Broadcom Inc.
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ITEM 1.BUSINESS
Overview
We are a global technology leader that designs, develops and supplies a broad range of semiconductor and semiconductor-based solutions and infrastructure software solutions. Our more than 60-year history of innovation dates back to our diverse origins from AT&T/Bell Labs, Lucent and Hewlett-Packard Company, and has evolved through acquisitions, including LSI Corporation, Broadcom Corporation, Brocade Communications Systems, Inc., CA, Inc., Symantec Enterprise Security, and VMware, Inc. (“VMware”). Over the years, we have assembled a large team of semiconductor and software design engineers around the world. We maintain design, product and software development engineering expertise and resources at locations primarily in the U.S., Asia, and Europe. We combine global scale, engineering depth, broad product portfolio, superior execution and operational focus to deliver category-leading semiconductor and infrastructure software solutions.
Business Strategy
Our strategy is focused on sustained technology leadership and developing category-leading solutions to deliver a comprehensive suite of innovative infrastructure technology products to the world’s leading business and government customers. We seek to achieve this through extensive internal research and development, as well as strategic acquisitions of businesses and technologies, to ensure our products retain their technology market leadership. This strategy results in a robust business model designed to drive diversified and sustainable operating and financial results.
Products and Markets
Semiconductor Solutions
Our semiconductor and semiconductor-based solutions include a broad portfolio of complex digital and mixed signal devices based on silicon wafers with complementary metal oxide semiconductor (“CMOS”) transistors, III-V based devices, network interface cards (“NICs”) and other modules, switches, subsystems and, in some cases, racks. Our solutions are used in a wide array of environments, end products and applications, such as enterprise and artificial intelligence (“AI”) data centers, servers and networking and connectivity equipment, as well as storage systems, home connectivity devices, set-top boxes (“STB”), broadband access, telecommunication equipment, wireless devices and base stations, factory automation, power generation and alternative energy systems, and electronic displays. We differentiate ourselves through our high-performance design and integration capabilities, and focus on developing semiconductor products for markets that require our high quality, leading technology and integrated performance semiconductor and semiconductor-based solutions.
Our semiconductor and semiconductor-based solutions also enable our customers to build and deploy AI data center infrastructure for their training and inference workloads and manage the movement of data across their AI network infrastructure based on open, flexible, standards-based Ethernet. In addition, our solutions enable accelerated compute and networking connectivity at scale, within and across AI server racks and across AI data center sites. Customers of these solutions are hyperscalers and companies with AI frontier models, as well as original equipment manufacturers (“OEMs”) and system integrators that develop servers, switches and racks deployed in large-scale AI data centers to run training and inference workloads. Our AI semiconductor solutions include custom accelerators or XPUs, Ethernet switching and routing silicon, Ethernet NICs, physical layer devices (“PHYs”) and optical components, as well as racks and systems based on our XPUs.
We offer our semiconductor and semiconductor-based solutions in five major end markets: Networking Connectivity, Wireless Device Connectivity, Servers and Storage Systems, Broadband and Industrial. Below is a description of our key solutions by end market and application.
Networking Connectivity. Our solutions manage the movement of data in data center, service provider and enterprise networking applications. We develop semiconductor products that enable accelerated compute and networking connectivity deployed in enterprise and AI data centers and service providers for their workloads. Our products offer an open, flexible, standards-based Ethernet NIC and switching solution to resolve connectivity bottlenecks in data centers, particularly in AI data centers where compute bandwidth and cluster sizes grow rapidly. The following products can be used for both AI and non-AI workloads and applications.
•Custom Silicon Solutions: We provide advanced technology and intellectual property (“IP”) platforms for customers to design and develop application specific integrated circuits (“ASICs”) for AI and high-performance computing, networking and storage applications. Our custom silicon solutions provide the platform to integrate embedded logic, high-bandwidth memory, serializer/deserializer technology, IP cores and processor cores using advanced packaging technologies. ASICs are custom products built to our individual customers’ specifications, such as our custom accelerators or XPUs, for hyperscalers, companies with AI frontier models and system integrators, and in some cases used in racks or systems.
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•Ethernet Switching & Routing: Ethernet is a ubiquitous interconnection technology that enables high-performance and cost-effective networking infrastructure. We offer a broad set of Ethernet switching and routing products that are optimized for enterprise and AI data center, service provider and enterprise networks. For our hyperscaler and other customers with AI frontier models, our high capacity, low-latency, switching silicon supports advanced protocols around virtualization and multi-pathing for data centers. Our Ethernet switching fabric technologies provide the ability to build highly scalable flat networks supporting tens of thousands of servers. Our service provider switch portfolio enables carrier networks to support prioritized delivery of data traffic in the wireless backhaul, access, aggregation and core of their networks. For enterprise networks, we offer product families with secure, encrypted switching capabilities and support lower power modes that comply with industry standards around energy efficient Ethernet.
