Just been looking at Broadcom's q1 fiscal 2026 earnings that dropped back in March, and the AI chip story is pretty wild. Their semiconductor revenues jumped 50% year-over-year like they guided, hitting that $12.3 billion mark. The real driver was those custom AI accelerators - XPUs - seeing massive demand for training generative AI models. AI revenues nearly doubled to $8.2 billion, which is insane growth.

But here's what caught my attention: despite the huge top-line numbers, their gross margins actually took a hit because these XPUs have lower margins than their traditional products. They were forecasting about a 100 basis point sequential decline, which makes sense when you're ramping production on lower-margin solutions to capture market share.

The infrastructure software side from their VMware acquisition also grew, though more modestly at around 2% year-over-year. The subscription model transition they're pushing seems to be working but not as explosively as the AI segment. Overall, AVGO's q1 performance showed the company riding the AI wave hard, but there's definitely a margin trade-off happening. Stock's still up solid over the year though.