There’s a fear quietly spreading through enterprise software circles — that agentic AI is coming for the business model. Why pay for software licenses when AI can write, replace, or automate what that software does?
It’s a legitimate question. And 65-year-old Broadcom (AVGO) CEO Hock Tan just answered it with unusual directness.
We’re not seeing it.
Tan offered the remark during Broadcom’s fiscal second-quarter earnings call on June 3, according to a report compiled by Investing.com.
If anything, he argued, the AI infrastructure boom is actively accelerating parts of the software business. VMware, in particular, is seeing stronger demand as enterprises expand computing capacity to support AI workloads.
Tan wasn’t alone in that view. Earlier on June 1, 2026, Nvidia (NVDA) CEO Jensen Huang pushed back on what he called the “Saaspocalypse” narrative at his Computex keynote in Taiwan.
“A lot of people have said, ‘Jensen, AI is coming. Agentic AI is coming. Therefore, all of the software companies are going to go out of business,'” Huang said in a The Wall Street Journal report. “I said it’s exactly the opposite.”
The earnings backing up Tan’s confidence were remarkable.
Also Read: Broadcom Inc. Latest News
Broadcom Inc. Q2 2026 results were historic
The Q2 fiscal 2026 numbers were genuinely extraordinary by almost any measure.
Key Broadcom Q2 2026 highlights:
- Revenue: $22.187 billion, up 48% year over year (YoY)
- AI semiconductor revenue: $10.8 billion, up 143% YoY, above the company’s own forecast
- Non-GAAP diluted EPS: $2.44, above the consensus estimate of $2.39
- Adjusted EBITDA: $15.244 billion, or 69% of revenue, up 52% YoY
- Free cash flow: $10.262 billion, or 46% of revenue, a record
- Non-GAAP operating margin: 67.3%, up 200 basis points YoY
Source: Broadcom Inc. Q2 Fiscal Year 2026 Results and earnings call transcript
CFO Kirsten Spears called it plainly in the company statement: “Q2 consolidated revenue grew 48% year-over-year to a record $22.2 billion. Adjusted EBITDA increased 52% year-over-year to a record $15.2 billion.”
And yet, after the earnings day closed on June 3, up 0.49% at $479.23, AVGO shares plunged 13% in after-hours trading to $413.21, according to Yahoo Finance.
My review of the data suggests the market’s reaction wasn’t about what Broadcom delivered, but about what the Q3 guidance implied for the valuation math at current price levels.
Bloomberg via Getty Images
Why Tan’s VMware comments matter more than they first appear
The “we’re not seeing it” quote deserves more attention than it got amid the earnings fireworks.
The concern in the market is structural. As agentic AI becomes more capable, enterprises may need less traditional software infrastructure. If AI agents can autonomously navigate, configure, and optimize systems, the argument goes, the hypervisor layer becomes less critical over time.
Tan rejected that logic and explained why. Broadcom’s infrastructure software sits as close to the hardware as software can get.
The hypervisor is the foundational layer that virtualizes compute resources. AI workloads don’t eliminate the need for that layer. They increase it.
“As I reported, the high volume of core count of CPUs selling together with GPUs, it’s driving some accelerated growth of our VMware business,” Tan said during the earnings call.
“We expect that to continue for the next multiple quarters as this demand picks up.”
Related: HSBC massively revamps Broadcom’s stock price target
The mechanism is straightforward. Every GPU deployed for AI needs a compute environment to run in. VMware provides that environment at scale.
More AI infrastructure means more VMware. Not less. Huang‘s comments from the Computex event reinforced the same thesis from a different angle: AI creates demand for software tools, but it doesn’t replace them.
Broadcom’s Q3 guidance points to a step-change in AI revenue
The Q3 outlook is where the numbers become almost difficult to process. Broadcom guided Q3 fiscal 2026 revenue of approximately $29.4 billion, up 84% YoY, with non-GAAP operating margin stable at approximately 67% and adjusted EBITDA at approximately 68% of revenue, according to a company statement.
I also identified a most striking number. Tan guided AI semiconductor revenue specifically to grow over 200% YoY in Q3 to $16.0 billion. In fact, that is nearly double Q2’s already-record $10.8 billion figure, according to the Broadcom statement and the earnings call.
Related: Bank of America resets Broadcom stock price target after earnings
Here is another angle I crunched on the sequential jump. Going from $10.8 billion to $16.0 billion in a single quarter represents roughly 48% sequential growth in AI revenue alone. That’s the kind of acceleration that reflects genuine demand, not channel fill.
The primary driver remains custom application-specific integrated circuits (ASICs) — chips Broadcom designs specifically for hyperscaler AI workloads — alongside AI networking hardware.
Tan described “increasing demand for custom AI accelerators and AI networking” as the core engine, according to the Broadcom statement.
What the stock performance actually signals about AVGO
AVGO shares have returned 49.60% over the past year and 400.30% over three years, according to Yahoo Finance data as of June 5, 2026. The S&P 500 returned 24.32% and 72.77% over those same periods.
The after-hours selloff, steep as it was at nearly 14%, followed a pattern that investors in high-multiple AI stocks have seen before.
When a stock is priced for perfection, even record results can disappoint if the guidance doesn’t imply the kind of upside that justifies the premium.
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Broadcom’s gross margin slipped slightly, down 230 basis points YoY to 77.1%, according to the earnings commentary data. That’s a reflection of the hardware-heavy AI revenue mix. That’s a number worth watching as AI semiconductor revenue continues scaling toward $16 billion in Q3.
The VMware and software business, meanwhile, appears insulated from the disruption narrative Tan addressed directly. With the hypervisor at the foundation of every AI compute deployment, the software headwind the market feared may never materialize, at least not the way the bears imagined.
Tan closed the loop. “We do not expect to see any impact on software products.”
After $10.3 billion in free cash flow and 143% AI revenue growth in a single quarter, you might need to take that statement seriously.
Related: 5-star analyst revamps Broadcom stock price target after earnings