•Ethernet NIC Controllers: Our Ethernet NIC controllers are designed for high-performance virtualization, intelligent flow processing, secure data center connectivity and machine learning.
•Physical Layer Devices: These devices are transceivers that enable the reception and transmission of Ethernet data packets over a physical medium such as copper wire or optical fibers. Our high-performance Ethernet transceivers are built upon a proprietary digital signal processing (DSP) communication architecture optimized for high-speed network connections and support the latest standards and advanced features, such as energy efficient Ethernet, data encryption and time synchronization. We also offer a range of automotive Ethernet products, including PHYs, switches and camera microcontrollers for in-vehicle connectivity and smart vision.
•Fiber Optic Components: We supply a wide array of optical components for the Ethernet networking, storage, and access, metro- and long-haul telecommunication markets. Our optical components enable the high-speed reception and transmission of data through optical fibers.
Wireless Device Connectivity Solutions. We provide leading edge connectivity solutions for the wireless device market. Our products include radio frequency (“RF”) front-end modules and filters, Wi-Fi/Bluetooth combination chips, custom touch controllers and inductive charging devices.
•RF Semiconductor Devices: Our devices selectively filter, as well as amplify and route, RF signals. Filters enable modern wireless communication systems to support a large number of subscribers simultaneously by ensuring that the multiple transmissions and receptions of voice and data streams do not interfere with each other. Our RF devices include multi-chip front-end modules that integrate transmit/receive switching and filtering functions for multiple frequency bands, filter modules and discrete filters, all using our proprietary commercial film bulk acoustic resonator (“FBAR”) filter technology. Our expertise in FBAR technology, amplifier design, and module integration enables us to offer industry-leading performance in cellular RF transceiver applications.
•Connectivity Solutions: Our solutions are designed for use in wireless devices including smartphones, tablets and wearable products. We offer a family of high performance, low power Wi-Fi chipsets, as well as Bluetooth silicon and software products. These solutions include combination chips that offer integrated Wi-Fi and Bluetooth functionality, which provides significant performance advantages over discrete solutions.
•Custom Touch Controllers: Our touch controllers process signals from touch screens in wireless devices.
•Inductive Charging ASICs: These products offer high efficiency and are highly integrated solutions for wireless and wearable devices.
Servers and Storage System Solutions. Our solutions enable secure movement of digital data to and from host machines, such as servers, personal computers and storage systems, to the underlying storage devices, such as hard disk drives (“HDD”) and solid-state drives (“SSD”).
•PCIe Switches: Our interconnect semiconductors support the peripheral component interconnect express (“PCIe”) communication standards in both AI and non-AI applications. PCIe is the primary interconnection mechanism inside modern computing systems.
•SAS & RAID Products: Our serial attached small computer system interface (“SAS”) and redundant array of independent disks (“RAID”) controller and adapter products enable secure and high-speed data transmission between a host computer, such as a server, and storage peripheral devices, such as HDD and SSD. RAID technology is a critical part of our server storage connectivity solutions as it provides protection against the loss of critical data resulting from HDD failures.
•Fibre Channel Products: We provide fibre channel host bus adapters that connect host computers such as servers to fibre channel storage area networking (“FC SAN”) products.
•HDD & SSD Solutions: We provide read channel-based system-on-chip (“SoC”) and preamplifiers that are the critical chips required to read, write and protect data. An HDD SoC is an integrated circuit (“IC”) that combines the functionality
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of a read channel, serial interface, memory and a hard disk controller in a small, high-performance, low-power and cost-effective package. Read channels convert analog signals that are generated by reading the stored data on the physical media into digital signals.
Our preamplifiers, which are complex, high-speed, mixed signal devices that enable writing and reading data to and from the HDD heads, interface with the SoC to provide the electronics data path in a HDD.
We also provide custom flash controllers that manage the underlying flash memory in SSDs, performing critical functions such as reading and writing data to and from the flash memory and performing error correction, wear leveling and bad block management.
Broadband Solutions. We provide solutions for enabling STBs and broadband access applications.
•Set-Top Box: We offer complete SoC platform solutions for cable, satellite, Internet Protocol television, over-the-top and terrestrial STBs. Our solutions enable global service providers to introduce new and enhanced technologies and services in STBs, including transcoding, digital video recording functionality, high definition video processing, increased networking capabilities, and added tuners to enable fast channel change and multiple simultaneous recordings.
•Broadband Access: We offer complete SoC platform solutions for digital subscriber line, cable, passive optical networking (“PON”) and wireless local area network for both consumer premise equipment (“CPE”) and central office deployments. Our CPE devices are used in broadband modems, residential gateways and Wi-Fi access points and routers. Our solutions enable global service providers to continue deploying next generation broadband access technologies across multiple standards, including G.fast, Data Over Cable Service Interface Specifications, PON and Wi-Fi to provide more bandwidth and faster speeds to consumers.
