Broadcom Inc.

Welcome to Broadcom's Inc. Second 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, Operator, and good afternoon, everyone. Joining me on today's call are Hawk Tan, President and CEO, Kirsten Spears, Chief Financial Officer, and Charlie Quaz, President, Semiconductor Solutions Group. Broadcom distributed a press release and financial tables after the market closed describing our financial performance for the second quarter of fiscal year 2025. If you did not receive a copy, you may obtain the information from the investor section of the 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 second quarter fiscal year 2025 results, guidance for our third 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 table attached to today's press release. Comments made during today's call will primarily refer to our non-GAAP financial results. I will now turn the call over to Hawks.

Thank you. Thank you, Gee. And thank you, everyone, for joining us today. In our fiscal Q2 2025, total revenue was a record $15 billion, up 20% year on year. This 20% year-on-year growth was all organic, as Q2 last year was the first full quarter with VMware. Now, revenue was driven by continued strength in AI semiconductors and the momentum we have achieved in VMware. Now, reflecting excellent operating leverage Q2 consolidated adjusted EBITDA was $10 billion, up 35% year on year. Now let me provide more color. Q2 semiconductor revenue was $8.4 billion, with growth accelerating to 17% year on year, up from 11% in Q1. And of course, driving this growth was AI semiconductor revenue of over $4.4 billion, which was up 46% year on year and continues the trajectory of nine consecutive quarters of strong growth. Within this, custom AI accelerators grew double digits year on year, while AI networking grew over 170% year on year. AI networking, which is based on Ethernet, was robust and represented 40% of our AI revenue. As a standards-based open protocol, Ethernet enables one single fabric for both scale out and scale up and remains the preferred choice by our hyperscale customers. Our networking portfolio of Tomahawk switches, Jericho routers, and NICs is what's driving our success within AI clusters in hyperscale. And the momentum continues with our breakthrough Tomahawk 6 switch just announced this week. This represents the next generation 102.4 terabits per second switch capacity. Tomahawk 6 enables clusters of more than 100,000 AI accelerators to be deployed in just two tiers instead of three. This flattening of the AI cluster is huge because it enables much better performance in training next generation frontier models through a lower latency, higher bandwidth, and lower power. Turning to XPUs or custom accelerators. We continue to make excellent progress on the multi-year journey of enabling our three customers and four prospects to deploy custom AI accelerators. As we had articulated over six months ago, we eventually expect at least three customers to each deploy 1 million ai accelerated clusters in 2027 largely for training their frontier models and we forecast and continue to do so a significant percentage of these deployments to be custom xpus these partners are still unwavering in their plan to invest despite this certain economic environment. In fact, what we've seen recently is that they are doubling down on inference in order to monetize their platforms. And reflecting this, we may actually see an acceleration of XPU demand into the back half of 2026. to meet urgent demand for inference on top of the demand we have indicated from training. And accordingly, we do anticipate now our fiscal 2025 growth rate of AI semiconductor revenue to sustain into fiscal 2026. Turning to our Q3 outlook, as we continue our current trajectory of growth, we forecast AI semiconductor revenue to be $5.1 billion, up 60% year on year, which would be the 10th consecutive quarter of growth. Now turning to non-AI semiconductors in Q2. Revenue of $4 billion was down 5% year-on-year. Non-AI semiconductor revenue is close to the bottom and has been relatively slow to recover. But there are bright spots. In Q2, broadband, enterprise networking, and server storage revenues were up. sequentially. However, industrial was down, and as expected, wireless was also down due to seasonality. In Q3, we expect enterprise networking and broadband to continue to grow sequentially, but server storage, wireless, and industrial are expected to be largely flat. And overall we forecast non AI semiconductor revenue to stay around $4 billion. Now let me talk about our infrastructure software segment. Q2 infrastructure software revenue of 6.6 billion was up 25% year on year above our outlook of $6.5 billion. As we have said before, This growth reflects our success in converting our enterprise customers from perpetual vSphere to the full VCF software stack subscription. Customers are increasingly turning to VCF to create a modernized private cloud on-prem, which will enable them to repatriate workloads from public clouds. while being able to run modern container based applications and AI applications. Of our 10,000 largest customers, over 87% have now adopted VCF. The momentum from strong VCF sales over the past 18 months since the acquisition of VMware has created annual recurring revenue or otherwise known as ARR growth of double digits in our core infrastructure software. In Q3, we expect infrastructure software revenue to be approximately $6.7 billion, up 16% year-on-year. So in total, we're getting Q3 consolidated revenue to be approximately $15.8 billion, up 21% year-on-year. We expect Q3 adjusted EBITDA to be at least 66%. With that, let me turn the call over to Kirsten.