AVGO’s Gross Margin Contracts Sequentially: Is Growth Getting Harder?

Broadcom’s AVGO gross margin has contracted sequentially in the trailing four quarters. In the first quarter of fiscal 2026, the company reported a gross margin of 77% compared with 77.9% reported in the fourth quarter of fiscal 2025, 78.4% reported in the third quarter of fiscal 2025, and 79.4% posted in the second quarter of fiscal 2025. On a year-over-year basis, fiscal first quarter gross margin contracted 210 basis points (bps) despite a 30 bps increase in the lower margin Semiconductor Solution segment gross margin. Gross margin for Infrastructure Software was 93% in the reported quarter.

Broadcom now expects second-quarter fiscal 2026 gross margin to be 77%, flat sequentially. Unfavorable product mix due to higher Semiconductor Solution revenues in comparison to Infrastructure Software is expected to hurt gross margin in the near term. AVGO’s Semiconductor business benefits from strong AI revenues, which surged 106% year over year in the first quarter of fiscal 2026….