Broadcom (AVGO) 31 Aug 232023 Q3 Earnings call transcript

Welcome to the Broadcom Inc.'s Third 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 third 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

take providing business well XXXX after the for results, questions During be our comments, environment. as third our our fourth and Hock of prepared as commentary guidance the regarding quarter We'll will quarter, of comments. end Kirsten details fiscal the year prepared

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

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

I'll call Hock. to the over turn now

remained Hyperscale Thank software year-on-year increased grew has everyone, $X.X X% us Semiconductor fiscal revenue In enterprise our billion and billion, to year-on-year net infrastructure for grow XXXX achieved to continued year-on-year. $X.X double-digits telco moderated. stable. X% our you, you, Meanwhile, business gravity, wireless consolidated billion. spending to and and today. QX up but revenue, year-on-year, solutions joining we Ji, virtually defying X% thank $X.X

Now strength hyperscale generative in spending for AI investments us. driving are continued the

supply compute we hyperscale AI engines. As with a customer major you custom know,

datacenters. up and networking of a clusters scale supplying scale within they also AI are We hyperscalers, as portfolio several out their their technologies

business in this represented the growth in billion, virtually Now representing our $X this QX over year-on-year. all infrastructure

of year-on-year. without generative business approximately QX, was revenue flat semiconductor AI the in our benefit So

ago, exactly the is to AI, And we revenue, In year around year, had you start as we indicated quarterly happening stabilized and the fiscal has fiscal it landing soft year, what billion. of during today. excluding this our a since 'XX, the is expected at a fact, semiconductor $X appears

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

we within one, that our As revenues end influencing see through broad markets all across the we portfolio that products and our landing, puts is takes networking. except soft go of and though this

And revenue. focus generative so, in today, in has remarks $X.X and networking XX% networking, was impact. we up where revenue my QX line AI representing on our with billion semiconductor year-on-year of XX% guidance, significant was

would as our market we silicon As end indicated routers hyperscale. our scaling in out AI among AI clusters this and as switches deploy they custom well as drove in growth above, engines, the

best now out always learning already offers that and Broadcom and tomorrow. best and protocol We've AI and Ethernet the networks attributes scale ever is for believed more clusters. Ethernet the networking the AI, technology AI latency has than today machine today with low to

a As deployments we industry partners, are with driving networks. member model scaling of founding the for large other language Ultra in Consortium Ethernet Ethernet

based this standards on a doing we're ecosystem. broad Importantly, and open

to our orders we begin hyperscale to switch routers six months shipping Tomahawk X JerichoX-AI quarter, the Over plan already products past and next substantial and for have the these over received customers. next-generation several

of the XXXG This SerDes this, has, per beyond X.X-terabit already second. throughput And over next-generation with connectivity, XXX-gigabit will existing terabit which the development started other things, we XXX-gigabit replace XXX among the for networks on have X connectivity. generating Tomahawk capacity switch,

are the engineers a much developing very AI Moore's before. has end silicon excited We feels our obviously what are in know computing Law never has today that cutting-edge pushing to is been We set but of technology revival. like limits that technology, on in generative technology developed silicon develop we

optics in industry-leading and to best even capabilities AI. can drive hardware the our to We with SerDes technologies scale fundamental generative cables. enable in copper customers invest invest that We hyperscale XXXG

have breaks bottlenecks We memory high-bandwidth in technology differentiating that current access.

also AI compute have connectivity engines. chip-to-chip integrate power multiple and high-speed ultra-low to X We

packaging heavily technologies, today's compute invested integrated in to engines X.XD have be also the migrating and We large XD, from accelerators. with AI complex memory which to enables

we our end-to-end deploy of we by generative XX% sum, of Not be AI in hyperscalers has the moving networking generative enables surprisingly, developed IP plug-and-play by driven continuing clusters QX, silicon time-to-market. strength year-on-year. AI have AI deployments, excess an grow develop to we their in accelerated to that accelerate on platform XX% obviously In two times driven about sequentially extremely been QX, And and this where expect revenue forecast in year-on-year. and to in almost to to

billion, Moving continues revenue, our customer WiFi, to across to year-on-year. revenue, RF multi-year Inductive Front-End and be and sequentially, The Touch, flat X% wireless up Bluetooth, wireless. with semiconductor American Power. deep North $X.X QX represented of XX% engagement