Industrial. We provide a broad variety of factory automation, renewable energy and automotive electronic solutions, including optocouplers, industrial fiber optics, industrial and medical sensors, motion encoders, light emitting diode devices, and Ethernet ICs. Our industrial products are used in a diverse set of applications, spanning industrial automation, power generation and distribution systems, medical systems and equipment, defense and aerospace, and vehicle subsystems including those used in electric vehicle powertrain, infotainment and advanced driver assistance systems.
Infrastructure Software
Our infrastructure software solutions help enterprises simplify their information technology (“IT”) environments. Many of the largest companies in the world, including most of the Fortune 500, and many government agencies rely on our infrastructure and security software solutions to modernize, optimize, and secure the most complex private cloud, hybrid cloud and edge environments. This enables scalability, agility, automation, insights, resiliency and security, making it easy for customers to run their mission-critical workloads. We also offer mission-critical FC SAN products and related software in the form of modules, switches and subsystems incorporating multiple semiconductor products.
We offer five major infrastructure software portfolios: Private Cloud, Mainframe Software, Cybersecurity, Enterprise Software and FC SAN Management. Below is a description of our key portfolio offerings.
Private Cloud Software Portfolio. Our portfolio delivers public cloud scale and agility with private cloud security, resilience and performance, and lower total cost of ownership as compared to native public cloud, providing customers with infrastructure, application and security modernization, private AI as a service and enhanced cyber resilient data.
•VMware Cloud Foundation (“VCF”):
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q (“Form 10-Q”) and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended November 2, 2025 (“fiscal year 2025”) included in our Annual Report on Form 10-K for fiscal year 2025 (“2025 Annual Report on Form 10-K”). This Form 10-Q contains forward-looking statements within the meaning of federal securities laws. These statements are indicated by words or phrases such as “anticipate,” “expect,” “estimate,” “seek,” “plan,” “believe,” “could,” “intend,” “will,” and similar words or phrases. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. These forward-looking statements may include our projected financial results or expectations regarding acquisitions, business strategies and models, and developments in technology, solutions and products. Such statements are based on current expectations, estimates, forecasts and projections of our industry performance and macroeconomic conditions, based on management’s judgment, beliefs, current trends and market conditions, and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Accordingly, we caution you not to place undue reliance on these statements. Material factors that could cause actual results to differ materially from our expectations include, but are not limited to, those disclosed under “Risk Factors” in Part II, Item 1A of this Form 10-Q, and in other documents we file from time to time with the Securities and Exchange Commission (the “SEC”). We undertake no intent or obligation to publicly update or revise any forward-looking statements for any reason, except as required by law.
Unless stated otherwise or the context otherwise requires, references to “Broadcom,” “we,” “our,” and “us” mean Broadcom Inc. and its consolidated subsidiaries.
Overview
We are a global technology leader that designs, develops and supplies a broad range of semiconductor and semiconductor-based solutions and infrastructure software solutions. Our semiconductor and semiconductor-based solutions include a broad portfolio of complex digital and mixed signal devices based on silicon wafers with complementary metal oxide semiconductor transistors, III-V based devices, network interface cards and other modules, switches, subsystems and, in some cases, racks. Our solutions are used in a wide array of environments, end products and applications, such as enterprise and artificial intelligence (“AI”) data centers, servers and networking and connectivity equipment, as well as storage systems, home connectivity devices, set-top boxes, broadband access, telecommunication equipment, wireless devices and base stations, factory automation, power generation and alternative energy systems, and electronic displays. Our infrastructure software solutions help enterprises simplify their information technology environments. Our customers rely on our infrastructure and security software solutions to modernize, optimize, and secure the most complex private cloud, hybrid cloud and edge environments. This enables scalability, agility, automation, insights, resiliency and security, making it easy for customers to run their mission-critical workloads. We also offer mission-critical fibre channel storage area networking (“FC SAN”) products and related software in the form of modules, switches and subsystems incorporating multiple semiconductor products.
We have two reportable segments: semiconductor solutions and infrastructure software. Our semiconductor solutions segment includes all of our semiconductor-based product lines and intellectual property (“IP”) licensing. Our infrastructure software segment includes our private cloud, mainframe software, cybersecurity and enterprise software portfolios, and our FC SAN business.
Quarterly Highlights
Highlights during the fiscal quarter ended May 3, 2026 include the following:
•We generated $10,493 million of cash from operations.
•We paid $3,092 million in cash dividends.
•We repurchased $600 million of common stock.
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Critical Accounting Estimates
The preparation of financial statements in accordance with generally accepted accounting principles in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. Our actual financial results may differ materially and adversely from our estimates. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. Those policies include revenue recognition, business combinations, valuation of goodwill and long-lived assets, and income taxes.
There were no significant changes in our critical accounting estimates during the two fiscal quarters ended May 3, 2026 compared to those previously disclosed in “Critical Accounting Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2025 Annual Report on Form 10-K.
