Broadcom (AVGO) 1 Jun 232023 Q2 Earnings call transcript

Welcome to Broadcom Inc.’s Second Quarter Fiscal Year 2023 Financial Results Conference Call.

At this time, for opening remarks and introductions, I would like to turn the call over to Ji Yoo, Head of Investor Relations of Broadcom Inc.

Thank you, operator, and good afternoon, everyone.

Joining me on today’s call are Hock Tan, President and CEO; Kirsten Spears, Chief Financial Officer; and Charlie Kawwas, President, Semiconductor Solutions Group.

Broadcom distributed a press release and financial tables after the market closed, describing our financial performance for the second quarter fiscal year 2023.

receive Investors you at section not information obtain broadcom.com. did the from of you a may copy, the If Broadcom’s website

replay the Investors This and of Broadcom’s be being is section for of audio accessed through conference can the year webcast one website. call call an live

providing business well XXXX the for results, During be our comments, environment. as second our third and Hock of prepared as commentary guidance the regarding quarter will quarter, Kirsten details fiscal year

the end after our prepared We questions will of comments. take

Please release filings refer specific and with on cause differ today the that made call. the statements to our this factors our on materially to press forward-looking our from actual results SEC recent for risk the could information

certain A included press non-GAAP to financial measures In financial call to to tables during addition on today’s results. reconciliation measures primarily is GAAP will reports basis. and in non-GAAP the Comments made today’s attached refer U.S. GAAP release. Broadcom non-GAAP between a our reporting,

to now the I’ll turn Hock. call over

Thank you, joining us you, today. thank Ji, for everyone, and

$X.X growth fiscal Semiconductor more the QX year-on-year. was as offset billion, grew revenue $X.X XXXX, Infrastructure to business. year-on-year net Brocade stable software softness billion. consolidated X% Software X% to our X% the And revenue up $X.X in increased Solutions core in year-on-year in billion than So,

believe be XX% in XX% Having this, about opportunity revenue it represents business. could our are start this Now, fiscal was this Put only we strong to from benefiting over we fiscal And want revenue XX% AI customers. how as in our this said about this by semiconductor 'XX. of I semiconductor of call, I all a know of in hear you today 'XX. deployment from it perspective, generative

And quarter. 'XX a In entering 'XX. quarterly our as fact, infrastructure a we time over by fiscal where are up. continued we the expect to year in trajectory course a semiconductor are exceed IT But, third in broadly our revenue seeing this QX, we providers 'XX, the while hyperscale, doubles you revenue exceed fiscal in infrastructure the enterprise quarter that driven we're know, by and fiscal we for also of in, the $X billion And and to hold diversified demand company. service well software was

Following increases five overall QX have over the experienced growth the to XX% year-on-year. IT quarters, year-on-year meet-teens demand we past moderated percentage in infrastructure

As continue to with have ship to you, we across we manage on very-disciplined we hand, on quarters. than ecosystem. quarter over level days exited our consistent told past we We of inventory maintained with demand. XX end-user how only the a We what always remain inventory eight less the have

Now, give our more let end on markets. you color me

Let me begin with wireless.

a wireless saw XG into As X-K in and wireless collaboration OEM with American connectivity our you North filing, a on multiyear recent cutting-edge components. entered we

Our remains strategic engagement in term. deep, supply and long and technology

single revenue the platform, just revenue revenue. X% seasonally, revenue ramp sequentially. wireless we seasonal be down represented of $X.X we the XX% down low begin as declined QX of Wireless to digits and In QX, next-generation billion XX% year-on-year. wireless of up expect phone quarter-on-quarter semiconductor

it We however, expect around will year-on-year. flattish remain

and of from and Jericho two, as was for revenue. semiconductor continued $X.X of XX% drivers here. There offload deployment up infrastructure are and networking. growth platforms guidance, with to One, hyperscalers growth as switching billion routing on in merchant line well Moving representing AI our was revenue in workloads enterprise year-on-year, compute in traditional Tomahawk our Networking two XX% networking. strong and strength telcos; for

