GOOGL Wavers; AVGO's Solo Pitch Won't Satisfy

AVGO released its Q3 FY2026 results (quarter ended Jul 2026) after the U.S. market close in the early hours of Sep 3 Beijing time:

1. AI biz: the core of the semi segment. AVGO’s AI revenue was $16.7bn this quarter, up $5.9bn QoQ and ahead of the Street (~$16.0bn), driven by volume ramps of Google and Anthropic’s TPUv7. Large caps like Google also raised 2026 capex outlooks, and Anthropic’s deliveries will accelerate from 2H. Mgmt guides next-quarter AI revenue of $21.7bn, +$5.0bn QoQ.

2. AVGO outlook: Q4 FY2026 revenue ~$34.8bn, below consensus (~$35.5bn). Mgmt expects non-GAAP OPM of 66% in Q4 FY2026. Given$Broadcom(AVGO.US) provided annual AI revenue outlooks, quarterly guidance matters somewhat less. Post-earnings, mgmt guided AI revenue for FY2026–FY2028 to $58bn (prev. $56bn), $115bn (prev. $100bn) and $230bn.

For FY2027, mgmt still points to 10GW capacity. The Street generally models $130–150bn revenue on 10GW, so the company’s stance remains muted. FY2028’s $230bn on 20GW is solid, but with 10GW tied to Anthropic, the market discounts this portion, especially as Anthropic’s ARR slope has recently slowed.

3. Operating metrics: revenue was $29.6bn this quarter, +86% YoY and in line with consensus (~$29.5bn). QoQ growth of $7.4bn was mainly driven by AI. GPM was 69%. Ex acquisition amortization and restructuring, Adj. GPM was 74%, down 200bps QoQ as lower-margin ASIC mix increased, pressuring headline margins.

4. AVGO’s biz splits into Semis and Infra Software.

① Semis: $20.8bn this quarter, +$5.8bn QoQ, with AI as the primary driver. Ex-AI, non-AI revenue was $4.2bn, +5% YoY, with broadband and server/storage up, offset by wireless softness.

② Infra Software: $8.75bn, +29% YoY, supported by VMware Private AI Cloud and VCF workload repatriation, i.e., enterprise AI tailwinds. Previously, growth was driven by VMware integration and the shift from perpetual licenses to subs. With M&A effects fading, future growth will hinge on VMware subs-driven organic growth.

5. Opex: core operating expenses (R&D + S&M) were $3.9bn this quarter, stable. With strong top-line growth, the core opex ratio fell to ~13%. Over the past two years, AVGO has clearly increased SBC-related spend (now nearly half of core opex). Ex-SBC, core opex was $2.1bn this quarter, down $80mn QoQ.

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Dolphin Research view: Long-dated guide has blemishes; intensifying competition clouds visibility

AVGO delivered revenue and GPM roughly in line with expectations. Top-line strength was largely from AI; Adj. GPM of 74% fell 200bps QoQ after excluding acquisition amortization and restructuring. Structurally, rising mix of lower-margin ASICs keeps pressure on margins medium term.

The market’s focus is AI: AI revenue was $16.7bn this quarter, +$5.9bn QoQ. Mgmt guides next quarter AI revenue to $21.7bn, +$5.0bn QoQ, slightly ahead of consensus ($21.5bn).

AVGO sold off harder in the prior pullback, beyond sector beta, on competitive risks. Google remains the key customer, but Google has begun a 'backup supplier' plan: ① split TPUv8 into dual versions and add MTK to the supply chain; ② took Marvell warrants and signed a custom silicon agreement with Marvell.

After last earnings, mgmt lifted FY2027 shipments to 10GW but kept revenue guide at '>$100bn'. Whether $15bn or $20bn per GW, 10GW implies well above $100bn, yet mgmt did not raise, which the market read as a confidence gap, triggering a 12% one-day drop post print.

NVIDIA just guided 70%+ growth for FY2028 (CY2027). Facing MTK and Marvell pressure, investors want AVGO to lift its FY2027 (CY2027) AI guide more decisively.

On the call, mgmt raised AI guides to $58bn (from $56bn) for this year and '>$115bn' (from $100bn) for FY2027, and provided a FY2028 outlook of $230bn (20GW).

Since most houses model FY2027 AI revenue at ~$130–150bn, the $115bn still reads as cautious or sandbagging. For FY2028’s 20GW (~$230bn), half is tied to Anthropic, a smaller-cap CSP proxy with weaker funding capacity, and with ARR slope slowing lately, the market discounts this leg.

Outside the print, the market is watching the following at AVGO:

a) Customers & capex: AVGO has 6 custom XPU customers (unchanged), including Google TPU, Meta MTIA, Anthropic, OpenAI and two undisclosed. Google and Meta have long been the main custom ASIC buyers; Anthropic and OpenAI start contributing from 2H.