Macroeconomic Factors
We are subject to risks and exposures from evolving macroeconomic conditions, including uncertainty and volatility in financial markets, geopolitical events, supply constraints, efforts of governments to stimulate or stabilize the economy and other unfavorable changes in economic conditions, as well as an increase in trade tensions and related tariffs with U.S. trading partners. While difficult to isolate and quantify, these risks and exposures may cause our net revenue to fluctuate significantly and disrupt supply chain operations, and we continuously monitor the broader impacts of these circumstances on our business, our supply chain and our results of operations.
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Results of Operations
Fiscal Quarter and Two Fiscal Quarters Ended May 3, 2026 Compared to Fiscal Quarter and Two Fiscal Quarters Ended May 4, 2025
The following tables set forth our results of operations for the periods presented:
Fiscal Quarter Ended | |||||||||||||||||||||||||
| May 3, 2026 | May 4, 2025 | May 3, 2026 | May 4, 2025 | ||||||||||||||||||||||
| (In millions) | (As a percentage of net revenue) | ||||||||||||||||||||||||
| Statements of Operations Data: | |||||||||||||||||||||||||
| Net revenue: | |||||||||||||||||||||||||
Products | $ | 16,892 | $ | 10,309 | 76 | % | 69 | % | |||||||||||||||||
Subscriptions and services | 5,295 | 4,695 | 24 | 31 | |||||||||||||||||||||
Total net revenue | 22,187 | 15,004 | 100 | 100 | |||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||||
Cost of products sold | 4,665 | 2,722 | 21 | 18 | |||||||||||||||||||||
Cost of subscriptions and services | 636 | 574 | 3 | 4 | |||||||||||||||||||||
Amortization of acquisition-related intangible assets | 1,461 | 1,483 | 7 | 10 | |||||||||||||||||||||
Restructuring charges | 10 | 28 | — | — | |||||||||||||||||||||
Total cost of revenue | 6,772 | 4,807 | 31 | 32 | |||||||||||||||||||||
| Gross margin | 15,415 | 10,197 | 69 | 68 | |||||||||||||||||||||
| Research and development | 2,995 | 2,693 | 13 | 18 | |||||||||||||||||||||
| Selling, general and administrative | 1,055 | 1,083 | 5 | 7 | |||||||||||||||||||||
| Amortization of acquisition-related intangible assets | 506 | 506 | 2 | 3 | |||||||||||||||||||||
Restructuring and other charges | 71 | 86 | — | 1 | |||||||||||||||||||||
| Total operating expenses | 4,627 | 4,368 | 20 | 29 | |||||||||||||||||||||
| Operating income | $ | 10,788 | $ | 5,829 | 49 | % | 39 | % | |||||||||||||||||
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| Two Fiscal Quarters Ended | |||||||||||||||||||||||||
| May 3, 2026 | May 4, 2025 | May 3, 2026 | May 4, 2025 | ||||||||||||||||||||||
| (In millions) | (As a percentage of net revenue) | ||||||||||||||||||||||||
| Statements of Operations Data: | |||||||||||||||||||||||||
| Net revenue: | |||||||||||||||||||||||||
Products | $ | 31,022 | $ | 20,452 | 75 | % | 68 | % | |||||||||||||||||
Subscriptions and services | 10,476 | 9,468 | 25 | 32 | |||||||||||||||||||||
Total net revenue | 41,498 | 29,920 | 100 | 100 | |||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||||
Cost of products sold | 8,706 | 5,417 | 21 | 18 | |||||||||||||||||||||
Cost of subscriptions and services | 1,274 | 1,152 | 3 | 4 | |||||||||||||||||||||
Amortization of acquisition-related intangible assets | 2,923 | 2,967 | 7 | 10 | |||||||||||||||||||||
Restructuring charges | 23 | 42 | — | — | |||||||||||||||||||||
Total cost of revenue | 12,926 | 9,578 | 31 | 32 | |||||||||||||||||||||
| Gross margin | 28,572 | 20,342 | 69 | 68 | |||||||||||||||||||||
| Research and development | 5,960 | 4,946 | 14 | 17 | |||||||||||||||||||||
| Selling, general and administrative | 2,074 | 2,032 | 5 | 7 | |||||||||||||||||||||
| Amortization of acquisition-related intangible assets | 1,013 | 1,017 | 3 | 3 | |||||||||||||||||||||
Restructuring and other charges | 174 | 258 | — | 1 | |||||||||||||||||||||
| Total operating expenses | 9,221 | 8,253 | 22 | 28 | |||||||||||||||||||||
| Operating income | $ | 19,351 | $ | 12,089 | 47 | % | 40 | % | |||||||||||||||||
We included upfront license revenue of $1,964 million and $3,719 million within products revenue for the fiscal quarter and two fiscal quarters ended May 3, 2026, respectively. We included the related costs, which were immaterial, in cost of products sold. To conform to the current period presentation, we reclassified $1,803 million and $3,775 million of upfront license revenue from subscriptions and services revenue to products revenue for the fiscal quarter and two fiscal quarters ended May 4, 2025, respectively. We also reclassified the related costs for the upfront license revenue, which were immaterial for the periods presented. See Note 2. “Revenue from Contracts with Customers” in Part I, Item 1. of this Form 10-Q for additional information.