at XXX and XX,XXX by for open on resources. the architecture disaggregated an running large-scale networks, support AI optimizing AI Ethernet per Broadcom’s based switching performance demanding speaking costly X Tomahawk of portfolio And gigabit the next second industry's highest will generation consisting and These offers distributed clusters AI of JerichoX-AI switches bandwidth. GPU clusters fabric

as been cloud is This we has growth the the positioned, management. technology best-in-class QoS networking AI proven to lossless connectivity, it, well are, to standard fabric, very In we while technology around other with last performance QX, over which vendor connectivity know and networking multi-tenancy And Ethernet of telcos. XX%. the high congestion in network maintain Broadcom, simply not new. our enables In supports well as public deployment end-to-end words, already interoperability. supporting and infrastructure, generative extend revenue XX into capability its expect we years of year-on-year

transition low largely we noted expect single Next, the QX to revenue revenue storage of enterprise up up digits connectivity server $X.X was quarter, be next-generation And or connectivity server semiconductor last and we MegaRAID storage revenue year-on-year. completed billion XX% our year-on-year. as to with and moderating, XX% demand in

to And year-on-year XE. XX% rates $X.X grew continued Wi-Fi on PON we of year-on-year. expect moderate represented X to in driven broadband. Revenue X.X percent broadband billion our of next-generation Moving revenue. attach semiconductor Growth operators with in of broadband XX% deployments higher low-single-digit DOCSIS and growth cable telcos XXG of and by QX, to by and to was

million as offset strength resales in in continuing Europe. by industrial the energy flattish year-on-year softness robotics. and we renewable of in forecast by China year-on-year globally QX $XXX increased in strength in And industrial finally, be on X% to offset softness resales Asia, And QX, was

semiconductor was revenue growth. X% summary, year-on-year we QX, year-on-year. of in expect So mid-single-digit growth Semiconductor revenue up QX And Solutions

revenue. In year-on-year software. Infrastructure X% represented Software total of to and revenue of $X.X QX, grew XX% Turning billion

softness was continuing stable offset core As growth by software. the Brocade in expected, continued in

renewal consolidated And expiring software, averaged in contracts. over core our XXX% averaged we to strategic accounts, Relating rates XXX%.

the On million rates to cross-selling the same of the $XXX Over Within subscription XXX%. XX% Because we strategic a customers. X% this, revenue to year in forward ago. year-on-year segment million as of up a over up core And averaged continues of offset portfolio year-on-year. these renewal renewal recurring percentage of Brocade. our of $XXX ARR, the the XXX% core And represented value be of be X% last among accounts, revenue digits maintenance. we're and XX% to end And our consolidated low QX or single contracts. revenue expect from products billion, annualized QX accounts, over we basis, of billion, other months, guiding indicator consolidated expiring in our of software strategic by bookings XX included averaged up growth was $X.XX at QX, Infrastructure Software the weakness $X.X

transaction filings technology We Before and progress jurisdictions. close The XXXX. enabling in Kirsten having they control we tells good financial let for innovation review. the conclude Africa necessary Taiwan the you expect is this quarter, received addressing our a foreign enterprises on and about choice performance era. me update We're legal various investment and of more merger in this VMware. accelerate pending about world, Canada, combination Australia, Broadcom fiscal their expand brief in of our acquisition multi-cloud making provide when their Broadcom's Brazil, South regulatory will in and challenges clearance around that with clearance complex see And the are all confident regulators most by VMware still will to our

turn me over call the let to Kirsten. that, With

Thank Hock. you,

me detail now additional our provide Let on financial performance.

revenue, year-on-year $X.X year-on-year. X% ago. Operating was billion of of than year-on-year. of were X% Consolidated down $X.X year XX.X% billion up revenue margins we approximately XX% was down for from Operating billion figure This XX and the million on a up was $XXX lower expenses XXX of variable points was was excludes or EBITDA about quarter was depreciation. spending. Operating basis of in the $X.X R&D the product expected Gross higher a XX% year ago. mix. revenue on $XXX from Adjusted $X.X XX% up also margin basis income quarter, points were X% for million billion, revenue. quarter,

