Q1 2022 Broadcom Inc Earnings Call
Yeah.
Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
[music].
Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
[music].
Welcome to Broadcom, Inc. First quarter fiscal year 2022 financial results conference call at this time for opening remarks, and introductions I would like to turn the call over to Jim <unk> Director of Investor Relations of Broadcom, Inc.
Thank you Sherry and good everyone.
Joining me on today's call are Hock Tan President and CEO .
Houston Spears, Chief Financial Officer, Tom Krauss, President Broadcom software group, and Charlie Collier, Chief operating officer.
Broadcom also distributed a press release and financial tables after the market close describing our financial performance for the first quarter of fiscal year 2022.
You did not receive a copy you may obtain the information from the investors section of Broadcom website at Broadcom dotcom.
This conference call is being webcast live and a recording will be available via telephone playback for one week. It will also be archived in the investors section of our website at Broadcom dotcom.
During the prepared comments hock in person will be providing details of our first quarter of fiscal year 2022 results.
Guidance for our second quarter as well as commentary regarding the business environment well.
We will 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 todays press release Com.
Comments made during today's call will primarily refer to are non-GAAP financial results I'll now turn the call over to Hawk.
Right.
G. Thank you everyone for joining us today.
So in our fiscal Q1 'twenty two consolidated rent net revenue was a record $7 7 billion up 16% year on year semiconductor solutions revenue grew 20% year on year to $5 9 billion and.
Infrastructure software revenue grew 5% year on year to $1 $8 billion.
No enterprise demand.
Grew very robustly from the trough, we saw in Q1 last year as the recovery in enterprise it spending continued to accelerate.
Meanwhile, Hypoglossal gray.
Grading their data centers and service providers telcos continued to deploy next generation fiber to the home.
And as expected against the peak of a year ago wireless grew single digits and our core software business remains very stable and steady.
On the supply front.
Lead times remain extended and unchanged as inventory of our products in the channel.
And our customers remain Lee our semiconductor backlog at the close of Q1.
Continue to grow double digit from that of the prior quarters.
Let me now provide more color by end markets.
Starting with networking.
Networking revenue of $1 9 billion was up 33% year on year and represented 32% of our semiconductor revenue. This strong growth was driven by deployment at scale.
Hum fall and compute offload across several hyperscale customers as they upgrade and scale out their data centers in enterprises campus switching upgrades continue to accelerate.
Let me talk about routing in this space investments in five G back hauled by telco operators worldwide continued to drive strong growth in our <unk> family of products.
More than this the opportunity in our routing silicon has expanded into hyperscale in a very significant way moving Ethernet into the bank and networks of large scale AI ml clusters.
In particular, I'm, referring to the Arista 7800, AI platform, which scales Ethernet to connect many tens of thousands of Cpus and Gpus in Hyperscale. These.
This platform is built on our Jericho router.
Our devices provide the most cost efficient cost efficient effective fabric Paul E. Mailed scale up we have an end to end congestion Manish lossless network.
And highest efficiency load balancing across the links.
Now in contrast to propriety proprietary protocols such as infinite been used typically in the high performance computing, we see low latency Ethernet.
The way forward for large scale AI ml networks as a widely adopted open architecture.
Our unique ability to network. These complex AI workloads in the Hyperscale.
Standing our customized training.
Inference SLC free footprint.
Several cloud guys.
Okay.
In Q2, we expect networking to continue to be strong across the board and revenue growth to be in excess of 30% year over year.
Next.
Our server storage connectivity connectivity revenue was $801 million.
And growth accelerated to 32%.
On year, representing 14% of semiconductor revenue.
This was driven in large part by the.
Genuine recovery of enterprise it spending much of which was deployed towards upgrading compute servers and most of these compute servers use either Ida our mega right.
Paul said.
False start server storage connectivity. We are also benefiting from increased content as enterprises upgrade to next generation storage connectivity solutions to support deployment of leading edge servers.
Beyond that into Bryan, we've proliferation of video content and social media.
We see our cloud customers increasingly adopting near line hard disk drives as the primary storage of choice and to manage this larger race of hard disk drives.