Net Revenue
A relatively small number of customers account for a significant portion of our net revenue. Direct sales to one semiconductor solutions customer, which is a distributor, accounted for 42% of our net revenue for each of the fiscal quarter and two fiscal quarters ended May 3, 2026, and 29% of our net revenue for each of the fiscal quarter and two fiscal quarters ended May 4, 2025.
We believe aggregate sales to our top five end customers, through all channels, accounted for approximately 45% of our net revenue for each of the fiscal quarter and two fiscal quarters ended May 3, 2026 and 40% of our net revenue for each of the fiscal quarter and two fiscal quarters ended May 4, 2025. We expect to continue to experience significant customer concentration in future periods. The loss of, or significant decrease in demand from, any of our top five end customers could have a material adverse effect on our business, results of operations and financial condition.
From time to time, some of our key semiconductor customers place large orders or delay orders, causing our quarterly net revenue to fluctuate significantly. This is particularly true of our products used in AI and wireless applications as fluctuations may be magnified by the timing of customer deployments, as well as product launches. For infrastructure software, the relative volume of customer contracts signed with the right to terminate causes variations in revenue recognized in each period.
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The following tables set forth net revenue by segment for the periods presented:
| Fiscal Quarter Ended | Two Fiscal Quarters Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net Revenue by Segment | May 3, 2026 | May 4, 2025 | $ Change | % Change | May 3, 2026 | May 4, 2025 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Semiconductor solutions | $ | 15,009 | $ | 8,408 | $ | 6,601 | 79 | % | $ | 27,524 | $ | 16,620 | $ | 10,904 | 66 | % | |||||||||||||||||||||||||||||||||
| Infrastructure software | 7,178 | 6,596 | 582 | 9 | % | 13,974 | 13,300 | 674 | 5 | % | |||||||||||||||||||||||||||||||||||||||
| Total net revenue | $ | 22,187 | $ | 15,004 | $ | 7,183 | 48 | % | $ | 41,498 | $ | 29,920 | $ | 11,578 | 39 | % | |||||||||||||||||||||||||||||||||
| Fiscal Quarter Ended | Two Fiscal Quarters Ended | ||||||||||||||||||||||||
| Net Revenue by Segment | May 3, 2026 | May 4, 2025 | May 3, 2026 | May 4, 2025 | |||||||||||||||||||||
| (As a percentage of net revenue) | |||||||||||||||||||||||||
| Semiconductor solutions | 68 | % | 56 | % | 66 | % | 56 | % | |||||||||||||||||
| Infrastructure software | 32 | 44 | 34 | 44 | |||||||||||||||||||||
| Total net revenue | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||
Net revenue from our semiconductor solutions segment increased in the fiscal quarter and two fiscal quarters ended May 3, 2026 compared to the prior year fiscal periods due to strong demand for our networking solutions, primarily custom AI accelerators and AI networking products.
Net revenue from our infrastructure software segment increased in the fiscal quarter and two fiscal quarters ended May 3, 2026 compared to the prior year fiscal periods primarily due to strong demand for our VMware Cloud Foundation (“VCF”) product.
Gross Margin
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 and $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. The increases were primarily due to strong product demand for our AI-related semiconductor solutions.
As a percentage of net revenue, gross margin was 69% for each of the fiscal quarter and two fiscal quarters ended May 3, 2026, and 68% for each of the fiscal quarter and two fiscal quarters ended May 4, 2025. The increases were primarily due to the gross margin benefit from our net revenue growth, partially offset by a higher mix of semiconductor solutions net revenue, which has a lower gross margin than infrastructure software.
Research and Development Expense
Research and development expense increased $302 million, or 11%, and $1,014 million or 21%, for the fiscal quarter and two fiscal quarters ended May 3, 2026, respectively, compared to the prior year fiscal periods. The increases were primarily due to higher stock-based compensation.
Selling, General and Administrative Expense
Selling, general and administrative expense decreased $28 million, or 3%, and increased $42 million or 2% for the fiscal quarter and two fiscal quarters ended May 3, 2026, respectively, compared to the prior year fiscal periods. These modest changes principally result from two factors. In the current fiscal year periods, higher stock-based compensation was substantially offset by lower acquisition-related costs compared to the prior year fiscal periods.
Stock-Based Compensation Expense
During the second quarter of fiscal year 2025, we granted two-year time- and market-based restricted stock unit awards (the “Two-Year Equity Awards”), in lieu of our annual employee equity awards historically granted in the second quarter of each fiscal year. Each of the Two-Year Equity Awards vests on the same basis as two annual grants with staggered vesting start dates of March 15, 2025 and March 15, 2026 and successive four-year vesting periods. We recognize stock-based compensation expense related to these awards from the grant date through their respective vesting date, ranging from four to five years.