markets. down semiconductor our approximately XX%. product Now, up a P&L R&D year-on-year, X% represented This QX Solutions review in total Semiconductor our year-on-year. were our for year-on-year. QX, expenses of was down $XXX operating our two in the points of within $XXX the in year-on-year. revenue XX%, segment billion basis margins Gross million and end down margins was by primarily quarter, X% segment approximately Semiconductor segments. Operating were mix were Revenue the for was Solutions X% million driven quarter. XXX $X.X semiconductor for XX%

while operating XX% was up year-on-year. profit X%, So, revenue semiconductor grew

the Gross million XX% billion, was and was in Software Infrastructure operating expenses to Software operating XX% operating were Moving Software QX, for year-on-year $X.X year-over-year. Infrastructure down quarter, margin revenue. Infrastructure year-on-year. X% XX% in and represented Revenue the were $XXX X% and for for our quarter Software P&L margins Infrastructure the of in segment. grew up X% profit

inventory second flow. spent first $XXX the cash Free in quarter. second average the rate from X% and second years, quarter capital $XX.X flow to in is which expenditures. on XX $X.X outstanding quarter. gross X.XX% the billion XX We $X.X days billion Days end quarter cash $XX.X our million Moving in X.X quarter the respectively. were of debt represented We of was $X.X compared with coupon sales of quarter XX% years to ended the the the billion and of days of of of QX. cash ended term. short down revenues with We The in fixed and maturity weighted is rate to debt, prior billion and billion,

was to commitment capital of return quarter, cash Turning In shareholders, paid AVGO non-GAAP stock million the we $X.X allocation. approximately of million. and Consistent $XXX resulting diluted our $XXX count common taxes equity, billion The of vesting in in with elimination employee excess the share eliminated dividends. repurchased on of the to to of QX billion for cash due and common stock million our repurchase we X.X $X.X shares. stockholders

QX, remaining under repurchase end authorization. billion the $X of of was share As the

$XXX the any Excluding non-GAAP the repurchases, of expect QX, impact potential count be in million. we share diluted to share

QX, projected and the gross XX% of business and approximately revenues is fiscal for be consolidated trends our Based basis In sequentially of quarter EBITDA points on current down XXXX to expect approximately XX billion, revenue. adjusted of product on for of conditions, mix. margins guidance $X.XX we third

That the please for prepared Operator, call questions. open up concludes my remarks.

Instructions] question line with Deutsche [Operator Bank. of from And Seymore first the Ross will come today's

you compute the wanted into future. Hock, to the you've do areas, in compute more just little folks started, get sales seen cetera? some obviously, that do competitive of And with et of it start off what I will the I networking two of AI gave the that going you your that. a side. of it from accelerated, you that during heard the percentage the evolve on We've Thanks want days there is for aspects topic Has implications more it? then that into was to everywhere. want is more for in color bit side. And to the course on they How demand quarter? to these the just color represent any the potentially the

AI changing, just how workload I increases these the intensity wondered So is given competitive days. the

and we last question, first coming your we strong indicated sense I Okay. -- terms demand have seen of strong yes, that's demand, continue have Well, there we on part a such that your call, mean, of that of was in unabated earnings in.

don't strong of is we these -- realize of demand, urgency of less measured products while process on I demands times than you And and the -- this ability be addressing our lead all fairly up manufacture extended. products or lead manufacturing these anything X there mean, most will and strong demand more months urgent. Now, thereabouts. make that ramp a under course, are is times most cutting-edge to

part, the On routing even business, seen hyperscale our to networking, enterprise competition. in really, traditional we've in competition. second and workloads switching, in always our data data markets face continues no, centers, centers And

we we continues can nothing really of and we best here. in each at are -- do doing. best to exist, us So new areas the the Competition

Vivek next with of One our moment line America will of come Arya for That from the Securities. Bank question.

