Release Date: June 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Broadcom Inc (AVGO, Financial) reported a record total revenue of $15 billion for fiscal Q2 2025, marking a 20% year-on-year increase.
- AI semiconductor revenue reached over $4.4 billion, up 46% year-on-year, continuing a trajectory of nine consecutive quarters of strong growth.
- Infrastructure software revenue grew by 25% year-on-year to $6.6 billion, driven by the successful integration of VMware and strong VCF sales.
- The company forecasts AI semiconductor revenue to grow by 60% year-on-year in Q3, marking the tenth consecutive quarter of growth.
- Broadcom Inc (AVGO) achieved a gross margin of 79.4% in Q2, better than originally guided, due to favorable product mix.
Negative Points
- Non-AI semiconductor revenue was down 5% year-on-year, with sectors like industrial and wireless experiencing declines.
- Free cash flow as a percentage of revenue was impacted by increased interest expenses from debt related to the VMware acquisition.
- The company anticipates a sequential decline in consolidated gross margin by approximately 130 basis points in Q3 due to a higher mix of XPUs.
- Broadcom Inc (AVGO) faces uncertainty regarding potential impacts from changing export control regulations.
- The transition of VMware customers to a subscription model is ongoing and expected to take another 1.5 years to complete.
Q & A Highlights
Q: Can you provide more color on the inference commentary and whether it's more of the XPU side or connectivity side that's driving growth?
A: We are seeing increased deployment of XPUs next year, more than we originally thought, along with more networking. It's a combination of both, and we are seeing much more inference now. - Hock Tan, President and CEO
Q: Given the positive growth in your AI business, do you see Broadcom sustaining the year-over-year growth rate into fiscal 2026?
A: Yes, the growth trajectory we are seeing in fiscal 2025 is expected to sustain into fiscal 2026. We have improved visibility and updates from our hyperscale partners on their AI cluster deployments. - Hock Tan, President and CEO
Q: Can you discuss the AI networking performance and the role of Tomahawk in future growth?
A: AI networking goes hand-in-hand with AI accelerator cluster deployments. The increased density in scale-up scenarios has surprised us, maintaining AI networking at about 40% of AI revenue. There is strong interest in the new Tomahawk switches, which are expected to drive future growth. - Hock Tan, President and CEO
Q: How do you view the competitive landscape with new protocols like NVLink, and what is Broadcom's position on Ethernet for AI networking?
A: Ethernet remains the open standard and preferred choice for networking. We believe Ethernet will continue to prevail as it has in traditional networking, and there is no need to create new standards for tasks that can be accomplished with Ethernet. - Hock Tan, President and CEO
Q: Can you comment on the progress of converting VMware customers to the subscription model?
A: Most VMware contracts are typically three years, and we are more than halfway through the renewals. We expect the conversion process to continue for at least another year to 1.5 years. - Hock Tan, President and CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
