Broadcom Inc.

Welcome to the Broadcom, Inc.' 's first quarter fiscal year 2025 financial results conference call. At this time, for opening remarks and introductions, I would like to turn the call over to G.U., Head of Investor Relations of Broadcom, Inc.

Thank you, Cherie, and good afternoon, everyone. Joining me on today's call are Hawk Tan, President and CEO, Kirsten Spears, Chief Financial Officer, and Charlie Coas, President, Semiconductor Solutions Group. Broadcom distributed a press release and financial tables after the market closed describing our financial performance for the first quarter of fiscal year 2025. If you did not receive a copy, you may obtain the information from the investor section of Broadcom's website at broadcom.com. This conference call is being webcast live and an audio replay of the call can be accessed for one year through the investor section of Broadcom's website. During the prepared comments, Hawk and Kirsten will be providing details of our first quarter fiscal year 2025 results, guidance for our second quarter of fiscal year 2025, as well as commentary regarding the business environment. We'll take questions after the end of our prepared comments. Please refer to our press release today and our recent filings with the SEC for information on the specific risk factors that could cause our actual results to differ materially from the forward-looking statements made on this call. In addition to U.S. GAAP reporting, Broadcom reports certain financial measures on a non-GAAP basis. A reconciliation between GAAP and non-GAAP measures is included in the tables attached to today's press release. Comments made during today's call will primarily refer to our non-GAAP financial results. I'll now turn the call over to Hawk.

Thank you, Gee, and thank you everyone for joining today. In our fiscal Q1 2025, total revenue was a record $14.9 billion, up 25% year-on-year, and consolidated adjusted EBITDA was a record, again, $10.1 billion, up 41% year-on-year. So let me first provide color on our semiconductor business. Q1 semiconductor revenue was 8.2 billion, up 11% year on year. Growth was driven by AI, as AI revenue of 4.1 billion was up 77% year on year. We bid our guidance for AI revenue of 3.8 billion, due to stronger shipments of networking solutions to hyperscalers on AI. Our hyperscale partners continue to invest aggressively in their next generation frontier models, which do require high performance accelerators, as well as AI data centers with larger clusters. And consistent with this, we are stepping up our R&D investment on two fronts. One, we're pushing the envelope of technology in creating the next generation of accelerators. We're taping out the industry's first two nanometer AI XPU package in 3.5D as we drive towards a 10,000 teraflops XPU. Secondly, we have a view towards scaling clusters of 500,000 accelerators for hyperscale customers. We have doubled the Radix capacity of the existing Tomahawk 5. And beyond this, to enable AI clusters to scale up on the internet towards 1 million XPUs, we have taped out our next generation 100 terabit Tomahawk 6 switch running 200 G30s at 1.6 terabit bandwidth. We will be delivering samples to customers within the next few months. These R&D investments are very aligned with the roadmap of our three hyperscale customers as they each race towards one million XPU clusters by the end of 2027. And accordingly, we do reaffirm what we said last quarter, that we expect these three hyperscale customers will generate a serviceable addressable market, or SEM, in the range of $60 to $90 billion in fiscal 2027. Beyond these three customers, we had also mentioned previously, that we are deeply engaged with two other hyperscalers in enabling them to create their own customized AI accelerator. We are on track to take out their XPUs this year. In the process of working with the hyperscalers, it has become very clear that while they are excellent in software, Broadcom is the best in hardware. Working together is what optimizes VR large language models. It is therefore no surprise to us since our last earnings call that two additional hyperscalers have selected Broadcom to develop custom accelerators to train their next generation frontier models. So even as we have three hyperscale customers, we are shipping XPUs in volume today, there are now four more who are deeply engaged with us to create their own accelerators. And to be clear, of course, these four are not included in our estimated SAM of 60 to 90 billion dollars in 2027. So we do see an exciting trend here. New frontier models and techniques put unexpected pressures on AI systems. It's difficult to serve all classes of models with a single system design point. And therefore, it is hard to imagine that a general purpose accelerator can be configured and optimized across multiple frontier models. And as I mentioned before, the trend towards XPUs is a multi-year journey. So coming back to 2025, we see a steady ramp in deployment of our XPUs and networking products. In Q1, AI revenue was $4.1 billion, and we expect Q2 AI revenue to grow to $4.4 billion, which is up 44% year on year. Turning to non-AI semiconductors, revenue of $4.1 billion was down 9% sequentially on a seasonal decline in wireless. In aggregate, during Q1, the recovery in non-AI semiconductors continued to be slow. Broadband, which bottomed in Q4 of 2024, showed a double-digit sequential recovery in Q1 and is expected to be up similarly in Q2 as service providers and telcos step up spending. Server storage was down single digits sequentially in Q1, but it's expected to be up high single digits sequentially in Q2. Meanwhile, enterprise networking continues to remain flattish in the first half of fiscal 25 as customers continue work through channel inventory. While wireless was down sequentially due to a seasonal decline, it remained flat year on year. In Q2, wireless is expected to be the same, flat again year on year. Resales in industrial were down double digits in Q1, and are expected to be down in Q2. So reflecting the foregoing puts and takes we expect non-AI semiconductor revenue in Q2 to be flattish sequentially, even though we are seeing bookings continue to grow year on year. In summary, for Q2, we expect total semiconductor revenue to grow 2% sequentially and up 17% year on year to $8.4 billion. Turning now to infrastructure software segment. Q1 infrastructure software revenue of $6.7 billion was up 47% year-on-year and up 15% sequentially, exaggerated though by deals which slipped from Q4 to Q1. Now this is the first quarter Q125, where the year-on-year comparables include VMware in both quarters. We're seeing significant growth in the software segment for two reasons. One, we're converting to a footprint of large, sorry, we're converting from a footprint of largely perpetual license to one of full subscription. And as of today, we are over 60% down. Two, these perpetual licenses were only largely for compute virtualization, otherwise called vSphere. We are upselling customers to a full-stack VCF. which enables the entire data center to be virtualized. And this enables customers to create their own private cloud environment on-prem. And as of the end of Q1, approximately 70% of our largest 10,000 customers have adopted VCF. As these customers consume VCF, with to see a further opportunity for future growth. As large enterprises adopt AI, they have to run their AI workloads on their on-prem data centers, which will include both GPU servers as well as traditional CPUs. And just as VCF virtualizes these traditional data centers using CPUs, VCF will also virtualize GPUs on a common platform and enable enterprises to import AI models to run their own data on prep. This platform, which virtualized the GPU, is called the VMware Private AI Foundation. And as of today, in collaboration with NVIDIA, we have 39 enterprise customers for the VMware Private AI Foundation. Customer demand has been driven by our open ecosystem, superior load balancing and automation capabilities that allows them to intelligently pull and run workloads across both GPU and CPU infrastructure and leading to very reduced costs. Moving on to Q2 Outlook for Software. We expect revenue of $6.5 billion, up 23% year-on-year. So in total, we're getting Q2 consolidated revenue to be approximately $14.9 billion, up 19% year-on-year. And we expect this will drive Q2 adjusted EBITDA to approximately 66% of revenue. With that, let me turn the call over to Kirsten.