So in with down launch, and XX% sequentially percent we low-single year. expect grow consistent over revenue QX, the seasonal wireless to year-on digit

of server was flat $X.X year-on-year expect a to compare, difficult storage semiconductor our down revenue connectivity year-on-year. it year-on-year. in and percent server connectivity XX% mid-teens revenue On storage With billion or we QX revenue, be

nine growth decline digits or year-on-year. to of semiconductor revenue. XX% expect on $X.X revenue of moderated QX, In to among XXG-PON high-single telcos, we broadband, broadband of following revenue double-digit increasing of to billion consecutive growth, moving deployment despite quarters And to X% penetration year-on-year

an seasonality. low-single declined And X% we largely QX, industrial weak in demand year-on reflecting industrial in percentage with year, digit China. resales of million QX year-on-year, resales Finally, improvement expect though $XXX reflecting up

our will summary, X% solutions year-on-year. semiconductor revenue semiconductor we And single-digit was So, year-on-year. low-to-mid expect up flat. growth of QX, in revenue generated if be revenue semiconductor we Sequentially, percentage in QX exclude AI,

of of Now XX% revenue revenue. billion turning represented total and infrastructure year-on-year software grew to X% In $X.X software. QX,

accounts, averaged over our averaged and XXX% expiring contracts, in software, renewal we core For strategic XXX%. consolidated rates

or portfolio of products the Within included value and core strategic renewal subscription represented over million and to accounts, customers XX% other $XXX bookings annualized of $XXX million these of cross-selling maintenance. recurring same XX% of

Because averaged strategic XXX% expiring over of forward revenue, our and of QX billion. renewal XX in the at this, $X.X was indicator our consolidated ARR, the XXX%. rates the we last months, add, end of Over averaged I contracts, should accounts,

digit up X% And revenue consolidated we segment $X.XX mid-single In for expect to of billion, QX revenue a year-on-year. Company, up year-on-year. QX, we guiding are the infrastructure on be software basis

you our provide our brief financial for Kirsten acquisition Before of VMware. me pending on more update tells a let quarter, about performance the

Hart-Scott-Rodino under merger We jurisdictions. no European have have necessary received regulations. legal Africa, merger in waiting clearance expired, the Brazil, Union, Kingdom and South United in and US, control Canada, Israel, there clearance foreign Australia, US legal closing to periods the investment the all Taiwan impediment the is pre-merger In and

in other process towards the to the stages before are jurisdiction constructively which We of XXth. regulators remaining the with work advanced will a continue in regulatory believe approvals, obtaining received required October be few and we

XXth, We XXXX. continue close expect October to to on

confident locate control the choice competition their will Now and where that enhance Broadcom by the combination VMware workloads. cloud and in benefit they enterprise with is them more giving customers

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

you, Hock. Thank

year-on-year provide million year Let expenses R&D financial of quarter, on was X% the Gross in X% detail $X.X also for performance. ago. from margins down in variable quarter, spending. lower $X.X billion, Operating X% our were were me now additional XX.X% year-on-year. was $XXX our a with on up of down Consolidated revenue expectations. billion revenue line the

$X.X ago. X% points figure billion EBITDA a XXX million $X.X billion the was was basis for This from up was of approximately excludes quarter of Adjusted year and income or was year-on-year. revenue. depreciation. margin revenue, XX% Operating Operating XX% $XXX up of

a our segments. P&L of the Now review for two

semiconductor driven for our and X% our was This product semiconductor year-on-year. segment mix approximately billion down end total for margins up of by solutions $X.X primarily in Gross Revenue year-on-year, was within XX%, XXX were solutions semiconductor markets. points revenue XX% our represented the basis quarter. segment

in X% semiconductor operating QX, year-on-year. expenses margins $XXX year-on-year. X% R&D the down Operating quarter, were were XX%. QX million down $XXX was in million

infrastructure Moving Revenue software to our the segment up XX% was of for and software billion, the infrastructure P&L revenue. for year-on-year represented $X.X segment.