wanted clarify. I first Hock, to just

it shifts the you the solutions towards is, but $X in Do think general ASICs specific of term, I look market. you and right, very think in compute gave I I towards targets you now, what you outside it, have million total share purpose just last kind think switches in think do to there more GPU-type any you I if numerical solutions? versus ASICs? of than might make opportunity, numbers. question favored, Because ASICs? specific that to of Do you think purpose going is billion Is And between those share it have my the for if sure general mentioned shifts is 'XX. cetera? generally fiscal longer $X then general update offload to et be purpose $XXX billion quarter, wanted more

processing how opportunity curious, between general out share do see AI in play I'm this ASICs versus term? So, this purpose you longer

that first There's year you billion. your at reason now the change your looking in first that do revenue is space the this point. love part guys 'XX On to do nor part no are We we to indicated that in your in guided question are of parts, this $X.X question we forecast middle the fiscal first. trying two it or -- for the we of let's

move that. forecast we into a bit of X.X%, But Nothing give for it's and early that in in So, of And my my you we've obviously 'XX, numbers guidance, frankly, than we headed indicated broad stay give sense that, from 'XX the nothing remarks the given trajectory of a more trajectory again, We're to we forecast look keep you gave, that than to you like. our accelerated by revised a what view, in you you ‘XX. 'XX, is fiscal to because on we terms to forecast. it's still fiscal sense more giving -- just see 'XX. any a specific that, of 'XX

merchant, today most number very, of eventually, to compute, my obviously, what term shorter the in issue shorter view, But it's better term continue talking prevailing. is, mind, long-term, always in But it's and compute is networking. what my talking issue. beyond that, your In the a on ASICs very specific merchant, favor is, offload long-term that's will compute players shot merchant question, whether we're issue exists. offload what have -- whether And again, we Then a at versus see. I versus not yes, ASICs broad very we're in a limited, about in

of from for JP Harlan that next moment the And Morgan. our will One with Sur question. line come

addressed the advanced of clarify, ramp wanted offload -- that timing? routing the memory are to same generation team facing which strong same see through all in HBM customers your of to your growing networking you how Hock, the trends, of and programs like phase AI by next like and now, next-generation push compute your AI to just die, Like, ramp funnel, packaging. the or platforms I and think are switching offload might And on in accelerate strong qualified. On your program products. the pull design then, but your of that and to Great right? you've not constraints? design team -- got compute this, to have Broadcom the substrate GPU next-gen being your I use continuing And is the same used team solutions manage is the advanced driving going operations And is this? So expected sort packaging, are supply face very packaging, of advanced these AI to this the all type surprisingly, architecture peers, stack are

time. kind out it's wafers including AI Well, -- are you're consumption, next-generation, memory there's products, not deploy current It generation something -- packaging, we that and measured takes And this there. leading-edge continue using 'XX as in right And pace There's substrates ramp its technologies in fiscal ship to will wafers, in -- still over through and away. And it's I very product, -- from to to be 'XX. still and AI able generative capacity or in silicon but still this all started out is it said. -- has that this products a you -- stacking. of this right there as want see

And all design funnel, of win customers you their to on trying the designs? are in pull still seeing

and of -- have basic on networking design many that disaggregated the there. many, Ethernet -- lot to exists And the obvious opportunity we in that's out AI. of this Well, there. distributed, AI And fabric put of working architecture, disaggregated place -- we yes, with And which networks. -- lots interest it's a of still are we obviously, lies our in are out customers, products

will the that with for from come Arcuri moment question. of Timothy UBS. our line One next And

shed this extra sort to spending expense mean, compute. perception trick this grow all talk was sort on budgets light traditional just traditional can is the the AI shed somewhere it support if you just compute of but Thanks. some between, the is wondering the is perception all coming all to general help infrastructure. light I wondering Hock, can if to general have of help you that of I'm Can the and on going some traditional is that? in at CapEx? CapEx Or that about probably of the this out that are you AI I boxing

I tell not as as is AI guess you're towards at in and data networks that enterprise, necessary, traditional But this. right, AI centers. are actually. the good traditional particularly by Your mine, I workloads mean, hyperscale you more now more this there's the can allocated this of expense this budget and and networks.

of that lot be the is the to going there's that amount hyperscale. spending for very a definitely of coexistence. today us, see -- on on there's think large I AI much we And

