Key Highlights

  • Total stock-based compensation was $2.092 billion in Q2 FY2026 and $4.268 billion in H1 FY2026.
  • SBC represents approximately 9.4% of Q2 Revenue of $22.187 billion — a material cost that non-GAAP reporting excludes entirely.
  • GAAP Net Income of $9.310 billion versus non-GAAP net income of $12.074 billion in Q2 — a 30% difference driven primarily by SBC and Amortisation exclusions.
  • GAAP diluted EPS was $1.91 versus non-GAAP diluted EPS of $2.44 in Q2 FY2026 — a 28% premium for non-GAAP reporting.
  • SBC grew 18% year-over-year from $1.771 billion in Q2 FY2025 to $2.092 billion in Q2 FY2026, faster than the 9% growth in the non-GAAP share count.

One of the most durable disputes in Equity analysis is the appropriate treatment of stock-based compensation. The non-GAAP consensus — endorsed by most technology management teams and accepted by many institutional investors — holds that SBC is a non-cash charge that does not affect operating performance and should be excluded from profit metrics. The dissenting view is that SBC is real compensation paid in a form that dilutes existing shareholders and should be treated as a genuine cost.

For Broadcom Inc. (Nasdaq: AVGO), this is not an academic debate. Total SBC in Q2 FY2026 was $2.092 billion. In H1 FY2026, SBC totalled $4.268 billion. These are large numbers, and how an investor accounts for them materially affects the Earnings/">Quality of Earnings being assessed.

The GAAP vs Non-GAAP Gap

In Q2 FY2026, Broadcom reported GAAP net income of $9.310 billion and non-GAAP net income of $12.074 billion. The difference of $2.764 billion is accounted for primarily by SBC ($2.092 billion) and after the partial offset of non-GAAP tax adjustments. On a per-share basis, GAAP diluted EPS was $1.91 versus non-GAAP diluted EPS of $2.44 — a 28% difference. Investors evaluating Broadcom on a non-GAAP basis are adding back $2.09 billion of real employee compensation to reported profits each quarter.

The Dilution Mechanics

The dilution effect of SBC is visible in the share count. The non-GAAP diluted share count in Q2 FY2026 was 4,940 million versus the GAAP diluted count of 4,876 million — a difference of 64 million shares. Broadcom spent $8.45 billion repurchasing shares in H1 FY2026, a meaningful portion of which offsets SBC dilution. Investors should consider whether Buybacks partially serving to offset SBC dilution represent genuine Capital return to shareholders.

The Balanced Assessment

Broadcom's true economic earnings lie between the GAAP and non-GAAP figures. Amortisation of Acquisition intangibles can reasonably be added back as a non-Cash Accounting charge. SBC should be treated as a real cost. Adjusting Q2 non-GAAP net income of $12.074 billion by removing the SBC benefit of $2.092 billion gives adjusted earnings of approximately $9.982 billion — above the GAAP figure (which over-states tax burden in non-GAAP terms) but well below the full non-GAAP number. This is the starting point for serious quality-adjusted earnings analysis.

Disclaimer: This article is for informational purposes only and does not constitute financial advice or Investment recommendation. All data sourced from Broadcom Inc. Q2 FY2026 earnings release dated June 3, 2026. Past performance is not indicative of future results. Investors should conduct their own Due Diligence.