to the strongest part of the market, while also deepening its position in high margin AI infrastructure.

When we step back, this was not just a strong quarter. It was another sign that Broadcom is scaling into the AI cycle with real momentum, rising profitability, and serious cash generation.

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A Mega Cap AI Winner With Real Cash Flow Power

What we really like to see here is the stability in Broadcom’s operating performance.

Gross margin expanded to 68%, which tells us the company still has strong pricing power while also improving its cost structure as AI product demand keeps rising.

Operating income grew to $8.6 billion, up 37%, which is another strong signal of operating leverage. Revenue is moving higher, and costs are starting to stabilise, which is exactly what we want to see in a business scaling this well.

Asset Light, Cash Heavy, and Winning in AI

But in our view, the real competitive advantage that sets Broadcom apart from many other mega cap tech names is how little capital it needs to keep growing.

Capex was only $250 million, which is remarkably low for a business producing this level of growth. That is a big reason free cash flow was so strong, reaching 41% of revenue. It shows Broadcom is not just growing fast, it is converting that growth into real cash.

We can also see demand strength in the working capital trends. Accounts receivable increased by $1.3 billion and inventory rose by $692 million, which points to strong customer demand, even if some of that also reflects timing around collections and fulfilment.

Profit, Dividends, and Buybacks

Another strong signal is what management did with that cash. The company launched a $10 billion buyback program and repurchased $7.8 billion of shares, paid down $3 billion of debt, and still increased its dividend to $0.65 per share.

To us, that is a very strong combination. It shows confidence in the business, balance sheet strength, and a management team that is generating enough cash to invest, return capital, and reduce leverage all at the same time.

Concentration Risk Is Rising

What investors should be watching closely is that Broadcom is becoming a far more concentrated AI story.

That has clearly helped growth, but it also means the business is becoming more exposed to the cyclical nature of semiconductor demand. If AI infrastructure spending slows, that can weigh on both revenue growth and profitability much faster than the market expects. Broadcom’s Q1 results showed just how central AI has become, with AI semiconductor revenue up 106% to $8.4 billion.

We also need to remember that Broadcom still carries a meaningful debt load from past acquisitions, so continued strong cash generation matters. The good news is the business is producing that cash right now, with Q1 adjusted EBITDA of $13.1 billion, or 68% of revenue, which gives it a strong buffer to keep deleveraging if execution stays on track.