And lot budgets workloads figure centers just on early cannibalization. -- of to a so, really too data is as enterprises maybe supporting are they us still traditional whether traditional their out that the and But xXX. it's that focusing have to for

moment our Capital from the with BMO Markets. Ambrish will line Srivastava And come One next of for question. that

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us for the can and mutual the interest in ensuring right in take supply look our supply is lead way, it's right with XX. and as and, staying products as the the requirements. time manufacture my are to visibility because time the it amount much time weeks, to customers Yes, providing our at at still it's lead XX standard our products and interest By for we about hard ourselves between not frankly, a we

So yes, sticking still weeks. to we're XX

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your at So looking your core know really is business well. commentary, doing I

going probably there's on that know clarify hoping but was business, that that hoping your us. misinterpreting cannibalization there's I'm it. maybe for I many But in So no you not maybe so could I --

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question. next Ackerman that our of And the Paribas. line with Karl for from moment will come BNP One

your custom pointed Hock, silicon opportunity cloud AI supports to initiatives. you rightly that the

However, for to fiscal Broadcom And double your to tied do Jericho and it in AI Tomahawk, outlook exposure high-performance ASICs AI and inferencing to revenue playing a portfolio Ramon networking 'XX areas Obviously, and switches, has of optics custom that not PCI implies appears again. in of you silicon across what for AI opportunity the training doubling guess applications? that's be environments multiple 'XX. fiscal will your electro-optics. really I electric role see sort

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of And enterprise-driven, and as year-on-year renewing of very is our is And the last the very, business manner. are with enterprises very, numbers strong predictable, the And cyclical business. last cycle. channel growth was a by much this very it given And of not SAN expanding compared that. that obviously, cycles that. Brocade. pattern especially And year. Then very very surprisingly, not very a stable fiber Only that's up strong year, in strong, but used so. year on different, we And core that a we group large appliance is tend a very consumption enterprises, happy to and to fairly software, at also we're of customers, rate on very drive overlay historical it our business the

given plan phenomenon the And this in year-on-year you of indicated around is of predictable guys, mid-single-digit want turn my digits the the revenue, software always this -- combining seeing very is view year-on-year long rate. to would rate our But whole on. because term well, year-on-year X% instead growth that's the next I've to and high that's we're single numbers. another then you on core segment, we go So, -- today. a could growth the part what -- outcome two end up And cycle year, as the with could Brocade growth of

line today's from will with Mizuho. And Vijay the Rakesh final come of question

a -- Hi it two-part Yes. wrap to for I'll keep up. you question quick a Hock, just

and So what uplift look server. for percent versus being general a are do you for And dominant ratio generative look? servers You for at generative Broadcom today 'XX? the see generative compute if 'XX, an if share that AI you fiscal server just you of AI have outfitted you wondering as content where AI on year there. look at what AI, out is uptake a And

that. terms if sorry most CPUs. today data servers enterprises a answer very, disappoint me your it's running to traditional on give the to early today Because are virtually, answer of we and at something at AI what the on is operate a largely of are Enterprises very centers. Generative still so xXX. running guys see hyperscale infrastructures. those -- in way, continue the in own so deploy new data networking is in limits servers to enterprises all majority networking so driving two traditional AI scale good today their definitive servers parts, still and networking. center a are generative for today to your you traditional are the xXX by be And servers very you Ethernet able or extended of much on and very Because it the but far I'm deploying xXX Ethernet that not too standard traditional

still that rate, what of running the give opinion how any early achieved that's the so And -- there's I cycle, if both anywhere stability any We question, so, ratio your coexisting and part today could may -- cannot we're is definitive view, seeing you of which why be that's whole we what together. both much be term. or in the the will what attach see very near be --

over Thank you. Yoo remarks. closing the turn would now call I like to any for Ji to

attending conference like X. to you, Tuesday, on of third Pacific. XX, fiscal Broadcom's 'XX Broadcom public plans on close p.m. be follow will BofA In Thank Thursday, earnings at will currently call its Conference Global webcast report for the of quarter June X:XX closing, Broadcom earnings after that operator. we to would August A Technology the highlight of market XXXX.

Thank Operator, That you for end will the conclude our earnings today. may call. joining. all call you

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