They deploy storage servers, and Expanders, which youth aligns very much our next generation storage connectivity silicon and software, creating another driver for revenue growth.
Interestingly.
We are also a critical supply of pre amplifiers and re channels in near line hard disk drives we found revenue growing at over 20% CAGR over the last five years, our mainline revenue represented over two thirds of our hard drive business. This.
Quarter.
With the adoption of next generation technology here.
Selling more boards than just silicon, resulting in much higher dollar content. This dynamic coupled with continuing strong demand from both enterprise and Hyperscale is expected to accelerate Q2 server storage connectivity.
<unk> revenue to over 55% year on year.
Now moving onto broadband revenue of $911 million grew 23% year on year and represented 16% of semiconductor revenue.
This was driven largely by increased deployment of next generation PON.
<unk> DOCSIS cable modem with high attach rates of Wi Fi six and six E in home gateways.
Examples of this iPhone last quarter chartered announced trials of DOCSIS 4.0, running at speeds of eight five gigabit.
Downstream and six gigabit upstream bowfin, CB and remote node.
Comcast, but the deployment of their Wi Fi six E DOCSIS three one gateways.
AT&T announced a multi gig PON service on the on the gateways.
All of this using Broadcom slc's.
We remain the market leader in delivering Wi Fi six and <unk> chips to leading phones as well as routers enterprise access points and carrier gateways.
Through the first quarter of 2022, we have accumulatively shipped over $1 billion Wi Fi six and succeeded radios.
And just around three years since our launch.
Our OEM customers and carrier partners are now ramping Wi Fi six E. The current generation of Wi Fi for Wifi, making use of the six gigahertz band, which has increasingly been made available for a license access across the globe.
And as we look ahead.
We are the industry leader heavily investing wisely in Wi Fi seven as the strategic complement to Teng PON and cable modem.
We see both broadband we see this as the next step in broadband development and deployment globally in the U S alone depending infrastructure egg sets of <unk> $65 billion over the next five years to connect more homes to high speed broadband.
Across the world. The same is happening as next generation Wired broadband is seen as the better alternative.
Two five G four home connectivity.
As far as Q2 is concerned we expect our broadband business to continue to grow 20% year on year.
Moving onto wireless Q1 revenue of 2 billion represented represented 34% of semiconductor revenue.
Demand from our North American customer for our products continue to be strong during the quarter driving wireless revenue up 10% sequentially and up 4% year on year from the peak quarter in fiscal 'twenty one.
As we expected in Q2 wireless revenue will be seasonally down about mid teens quarter on quarter, but will still be.
Mid single digits from a year ago.
Finally industrial.
Revenue of $243 million.
Represented approximately 4% of Q1 semiconductor revenue.
Q1 resales.
$239 million grew 37% year over year, driven by robust demand from <unk>.
Electric vehicles, and renewable energy factory automation and health care.
Reflecting such strong resales.
Inventory in the channel remain.
Round, one month, and we expect <unk> to continue to be strong in Q2.
Accordingly in summary.
Q1 semiconductor solution revenue was up 20% year on year Q2, we expect semiconductor revenue to accelerate to 25% year on year.
Turning to software.
In Q1 infrastructure software revenue of $1 $8 billion grew 5% year on year and represented 24% of total revenue.
Call software revenue grew 6% year on year in dollar terms.
Consolidated renewal rates averaged 121% over expiring contract one in our strategic accounts, we averaged 136%.
We then this strategic accounts $656 million represented renewals on expiring contracts of which $164 million represented cross selling including Ple's offer a portfolio of products to the same customer.
<unk>.
Over 90% of the renewal value represented recurring subscription and maintenance.
Yes.
Okay a R R.
Annual recurring revenue at the end of Q1 was $5 3 billion.
Which was up 5% from a year ago.
In Q2, we expect our infrastructure software revenue to sustain around mid single digit percentage growth year upon.
One year.
Okay.
In summary.
In Q1 semiconductor revenue grew a strong 20%.
In fact, excluding wireless grew actually grew over 30%.
Finally, with a stable software business consolidated revenue grew 16% year on year to $7 7 billion.