operating and XX% software million infrastructure were QX were $XXX in profit quarter, in operating grew year-over-year. margin XX% the year-on-year. operating for margins XX% was and down XX% quarter, the Infrastructure software in Gross expenses

in billion Free XX% in quarter on QX. to flow. $X.X Moving cash was represented flow of cash and revenues the

capital third million sequentially. with in of third second $X.X $XXX sales the expenditures. X% XX down Days billion, spent were compared quarter outstanding quarter days on in inventory quarter. the We ended to XX the days We

remain QX, down in manage quarter the days across inventory We me, XX exited continue XX ecosystem. excuse down disciplined to with the days we days very hand, from on in how of We XX inventory on QX.

average billion which is term. X.XX% We debt, respectively. cash X.X ended the and and fixed The is rate quarter years debt short of coupon $XX.X with rate third of to our gross $XX.X weighted $X.X of years, billion billion maturity and of

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

was share non-GAAP in diluted The million. $XXX count QX

end our SEC allow shareholders the in acquire with cash suspended not share in our rules, which during stock repurchase the in program August period and of VMware. billion We pending are electing do $X.X of transaction remaining As authorization. was between VMware under repurchase QX, stock in accordance the early consideration which to buybacks

XXXX. the the October to transaction anticipated XXth, election before expect period of the shortly closing end We on

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

business on consolidated Based of fourth approximately XXXX $X.XX our guidance the projected EBITDA is XX% and fiscal conditions, of of revenues for and revenue. of trends current adjusted for quarter billion

expect mix. not We contribution we product from our sequentially any QX, basis QX down be points for In margins VMware. note gross include to XX that on does guidance

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

come And from America. Bank question line our Thank Vivek first [Operator with you. of Arya will of Instructions] the

line open. Your is

hold contract. something feel taking to the do some question for Hock, has visibility who Taiwan-based cheaper. years this kind think my they have large several face a does my to because compute have the ASIC and offload for with right, can for Is of you Thanks domestic competitors, both next AI you of question. on do this to ASIC annual your competitive range or situation it you

I'm this several So what the win and competitive years? curious, maintaining this growing visibility over just next into your hopefully is content in then

the to your nature not, of dealings Love anyway will specific we I but dealings especially question, customer. Vivek, with directly do discuss not any you're to our respect because particular asking and not answer

appropriate. you broad our over agreements OEM long-term customer you that's very generality, But many tell North American large our in -- I with arrangements similar. this in wireless, look ways not long-term So in

And usually We this in it's in case, multiple have than generative whether very leading-edge want. need strategic which and and is it's it's goes that and of engagement engagement very to or multiple very kind what it's AI, is create one a in deep. multiyear the you strategic -- products, more those in wireless multiyear, technologies, products in creating they technologies broad

you, Thank Hock.

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open. is Your line

Good $X sort of run and for per relatively taking market of question. to afternoon. supply rate drive allowing environment. Thanks to the this in weak see leadership Great team sort discipline, really market my a diversification, the quarter macro stable billion

team Looking improve quarters sort provider start soften customers' given or your continue before demand enterprise visibility, to trends strong you the to stable-ish next service profile of and this profiles, a potentially beyond quarter? anticipate to continue billion trends ex-AI lead few at to over your the your revenue $X times, do sustain macro can

you grade, mean, quarter. and seeing. be pay hey, landing, You're we a what, you likely to 'XX I will But guide point that's we remarks, that that's 'XX, I Harlan. to exactly soft beyond promised know. you, asking pointed me I landing. out late my to as soft a want fiscal But are out a And my to just beyond what

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go They Ross, -- these go hand things very hand-in-hand.