Total stock-based compensation expense was $2,092 million and $1,771 million for the fiscal quarters ended May 3, 2026 and May 4, 2025, respectively, and $4,268 million and $3,051 million for the two fiscal quarters ended May 3, 2026 and
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May 4, 2025, respectively. The increases were due to the full impact in the current year fiscal periods of the Two-Year Equity Awards granted during the second quarter of fiscal year 2025.
The following table sets forth the total unrecognized compensation cost related to unvested stock-based awards outstanding and expected to vest as of May 3, 2026. The remaining weighted-average service period was 3.0 years.
| Fiscal Year: | Unrecognized Compensation Cost, Net of Expected Forfeitures | ||||||
| (In millions) | |||||||
| 2026 (remainder) | $ | 4,078 | |||||
| 2027 | 7,235 | ||||||
| 2028 | 5,137 | ||||||
| 2029 | 2,873 | ||||||
| 2030 | 783 | ||||||
| Total | $ | 20,106 | |||||
Segment Operating Results
| Fiscal Quarter Ended | Two Fiscal Quarters Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
| Operating Income by Segment | May 3, 2026 | May 4, 2025 | $ Change | % Change | May 3, 2026 | May 4, 2025 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Semiconductor solutions | $ | 9,281 | $ | 4,806 | $ | 4,475 | 93 | % | $ | 16,784 | $ | 9,512 | $ | 7,272 | 76 | % | |||||||||||||||||||||||||||||||||
| Infrastructure software | 5,647 | 4,987 | 660 | 13 | % | 10,970 | 10,109 | 861 | 9 | % | |||||||||||||||||||||||||||||||||||||||
| Unallocated expenses | (4,140) | (3,964) | (176) | 4 | % | (8,403) | (7,532) | (871) | 12 | % | |||||||||||||||||||||||||||||||||||||||
| Total operating income | $ | 10,788 | $ | 5,829 | $ | 4,959 | 85 | % | $ | 19,351 | $ | 12,089 | $ | 7,262 | 60 | % | |||||||||||||||||||||||||||||||||
Operating income from our semiconductor solutions segment increased for the fiscal quarter and two fiscal quarters ended May 3, 2026 compared to the prior year fiscal periods due to strong demand for our networking solutions, primarily custom AI accelerators and AI networking products.
Higher operating income from our infrastructure software segment in the fiscal quarter and two fiscal quarters ended May 3, 2026 compared to the prior year fiscal periods was primarily due to strong demand for our VCF product.
Unallocated expenses include stock-based compensation expense, amortization of acquisition-related intangible assets, restructuring and other charges, acquisition-related costs, and other costs, which are not used in evaluating the results of, or in allocating resources to, our segments. Unallocated expenses increased 4% and 12% for the fiscal quarter and two fiscal quarters ended May 3, 2026, respectively, compared to the prior year fiscal periods due to higher stock-based compensation expense.
Non-Operating Income and Expenses
Interest expense. Interest expense was $776 million and $769 million for the fiscal quarters ended May 3, 2026 and May 4, 2025, respectively. The increase was due to a loss on debt extinguishment. Interest expense was $1,577 million and $1,642 million for the two fiscal quarters ended May 3, 2026 and May 4, 2025, respectively. The decrease was primarily due to an overall reduction in outstanding debt balances and debt refinancing activities.
Other income, net. Other income, net includes interest income, gains and losses on investments, foreign currency remeasurement and other miscellaneous items. Other income, net, was $118 million and $551 million for the fiscal quarter and two fiscal quarters ended May 3, 2026, respectively, and $25 million and $128 million for the fiscal quarter and two fiscal quarters ended May 4, 2025, respectively. Interest income increased compared to the prior year fiscal periods as a result of higher invested balances. In addition, for the two fiscal quarters ended May 3, 2026, other income, net included a $315 million gain from the reversal of excise tax charges on our acquisition of VMware, Inc. (“VMware”), as the final Inflation Reduction Act of 2022 regulations exempted purchases of common stock on acquisitions from excise tax.
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Provision for income taxes. The provision for income taxes was $820 million and $1,666 million for the fiscal quarter and two fiscal quarters ended May 3, 2026, respectively, compared to $120 million and $107 million for the fiscal quarter and two fiscal quarters ended May 4, 2025, respectively. The increase in the provision for income taxes in both the fiscal quarter and two fiscal quarters ended May 3, 2026, as compared to the prior year fiscal periods, was primarily due to higher income before income taxes.
Liquidity and Capital Resources
The following section discusses our principal liquidity and capital resources as well as our primary liquidity requirements and uses of cash. Our cash and cash equivalents are maintained in highly liquid investments with remaining maturities of 90 days or less at the time of purchase. We believe our cash equivalents are liquid and accessible.
Our primary sources of liquidity as of May 3, 2026 consisted of: (i) $19,628 million in cash and cash equivalents, (ii) cash we expect to generate from operations and (iii) available capacity under our $7.5 billion unsecured revolving credit facility. In addition, we may also generate cash from the sale of assets, and debt or equity financings from time to time.