Now turning to Q2 guidance, we expect semiconductor revenue girl.
Our salary, 225% yield upon year and excluding wireless it will be 35% year on year layering on our stable software business. We expect Q2 consolidated revenue growth of 20% year on year to seven.
One 9 billion.
And before I turn this call over to Kirsten.
Yeah.
I just wanted to add Broadcom recently published its second annual ESG report available on the company's corporate.
Citizenship site, which discusses the company's ESG initiatives as a global technology leader we recognized.
The company's responsibility to have a positive impact on our communities through our product and technology innovation and operational excellence. We remain very committed to this mission with that let me turn the call over to Keith.
Thank you hock.
Let me now provide additional detail on our financial performance.
<unk> seven 7 billion for the quarter.
Up 16% from a year ago.
Gross margins were 76% of revenue in the quarter and up 227 basis points year on year.
Operating expenses were $1 2 billion up 6% year on year, driven by investment in research and development.
Operating income for the quarter was $4 7 billion and was up 23% from a year ago.
Operating margin was 60% of revenue up approximately 362 basis points year on year.
Adjusted EBITDA was $4 8 billion or 62, 5% of revenue.
Note that this figure excludes $136 million of depreciation.
Now a review of the P&L for our two segments.
Revenue for our semiconductor solutions segment was $5 9 billion and represented 76% of total revenue in the quarter. This was up 20% year on year.
Great.
Gross margins for our semiconductor solutions segment were approximately 71% up 347 basis points year on year, driven by favorable product mix and content growth in next generation products across our extensive product portfolio.
Operating expenses were $817 million in Q1 up 9% year on year.
R&D was $725 million in the quarter up 10% year on year.
Q1 semiconductor operating margins increased to 57%.
While semiconductor revenue was up 20% operating profit grew 31%.
Moving to the P&L for our infrastructure software segment.
Revenue for infrastructure software was $1 8 billion and represented 24% of revenue this was up 5% year on year.
Gross margins for infrastructure software, where 90% in the quarter up 71 basis points year over year.
Operating expenses were $348 million in the quarter up 1% year over year.
Infrastructure software operating margin was 71% in Q1 and operating profit grew 7%.
Moving to cash flow.
Free cash flow in the quarter was $3 4 billion, representing 44% of revenue, we spent 101 million on capital expenditures.
Days sales outstanding were 30 days in the first quarter compared to 35 days a year ago.
We ended the first quarter with inventory of $1 5 billion up 17% from the end of the prior quarter in large part due to higher material costs.
Our hardware backlog at the end of the quarter with over 25 billion compared to 22 billion the preceding quarter and our lead times remained steady at 50 weeks.
Our software backlog continued to grow as well and ended the quarter at over $15 billion.
As a point of reference software backlog was $13 billion a year ago.
We ended the quarter with $10 2 billion of cash and $39 5 billion of gross debt of which 300 million is short term.
Turning to capital allocation.
In the quarter, we paid stockholders $1 8 billion of cash dividend.
<unk> with our commitment to return excess cash cash to shareholders, we repurchased $2 7 billion in common stock and eliminated $375 million of common stock for taxes due on vesting of employee equity, resulting in the elimination of approximately 5 million <unk> shares.
The non-GAAP diluted share count in Q1 was $446 million.
Based on current business trends and conditions, our guidance for the second quarter of fiscal 2022 is for consolidated revenues of $7 9 billion and adjusted EBITDA of approximately 62, 5% of projected revenue.
Note that we expect Q2, non-GAAP diluted share count to be $442 million.
This excludes the potential impact of any share repurchases completed in the second quarter.
That concludes my prepared remarks, operator, please open up the call for questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone we ask that you. Please limit yourself to one question. So withdraw your question. Please press the pound key.
Please standby, while we compile the Q&A roster.
Our first question will come from Harlan sur with Jpmorgan. Please go ahead.
Good afternoon, and congratulations on the strong results and execution crop you know given your backlog and extended lead times.
<unk> got pretty good visibility into this year. Your end markets are strong cloud and Hyperscale capex spending is looking to grow about 30%.