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for actually Thanks AI quarter. it is is, next if non-AI my semiconductor sort that the higher that you getting the two that get of taking still there? get it of guys. I'm question. I or non-AI I you the Do you Hi, goes so what revenue If that to just in how about mentioned and up I I to moving how I XX% of think run $X to going then get it's take is, number rate AI two or XX% XX% that last the questions. calculate do that One revenue guess think And and be year? pieces, And the order how still if lower? goes Because non-AI percentage that down? with is number do billion

a trajectory next AI year. -- going has help to couple you and one with, accelerating assumptions except to accelerating we I our surprise. are which guide none make, there an know, no indicated, you But of has because tell of don't been I'm on to as you revenue, as Well,

basis on been hear are You deployment guys we it's because the an that strong, has been demand very -- strong. extremely urgent fairly seeing and

through and end that 'XX accelerating through expect you. we we so And for just 'XX, accelerate of continued accelerating end And to somewhat trend. accelerating to it we fiscal 'XX, indicated a of now similar see

over just, forecast, we to of is -- revenue it we so And revenue have our revenue. of answer for which previously always semiconductor your our is be that 'XX, of over question, believe semiconductor indicated a which will our fiscal XX% XX%

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at levels customers, As you they're about, of your bit sitting guys inventory. when inventory. customers really for your But seems a quite talked well across it in own done managing though you've look or inventory you your as on

you. as pertains it correction a your So in networking inventory to business what's level your business, confidence potential non-AI going forward? Thank

very all that kind chip in in and Okay. these the even terms of across time memory products, packaging AI, Well, supply chips. or Well, question, you're are the the lead they cutting-edge are first about products. and on very, long leading-edge generative the These itself, both to from the take engines, for times. memory, whether chain. entire the very to silicon customer of products HBM networking is stack used talking long It's lead -- those very

times. to trying supply, wants like everybody lead to have, within else we're So

you So constraints. have by definition,

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you. Thank Great.

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Your line is open.

you. Thank

still tailwind? a year tough margins, next year-over-year could or gross of which, to year quantify elevated the a and gross perhaps you. is on in some margins you margins, substrate Thank a this semis, remains to up for perhaps freeing had costs costs way headwind supply compare be from Just that semiconductor as your think logistics gross of about the think we course, chain best but the about there

it Karl, Hock. is know, You

me of multiple impacting it it's to transactional Let time, not and frankly, a question viewpoint this range a have of point a because have as from segment supply largely material The try than issues. more and to margin And of I sure products for company end us as in here's out it's mentioned chain gross to take make not in at even them terms impact in product a a as is, trends. mix, and mean. on holistic any markets. not a order communication but of it's gross as particular What they sustained us we what really stab more drives we a product classify broad I'm answer, as margin them else, earlier, into related I anything mix.

all market, various on where Within and and aspects. on used they have depending products, -- they the the criticality other your the and margins end different gross

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new pace more product margin category, So lift in of products you that that's product than mixed products. one adoption adoption for it a more real drives generation extended multiple across every gets product think trend else a matters, we And to instance, gross we And a way. products of so gross therefore, And rate the the anything the -- each opportunity versus uplift adopted, measure changes what years one. particular of few -- next-generation some time margin. each the that is gross of in for have of And in get because bank. margin

is profile. important all the gross tied different variable. growth what this have And most to margin You is

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basis. in the from XXX an XXX In of annual go a XX basis ranges long-term over points happened that That a seen between, basis. numbers years for on seen semiconductors basis on you've to consolidated expansion maybe to basis course, basis, And long-term an of XXXX. that's gross points. on over have that margin a We

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Yes, Hock.