Our short-term and long-term liquidity requirements primarily arise from: (i) working capital requirements, (ii) research and development and capital expenditure needs, (iii) cash dividend payments (if and when declared by our Board of Directors), (iv) interest and principal payments related to our $66,720 million of outstanding indebtedness with $2,252 million principal amounts payable within 12 months, (v) payment of income taxes, (vi) discretionary stock repurchases, and (vii) business acquisitions and investments we may make from time to time. Our ability to fund these requirements will depend, in part, on our future cash flows, which are determined by our future operating performance and, therefore, subject to prevailing global macroeconomic conditions and financial, business and other factors, some of which are beyond our control.
We believe that our cash and cash equivalents on hand, cash flows from operations and our revolving credit facility will provide sufficient liquidity to operate our business and fund our current obligations for at least the next 12 months. For additional information regarding our cash requirement from indebtedness, contractual commitments and backstops, see Note 6. “Borrowings,” Note 10. “Commitments and Contingencies” and Note 11. “Subsequent Events” in Part I, Item 1 of this Form 10-Q, as well as our disclosure in Part II, Item 5 of this Form 10-Q.
From time to time, we engage in discussions with third parties regarding potential acquisitions of, or investments in, businesses, technologies and product lines. Any such transaction, or evaluation of potential transactions, could require significant use of our cash and cash equivalents, or require us to increase our borrowings to fund such transactions. If we do not have sufficient cash to fund our operations or finance growth opportunities, including acquisitions, expansions of new business strategies and models, or unanticipated capital expenditures, our business and financial condition could suffer. In addition, we may agree to financial obligations, including backstops, or increase our exposure to credit or customer default risks to support our strategic initiatives or other corporate purposes. In such circumstances, we may seek to obtain new debt or equity financing. However, we cannot assure you that such additional financing will be available on terms acceptable to us or at all. Our ability to service our outstanding indebtedness and any other indebtedness we may incur will depend on our ability to generate cash in the future. We may also elect to issue additional debt or equity securities for reasons other than those specified above. From time to time, we manage our indebtedness through financings, redemptions, repayments, exchanges, tender offers and other transactions. Such transactions will depend on prevailing market conditions, our liquidity requirements, the terms of indentures, contractual restrictions and other factors.
Working Capital
Working capital increased to $23,351 million at May 3, 2026 from $13,059 million at November 2, 2025. The increase was primarily attributable to the following:
•Trade accounts receivable, net increased to $10,830 million at May 3, 2026 from $7,145 million at November 2, 2025 primarily due to higher semiconductor revenue, the timing of billings and lower receivables sold through factoring arrangements.
•Cash and cash equivalents increased to $19,628 million at May 3, 2026 from $16,178 million at November 2, 2025, primarily due to $18,753 million in net cash provided by operating activities, offset in part by $8,450 million of stock repurchases and $6,178 million of dividend payments.
•Inventory increased to $4,328 million at May 3, 2026 from $2,270 million at November 2, 2025 primarily to support higher expected shipments for custom AI accelerators.
•Other current assets increased to $7,427 million at May 3, 2026 from $5,980 million at November 2, 2025 primarily from higher software contract assets and prepaid taxes.
These increases in working capital were offset in part by the following:
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•Other current liabilities increased to $13,139 million at May 3, 2026 from $11,673 million at November 2, 2025 primarily from higher contract liabilities.
Capital Returns
| Two Fiscal Quarters Ended | |||||||||||||
| Cash Dividends Declared and Paid | May 3, 2026 | May 4, 2025 | |||||||||||
| (In millions, except per share data) | |||||||||||||
| Dividends per share to common stockholders | $ | 1.30 | $ | 1.18 | |||||||||
| Dividends to common stockholders | $ | 6,178 | $ | 5,559 | |||||||||
In April 2025, our Board of Directors authorized a stock repurchase program to repurchase up to $10 billion of our common stock through December 31, 2025, which was subsequently extended through December 31, 2026 and increased to $11 billion. In March 2026, our Board of Directors authorized a stock repurchase program to repurchase up to $10 billion of our common stock from time to time through December 31, 2026. During the two fiscal quarters ended May 3, 2026 and May 4, 2025, we repurchased and retired 25 million and 16 million shares for $8,450 million and $2,450 million, respectively. As of May 3, 2026, $10.1 billion of the authorized amount remained available for repurchase.
During the two fiscal quarters ended May 4, 2025, we paid $3,802 million in employee withholding taxes due upon the vesting of net settled equity awards and withheld 17 million shares from employees in connection with such net share settlements. In the current year fiscal period, we settled withholding taxes upon the vesting of employee equity awards using proceeds from the sale of a portion of the vested shares.