Street-implied split of FY2027’s 10GW: Google (3–4GW), Anthropic (5GW), OpenAI (1–2GW), Meta (1–2GW). Google and Meta both raised full-year capex again post results, supporting demand visibility. For Anthropic and OpenAI, investors focus on ARR slopes; Anthropic’s recent slowdown raises uncertainty.

b) AI chips & competition: NVIDIA remains dominant, while AVGO is a challenger, but now faces 'fires in the backyard'. The AVGO + Google TPU combo emerged as a rival to NVIDIA, yet Google is uneasy with a single-source tie-up, pulling MTK into TPUv8 and engaging with Marvell. Focus has shifted from 'threat to NVIDIA' to 'can AVGO defend TPU share?'

Marvell’s recent Google agreement defines eligible revenue as Google’s custom ASICs, including AI inference accelerators, storage controllers, NICs, memory interfaces and near-memory compute. This clearly overlaps with AVGO’s custom TPU/ASIC relationship with Google.

c) Financing platform: AVGO and Apollo/Blackstone’s credit insurance units formed the AI XPV Platform, targeting >20GW by 2028 using AVGO XPUs and networking, customized for frontier labs (explicitly Anthropic and OpenAI). The first $35bn tranche, led by Apollo, funds Anthropic’s >1GW deployment at Fluidstack sites.

Mechanics: Apollo/Blackstone finance the chip purchases from AVGO and deliver to cash-constrained frontier labs. Revenue is real for AVGO, but ultimate repayment depends on Anthropic/OpenAI’s commercial success (ARR).

While 'chips-only' keeps AVGO cleaner, the collateral is a custom XPU for a single client’s single model stack, with little resale value (vs. NVIDIA’s general-purpose GPUs). If residual value is zero, the next funding round may vanish, injecting uncertainty into the 20GW ramp.

At a ~$1.75tn mkt cap, AVGO trades at ~16x post-tax core OP for FY2027 by our math (assumptions: revenue CAGR +76%, Adj. GPM 70%, tax 11%). Initially viewed as a share taker vs. NVIDIA, AVGO’s multiple was richer. Now, facing MTK and Marvell, it has become the 'target', with the multiple compressed to ~16x PE.

Key concerns: intensifying competition could threaten share at Google; and reliance on frontier labs (Anthropic/OpenAI) means a slower ARR slope raises uncertainty and risks a 'funding loop' trap.

Overall, execution met expectations, but investors care more about AI outlook. Mgmt raised FY2027 AI guidance and added FY2028, yet the guide still has issues: $115bn for FY2027 is below consensus, and the FY2028 20GW uplift is concentrated in Anthropic and OpenAI.

Unlike NVIDIA’s general GPUs, AVGO’s custom ASICs have narrow collateral use, elevating tail risk. If Anthropic or OpenAI’s ARR slows, orders could be cut and broader partnership roadmaps impaired.

Higher AI guides help, but may not fully restore confidence as Anthropic exposure is viewed as uncertain. Until concerns ease, the multiple likely stays near ~15x.

Detailed data and charts on AVGO’s results from Dolphin Research:

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Related AVGO coverage by Dolphin Research:

Hot take:

Jul 7, 2026 Hot Take: AVGO: Can’t catch NVIDIA, now hunted by 'smaller rivals'?

Earnings:

Jun 4, 2026 Trans: AVGO (Trans): Chips-only strategy; customers diversifying supply chains

Jun 4, 2026 Earnings Take: AVGO: Titans vs. Titans — ASIC camp splitting?

Mar 5, 2026 Trans: AVGO (Trans): FY2027 AI revenue >$100bn; XPU partnerships sustainable

Mar 5, 2026 Earnings Take: AVGO: AI at full throttle — a stiffer rival to NVIDIA?

Dec 12, 2025 Trans: AVGO (Trans): Anthropic adds $10bn+; $73bn orders as a floor

Dec 12, 2025 Earnings Take: AVGO: Challenging NVIDIA, but the vanguard blinked first?

Sep 5, 2025 Trans: AVGO (Trans): AI revenue growth to exceed 60% next fiscal year

Sep 5, 2025 Earnings Take: NVIDIA, AMD cool off? AVGO grabs the AI baton

Jun 6, 2025 Trans: AVGO (Trans): AI revenue to sustain 60% growth into 2026

Jun 6, 2025 Earnings Take: AVGO: ASIC growth 'misfires' — hiccup or opportunity?

Mar 7, 2025 Trans: AVGO (Trans): ASIC customers expand from 2 to '3+4'; no M&A for now

Mar 7, 2025 Earnings Take: Marvell stumbles, NVIDIA in a lull? AVGO as the anchor

Risk disclosure and statement: Dolphin Research disclaimer and general disclosure