The numbers from Broadcom’s first quarter were hard to ignore. Revenue rose 29% year over year to $19.3 billion, and the company said it expects second-quarter revenue to jump 47% from a year earlier to about $22.0 billion, per the Broadcom Q1 FY2026 earnings release.

Adjusted EBITDA came in at $13.1 billion, or 68% of revenue, according to the same Broadcom investor release. That kind of margin gives the stock a sturdier base than the usual AI story trading it would otherwise have to lean on.

The real driver, though, is AI semiconductors. Broadcom said AI-related semiconductor revenue reached $8.4 billion in Q1, up 106% year over year, driven by custom AI accelerators and AI networking, and guided that business to $10.7 billion in Q2, according to the March release.

That pace matters because it has not shown up as a one-quarter fluke. Broadcom reported $5.2 billion in AI revenue in Q3 FY2025, up 63% year over year, and about $6.2 billion in Q4 FY2025, up 74%, per Broadcom’s Q4 FY2025 release from December 2025. Investors will want to know whether tonight’s print confirms the trend or simply keeps pace with it.

Broadcom’s valuation support does not come from growth alone. In Q1, the company returned $10.9 billion to shareholders through $3.1 billion in dividends and $7.8 billion in buybacks, and it authorized a new $10 billion repurchase program through December 2026, per the Q1 FY2026 release.

The cash generation is just as striking. Broadcom reported $8.0 billion in free cash flow in Q1, equal to 41% of revenue, after spending only $250 million on capital expenditures, according to the same Broadcom filing. That is the sort of conversion rate that makes a premium easier to justify, even if the market is never especially polite about the price it asks in return.

Broadcom has also raised its dividend for 15 consecutive years. The FY2026 annual target of $2.60 per share is a 10% increase from the prior year, set in December 2025 in the Q4 FY2025 release.

What has held up through the last several quarters is consistency. Adjusted EBITDA margins were 67% in Q3 FY2025, 68% in Q4 FY2025, and 68% again in Q1 FY2026, according to Broadcom’s quarterly investor releases and the Q1 FY2026 filing. It is not glamorous, but it does the job.

VMware is where the story gets messier. Broadcom has eliminated perpetual licenses, pushed customers into a more costly subscription model and longer-term contracts, raised the minimum licensed cores per order from 16 to 72, required buyers to take a full bundle under the Virtual Cloud Foundation banner, cut the reseller base, and concentrated attention on the top 10,000 customers out of a customer base of more than 300,000, according to Network World.

The financial effect has been real. VMware revenue was up 13% year over year in Q1, and recurring VMware-based revenue growth is on pace for a 19% increase, Network World reported this week.

Broadcom has also been explicit about where the conversion has worked best. Hock Tan said in March that more than 87% of the company’s 10,000 largest customers have adopted VCF, and he tied the growth to converting enterprise users from perpetual vSphere licenses to the full VCF software stack subscription, per Network World.

The other side of that picture is less comforting. A survey commissioned by CloudBolt found that 87% of respondents are actively reducing their VMware footprint, while only 4% have finished a full migration, Network World reported. The survey is directional, not definitive, but it is hard to miss the tension.

There is also the matter of time. Gartner analyst Paul Delory has said it could take a midsized organization two years and a large enterprise up to four years to untangle its dependence on VMware, according to Network World. That is a long runway for Broadcom, and a long runway for customers trying to decide whether to stick with the platform or start the slog out of it.

The bar is straightforward, even if the answer is not. Broadcom’s own Q2 guidance called for revenue of about $22.0 billion and adjusted EBITDA of roughly 68% of projected revenue, per the Q1 FY2026 release. Meeting those targets would probably not be enough on its own for a stock already hovering near record territory.

What investors are really looking for is confirmation that AI is still accelerating, not merely holding steady. The market will likely focus on whether AI semiconductor revenue reaches or tops the $10.7 billion guide, and whether management points to more of the same in the next quarter.

VMware adds the second test. Investors will want to hear whether Broadcom thinks the VCF conversion story can keep traveling beyond the biggest customers, or whether the company is leaning mostly on a locked-in base that has limited room left to surprise.

Network World summed up the risk this week: Broadcom has delivered for investors in the near term, but sustaining momentum without further alienating its customer base will determine whether this high-stakes bet pays off in the long run.

For now, the financial foundation is solid. Broadcom has posted record results in recent quarters, kept margins in a tight band, and turned a lot of revenue into cash. Tonight’s report will say whether AI keeps doing the heavy lifting, and whether VMware remains a source of strength or starts looking more like a very expensive argument.