Broadcom Inc.

Welcome to Broadcom, Inc.' 's second quarter fiscal year 2026 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, Charlie Kawaz, president, semiconductor solutions group, and Ram Balaga, President, Infrastructure Software Group. Also joining is Kirsten Spears, Chief Financial Officer. As we announced, Kirsten will be retiring June 12th, and today we have joining us our incoming Chief Financial Officer, Amy Teener. Thank you, Kirsten, for your leadership over the past 12 years. Broadcom distributed a press release and financial tables after the market closed describing our financial performance for the second quarter fiscal year 2026. 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 then 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 2026 results, guidance for our third quarter fiscal year 2026, 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 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 to the extent possible 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 will now turn the call over to Hawk.

Thank you, G. Well, in Q2, revenue was a record $15 billion as we grew 79% year on year. Driving this growth was AI semiconductor revenue, at a record $10.8 billion, 143%. Oops, sorry. Well, let me restart, guys. Thank you, Jay. Thank you, everyone, for joining today. In our fiscal Q2 2026, total revenue reached a record $22.2 billion, up 48% year-on-year, above our guidance on strength in AI semiconductors. Q2 operating margin was a record 67%, and adjusted EBITDA was a record 69% of revenue, which was above our guidance. Even as our revenue scales are massively driven by AI, our operating and EBITDA margins remain strong and stable. Turning to semiconductors, Q2 revenue was a record $15 billion, as I said before, as we grew 79% year on year. Driving this growth was AI semiconductor revenue at a record $10.8 billion up 143% year-on-year and above our outlook. Networking represented almost 40% of our Q2 AI revenue. Demand for XPUs and networking is simply insatiable. During the quarter, bookings for AI semiconductors were over $30 billion, against the $10.8 billion we shipped. In the second half of 2026, we expect AI semiconductor revenue to double from the first half we shipped this year. Consistent with this trend in Q3, we expect AI semiconductor revenue to accelerate to $16 billion, up over 200% year on year. For the full year 2026, we expect to achieve AI semiconductor revenue of $56 billion, up approximately 180% from fiscal 2025. Now, we expect this momentum to continue into fiscal year 2027 and reiterate our AI semiconductor revenue guidance to be in excess of $100 billion. We expect AI semiconductor revenue growth to continue in fiscal 2028 based on the following initiatives we have with our six core customers. As you are aware, with Google, we announced in April that we entered into a long-term agreement to develop and supply multiple generations of TPUs and AI networking. Our relationship continues to be strategic and very substantial as we continue to deliver vastly superior technology and execution compared to other alternatives. This ability to provide differentiated value to Google ensures that our business will sustain and grow for the foreseeable future. For Entropic, as you know, for 2026, we are providing access to Broadcom TPU based compute of over 1 gigawatts. In April, we entered into an agreement to enable Entropic to access another 5 gigawatts of next generation TPU based compute beginning in 2027. For OpenAI, we have delivered silicon and we are on track for production late 2026. We have a contractual commitment to deploy 1.3 gigawatts in 2027 as part of the larger 10 gigawatts that by 2029 agreement we announced last year. For META, in April, we announced a partnership to deliver multiple generations of MTIA XPUs. And under this agreement, we expect to deploy 3 gigawatts through the end of 2028. The initial order for one gigawatt, which includes XPUs and our networking, has been received and will start delivery in the second half of 2027. For our other two customers, we expect shipments to begin late 2026 and accelerate into 2027. To date, we have received purchase orders totaling $6 billion. While we have significant IP and execution leadership in XPUs, networking is key to building scalable XPU and GPU clusters. And here in networking, we have at least one generation of technology and product leadership. For scale-up within RACs, We enable direct attached copper based on an industry-leading 200G and 400G service, driving co-packaged copper with Ethernet and PCI Express switches. For scale-out between the racks, we have been shipping the industry's only 100TB Ethernet switch, the Tomahawk 6, for over a year. We will now be taping out our next generation 200 terabit switch this quarter. And in CPOs, which is called package optics, 1.6 terabit DSPs, CW and EML lasers, we are the de facto standard in the industry. To extend AI sub-clusters across data centers. We remain the industry leader with our Jericho 3 and Jericho 4 fabric solutions and enabling the world's largest deployments and multiple hyperscalers. Our strategic vision is to bring together Broadcom's leading technology and investor partners with the strongest balance sheets to deliver at scale sufficient compute capacity at the lowest cost and power for the leading AI frontier labs, including entropic and open AI. To deliver this vision, we are creating the AI XPV platform with Apollo and Blackstone and other leading investors to deploy more than 20 gigawatts of compute capacity through 2028. The first trench of this platform valued at $35 billion is in fact currently being launched by Apollo. Now turning to non-AI semiconductors. Q2 revenue of $4.2 billion was up 6% year on year. Bookings during the same period exceeded $6 billion, which is a clear indication we are on the path towards a full cyclical recovery. Broadband, server storage, and enterprise networking together were up, partially offset by a seasonal decline in wireless. Consistent with this trend in Q3, we forecast non-AI semiconductor revenue to be approximately $4.5 billion, up 12% from a year ago. In summary, we expect Q3 semiconductor revenue to be $20.5 billion, up 124% year on year. Let me turn to infrastructure software segment. Q2 software revenue of $7.2 billion was up 9% year on year, in line with our guidance. Bookings continue to be strong as we sustain ARR growth of 17% year over year. For Q3, we forecast software revenue to be approximately $8.9 billion, up 31% year on year. We just released VMware Cloud Foundation 9.1, focused on improving infrastructure efficiency, security, and support for enterprise AI inferencing workloads. With strong server demand globally, The deployment of VCF 9.1 for on-prem cloud computing is extremely strong, driving robust revenue growth. This release adds heterogeneous compute support across GPUs and CPU architectures, including AMD, Intel, and Nvidia platforms, enabling customers, enterprise cloud customers, to run AI, Kubernetes, and traditional virtualized workloads on a common private cloud environment. So to sum it up for Q3, 2026, we expect our consolidated revenue to grow to 29.4 billion, up 84% year on year. We expect operating margin to be stable at approximately 67% of revenue and adjusted EBITDA to be at approximately 68% of revenue. And with that, let me turn the call over to Kirsten.