NEW YORK — Buried in the notes of Broadcom’s latest quarterly filing is a number the company did not put in a press release: $164.6 billion of orders that customers have firmly committed to, and, in some cases, cannot walk away from.
The phrasing is the part that matters. Broadcom tells the Securities and Exchange Commission that certain of its multi-year customer contracts, including contracts where customers do not have termination rights, contain firmly committed amounts. Those obligations totalled approximately $164.6 billion at the start of May, and the company expects to recognise about 30 per cent of them as revenue within twelve months.
On Monday the stock closed down 2.63 per cent at $358.76, leaving it 27.5 per cent below its 52-week high.
A company holding roughly $165 billion of committed orders, in a market that cannot make enough of what it sells, does not obviously belong 27 per cent below its high. That gap is the story.
AVGO Stock Today: What the Quarter Actually Showed
| Line item | Q2 FY2026 ($m) | Q2 FY2025 ($m) | Change |
|---|---|---|---|
| Products | 16,892 | 10,309 | +64% |
| Subscriptions and services | 5,295 | 4,695 | +13% |
| Total net revenue | 22,187 | 15,004 | +48% |
| Total cost of revenue | 6,772 | 4,807 | +41% |
| Gross margin | 15,415 | 10,197 | +51% |
| Gross margin as a share of revenue | 69% | 68% | +1 pt |
| Research and development | 2,995 | 2,693 | +11% |
| Figures as reported in Broadcom’s quarterly report. Percentage changes are Eastern Herald’s calculation from the reported amounts. Broadcom does not report a separate audited revenue line for artificial-intelligence semiconductors, so any AI-specific revenue figure comes from management commentary rather than the financial statements. | |||
Product revenue grew 64 per cent while subscriptions and services, the software half of the business acquired with VMware, grew 13. The chip business is doing the work, and doing it without giving up margin: gross margin widened to 69 per cent of revenue from 68, even as cost of revenue rose 41 per cent.
The Backlog Is the Real Disclosure
In the quarterly report Broadcom filed with the SEC, the remaining performance obligation note carries three facts worth separating.
The committed total is approximately $164.6 billion. Some of it sits under contracts where the customer has no right to terminate, which Broadcom states explicitly. And the figure includes obligations under a long-term contract for custom AI accelerators entered during that same quarter.
About 30 per cent is expected to convert to revenue over the next twelve months, which is roughly $49 billion, against $41.5 billion of revenue in Broadcom’s first two fiscal quarters combined.
Broadcom also notes that it excludes from this figure any software, subscription or service contract where the customer can terminate for convenience, while observing that such customers generally do not exercise that right. In other words the $164.6 billion is the conservative number, not the promotional one.
Broadcom Is the Way to Bet Against Nvidia
Broadcom does not compete with Nvidia by making a better general-purpose accelerator. It competes by making the chip a customer designs for itself. Its business is application-specific integrated circuits, custom silicon built for a single buyer, and its buyers are the largest computing companies in the world.
OpenAI’s first custom processor, the Jalapeno inference chip, was designed with Broadcom. The two companies have announced a collaboration covering ten gigawatts of OpenAI-designed accelerators, with deployments targeted to start in the second half of this year and complete by the end of 2029. Meta’s custom Training and Inference Accelerator, the MTIA line, is also a Broadcom partnership, with an initial gigawatt of deployment and multiple gigawatts planned for 2027 and beyond.
The engineering behind it is not incremental. Broadcom’s 3.5D packaging platform integrates more than 6,000 square millimetres of silicon and up to twelve stacks of high-bandwidth memory in a single package, and the company began shipping the first 2-nanometre custom compute part built on it in February.
Note also where the twelve memory stacks come from. Broadcom’s custom accelerators are among the largest consumers of exactly the memory that Micron has already sold out for 2026 and that SanDisk has contracted through fiscal 2028. The market sold all three on Monday.
Committed Orders Are Becoming the Industry’s Currency
Broadcom’s disclosure is not an isolated one, and read alongside its peers it describes a change in how this industry sells.
Microsoft’s commercial remaining performance obligation reached $678 billion, with a weighted average duration of about 2.3 years and, by coincidence, the same 30 per cent expected within twelve months. Meta has moved $10.8 billion into escrow under multi-year infrastructure purchase agreements that do not release until 2028 at the earliest.
Suppliers are demanding commitment and buyers are giving it. What used to be a purchase order is now a multi-year contract, sometimes without a termination right, sometimes with cash set aside against it. That is what a genuine capacity shortage looks like in the paperwork, and it is more persuasive than any forecast.
Why a Company With $164.6 Billion Booked Falls Anyway
Because Monday was not about Broadcom. Every large chip name fell, memory hardest, and the Philadelphia Semiconductor Index was down 2.42 per cent through the afternoon, sitting 21.8 per cent below its high. Nvidia reports on Wednesday, Jackson Hole opens Thursday, inflation data lands Friday, and crowded positions get trimmed before all three.
| Company | Close | Session | Week | Below 52-week high |
|---|---|---|---|---|
| Broadcom (AVGO) | $358.76 | -2.63% | -8.58% | -27.5% |
| Micron Technology (MU) | $910.43 | -5.83% | -10.01% | -27.5% |
| Advanced Micro Devices (AMD) | $456.75 | -3.49% | -9.73% | -21.9% |
| Intel (INTC) | $87.26 | -3.12% | -15.68% | -38.7% |
| Nvidia (NVDA) | $208.48 | -2.91% | -7.35% | -11.9% |
| Texas Instruments (TXN) | $258.94 | -2.05% | -8.47% | -22.5% |
| Closing prices. The weekly change is measured Friday to Friday. Distance from the 52-week high is Eastern Herald’s calculation from the closing price. Every one of the six fell, and Broadcom’s decline was the second smallest of them, which is most of the answer to the question in this heading. The selling was not a verdict on Broadcom’s order book. It was the entire complex being sold at once, and the memory names, which have the tightest supply and the most contracted revenue, were sold hardest of all. | ||||
Our Nasdaq column for Monday found roughly half of the largest Nasdaq companies higher on the day. This was a sector being sold, not a market. The Dow closed up 0.26 per cent while it happened.
What This Column Cannot Tell You Yet
We cannot tell you what Broadcom earns on a custom accelerator. The filing reports revenue split between products and subscriptions, and gross margin at group level, but it does not break out margin on the custom silicon business separately from networking or from software. Custom design work is generally lower margin than merchant silicon, and without the disclosure it is not possible to say how much of that 69 per cent gross margin the AI business is actually carrying.
We also cannot say how much of the $164.6 billion belongs to any one customer. Broadcom names no counterparty and gives no concentration figure, so a book heavily weighted to a single buyer and one spread across a dozen would look identical in this disclosure. Given that the largest of those buyers are themselves financing their purchases through debt and escrow arrangements, the identity of the counterparties is not a small detail, and it is the one thing this otherwise unusually candid note leaves out.
Related Posts