Cash Flows
| Two Fiscal Quarters Ended | |||||||||||||
| May 3, 2026 | May 4, 2025 | ||||||||||||
| (In millions) | |||||||||||||
| Net cash provided by operating activities | $ | 18,753 | $ | 12,668 | |||||||||
| Net cash used in investing activities | (323) | (307) | |||||||||||
| Net cash used in financing activities | (14,980) | (12,237) | |||||||||||
| Net change in cash and cash equivalents | $ | 3,450 | $ | 124 | |||||||||
Operating Activities
Cash flows from operating activities consist of net income adjusted for certain non-cash and other items and changes in assets and liabilities. The $6,085 million increase in cash provided by operations during the two fiscal quarters ended May 3, 2026 compared to the prior year fiscal period was primarily due to $6,191 million higher net income and $1,310 million higher non-cash adjustments primarily from higher stock-based compensation, offset in part by $1,416 million from changes in operating assets and liabilities.
Investing Activities
Cash flows from investing activities primarily consist of capital expenditures and proceeds and payments related to investments. The cash flows from investing activities during the two fiscal quarters ended May 3, 2026 were relatively flat compared to the prior year fiscal period as higher capital expenditures in the current year fiscal period was substantially offset by an increase in net proceeds from investments compared to the prior year fiscal period.
Financing Activities
Cash flows from financing activities primarily consist of proceeds and payments related to our borrowings, dividend payments, authorized stock repurchases, and employee withholding tax payments related to net settled equity awards. The $2,743 million increase in cash used in financing activities during the two fiscal quarters ended May 3, 2026 compared to the prior year fiscal period was primarily due to a $6,000 million increase in stock repurchases, offset in part by $3,802 million of employee withholding tax payments related to net settled equity awards in the prior year fiscal period.
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Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-04-10 | Velaga S. Ram | President, ISG | Sell | -8,000 | $370.52 | -$2,964,178 |
| 2026-04-09 | DELLY GAYLA J | Director | Sell | -1,000 | $358.31 | -$358,310 |
| 2026-04-08 | Kawwas Charlie B indirect | President, SSG | Sell | -10,000 | $345.23 | -$3,452,270 |
| 2026-04-08 | PAGE JUSTINE | Director | Sell | -2,018 | $353.00 | -$712,354 |
| 2026-04-09 | Velaga S. Ram | President, ISG | Sell | -17,260 | $352.12 | -$6,077,564 |
| 2026-04-08 | Velaga S. Ram | President, ISG | Sell | -12,955 | $352.02 | -$4,560,449 |
| 2026-03-25 | SAMUELI HENRY indirect | Director | Sell | -781,967 ×16 | $319.71 | -$250,000,302 |
| 2026-03-17 | Brazeal Mark David | Chief Legal & Corp Affairs Ofc | Sell | -50,488 ×10 | $321.60 | -$16,236,990 |
| 2026-03-16 | Brazeal Mark David | Chief Legal & Corp Affairs Ofc | Sell | -33,194 ×9 | $326.10 | -$10,824,704 |
| 2026-03-17 | Kawwas Charlie B | President, SSG | Sell | -39,116 ×10 | $321.61 | -$12,579,953 |
| 2026-03-16 | Kawwas Charlie B | President, SSG | Sell | -25,718 ×8 | $326.10 | -$8,386,722 |
| 2026-03-17 | Spears Kirsten M. | CFO & Chief Accounting Officer | Sell | -36,292 ×10 | $321.60 | -$11,671,572 |
| 2026-03-16 | Spears Kirsten M. | CFO & Chief Accounting Officer | Sell | -23,862 ×8 | $326.09 | -$7,781,144 |
| 2026-03-17 | Velaga S. Ram | President, ISG | Sell | -38,841 ×10 | $321.60 | -$12,491,272 |
| 2026-03-16 | Velaga S. Ram | President, ISG | Sell | -25,538 ×8 | $326.10 | -$8,327,831 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-09-09 10-Q expected by 2026-09-11 (in 90 days)
- ~2026-12-17 10-K expected by 2026-12-30 (in 189 days)
- ~2027-03-10 10-Q expected by 2027-03-12 (in 272 days)
- ~2027-06-08 10-Q expected by 2027-06-10 (in 362 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-06-09 10-Q Quarterly Report
- 2026-06-03 8-K Earnings Release; Other Events; Financial Statements and Exhibits
- 2026-04-06 8-K Other Events
- 2026-04-02 8-K Officer/Director Change
- 2026-03-11 10-Q Quarterly Report
- 2026-03-04 8-K Earnings Release; Other Events; Financial Statements and Exhibits
- 2026-03-02 8-K Officer/Director Change
- 2026-01-13 8-K Other Events; Financial Statements and Exhibits
- 2025-12-18 10-K Annual Report
- 2025-12-11 8-K Earnings Release; Other Events; Financial Statements and Exhibits
- 2025-09-29 8-K Other Events; Financial Statements and Exhibits
- 2025-09-10 10-Q Quarterly Report
- 2025-09-10 S-4 Registration (Merger)
- 2025-09-10 S-4 Registration (Merger)
- 2025-09-10 8-K Other Events; Financial Statements and Exhibits