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lead your is product X -- of most You've your got lines. that for a about year time

words, and helpful. are starting about for then at can we see you maybe then, So you a assume a suppose would that back? start happening Just we'll as be The in frame is needed? the needed bottom I not about is it see backlog year to out? year out. or really So out? or VMware a any And Or China in other for growth approval color Hock, time before even is, that not come a visibility spend clarification, to time year year a question

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AI the as Thanks congrats the question Ethernet Yes. taking opportunity curious, in on execution. about build-outs. I think I'm fabric just also for the and

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Your line is open.

consider customer merchant of that ramping on on maybe you big Thank focus appetite question not. I large But question. guess silicon or really routing ask widened customers all really a there in silicon, the you And Good But any Gen many appetite to is custom spending for those if -- custom that your very a business. hyperscale arena? take Hock, described. AI, maybe switching sort customers afternoon. two-part Gen catalyzed maybe other by much. enthusiasm customers on really, large surge large in to custom keen a wanted for to the as I and of some recent wonder considering at you. products aperture Yes. are are areas? Obviously, Thank other your has I projects the in AI maybe secondly, nicely

in Creating to I We offload GPU to very I a want engagement, that said but customized. do company, other I'm as very as large that, into saying a do these all And trying that mislead is you I do. not I don't that having program you. to not hyperscalers I'm your is mean, and is is language test run translated large we should to what may for We're of oh, not this revenue. on difficult customer to a fact custom minds even fact engagement, much the -- if complex translate at say we're models not revenues. guys. The it's translate than there engines. pipeline have insightful And a easily to you don't question. infrastructure and yes, that will an and anyone have be computing not any it thank and That's only Well, one -- extremely AI know, does compute, hardware

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trying message behavior years there's over doing shown. to the then to have do performance the merchant or to a solution a some is, last XX solution custom here here advantages So as

Appreciate it. Hock. Thanks,

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question. thanks for the Hey,

really down cycles. storage light of I are resilience think, the business some of AI the shows what So And I the the have think your who, Broadcom me. story parts horror in there's broadband core upside. the the two and first of kind of second great been is is that clear competitors And has been for surprised and of in just particularly

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Thanks.

even end whole and in it only beyond markets. taking point My the there. products made I and some looking a good that each in will soft quarter more out show are There why very we it, never of lower. we seems heard we it has remarks at bit about we takes in the And end end broad, instance, looking paints some this time, the what into some reach, shipped products me today, timing the at not timing and to. why continue QX. some customers. products around come you're we which It's -- one out that Kirsten revenues, purposely logistics shipments, in of a related a as we're range out that in referred saying, but quite go median also it This puts highlight a of some And customers numbers median. this OEM. particular it. seeing say end flat, QX ship you has in, of AI. because demand that getting in call service in portfolio customer for my broadband, And saying been we whole earning much I as we call -- showing a are we it, sit is plateau to which segmented collectively here foremost, of beyond and as you're even billion. try but Doesn't We are talked is very to way. wrong the since it numbers and look what timing may in $X pretty And of at, come it's shipments enterprise, to around stay to of when beyond in I that. First that's at enterprises of you've got to different are start QX, flat. and our we still $X to differences only billion it in $X sit calls, gets And to I'm billion, and you 'XX. of in customers. and all preceding storage ship And And And I generative you We landing, right fiscal around differences, and reemphasized the be of look mean users, sitting those largely quarter, even as it OEM some pretty and guys and telcos as you you much and are

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Hock. Thanks,

Thank will of you. our question. Snyder And Charter One that line Research. Equity moment for come from with next Edward the

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a That's in indicated years. next is XX% couple big centers. right. a thing add, the in I particularly, data it. AI of And now come is enormous, reduction. the know could power All over XX%, use You centers, I generative data that power power simply would case have big

question-and-answer all Yoo you. Ms. Ji call any closing for turn participating today's over you remarks. to now like Thank would Thank session. the to I for in

closing, call In will joining. fiscal and earnings of after operator. be Broadcom you, the report Thank 'XX we the currently would Conference Goldman Technology September Sachs its like to on fourth quarter Broadcom Xth. for that plans Thursday, Thursday, market Communacopia highlight to will for today. conference earnings Pacific. call Operator, close webcast follow Broadcom's of end public earnings will That Xth, of P.M. December may XXXX. call. you A the at all Thank on you conclude X:XX our attending

for today's Thank participating. This concludes program. you all

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