Driving the 204 hundred gig networking upgrade cycle enterprise spending is still expanding as you mentioned Broadcom continued strong whether it's stock. This Wi Fi fiber upgrades and then on your compute acceleration ASIC pipeline, you've got Google Facebook, Microsoft Although these guys ramping so it seems like the demand.
Your product leadership seasonality can sustain up sort.
Sort of low to mid 20% plus type year over year revenue growth profile through this year. So I guess a question for you is do you have line of sight and confidence on sustaining this type of growth to the year and then more importantly, do you have the supply commitments to support this type of growth.
I'm not providing annual guidance Holland, if that's what you're angling fall, but what do you say makes.
A lot of sense.
And to answer your question directly yes, we have line of sight through <unk>.
End of 2022.
And both we believe.
In <unk> demand and in supply.
Yes.
Thanks, Bob.
Sure.
Thank you. Our next question will come from Vivek Arya with Bank of America. Please go ahead.
Alright. Thank you for taking my question Hock I was hoping if you could just revisit whats driving the acceleration in growth and then the most important question is that there is a perception that semiconductor companies are benefiting abnormally because of a pricing lever because of the tight supply conditions and as the foundry capacity eases that.
Cost will go down and the pricing advantage disappear and I was hoping you could give us some more color how much of a role is pricing playing in the expected sales growth. This year on a like to like basis versus what you saw last year.
Oh, that's a very good question and.
I mean in truth, the rail demand that we're seeing underlying if you talked about.
Underlying trend that is sustainable at least in this debate.
Up cycle Youre right.
It's a well, we're showing 30% in networking and server storage.
A part of it is driven by ASP increases simply because we are passing on our material cost increases wafer substrates assembly to our customers' inevitably, but it's much less than you probably think it is.
What is really sustainable is the one <unk>. The previous question. We think the trend demand increase is more like closer to 20% year on year.
Then than what than one perhaps in dollar terms you are represented.
And how long would it last.
It's hard to for me to figure out because I've been wrong. So many times and this is now going on into the almost 22 is done and is strong. We're now booking given our lead times I indicated in 'twenty three.
And 'twenty three I think will be at least the first half of 'twenty three will still be pretty close to the same.
In the latter part of 'twenty three 'twenty four that we have to figure out whether there is enough supply that will start coming in to basically.
Address what is today and what we're seeing in extremely strong demand environment, whether it's from enterprise.
Telcos and service providers and Hyperscale all three are strong.
Got it to price stickiness, perhaps can continue into 'twenty three I just wanted to clarify that.
At least the first part of journey three yes.
Okay. Thank you hock.
Thank you. Our next question will come from Stacy <unk> with Bernstein Research. Please go ahead.
Hi, guys. Thanks for taking my questions.
Mark I wanted to ask about gross margin. So you did like 75, 5% in the quarter.
71% for Sammy's, and if I sort of like squint to your guidance. It implies gross margins into Q2 at least at that level, if not even probably higher.
And this is a mid cost increases and everything else. So I mean, how do we think about like the limited. This I know you always talked about margins kind of going up 100 basis points a year, they seem to be doing even better than that.
Can we just keep modeling them going up from here or do you think they take a pause or there are the other drivers like into the back of this your mix or anything else that would that would sit on that just how do we think about that just given given the levels that they're sitting at right now.
Well.
And.
I could tell by my usual statement because it happens to be true, which is yield per year.
Under normal situations.
Yeah, we see these hundred around 100 basis point expansion of gross margin on our semiconductor front, you'll get that.
No.
Then just indicate that we did better than that in semiconductor and I guess, the <unk> and the.
The reason why we did better than that this season, so to speak if you view a view back to my remarks, there's a lot of deployment launch and deployment of newer generation products that I mentioned, we're talking about in networking.
Tom Tom.
Paul.
Much mall tried didn't fall.
Which is more towards the <unk>.
Some data centers.
Enterprises come out for use in hypoglossal that new generation, then we talk about Jericho being deployed the Lai.
<unk> been deployed in the bank and net the bank site networks of machine learning AI and AR GPU in the connectivity that's a whole new application then with tongue in server storage I did talk about a whole slew of new generation.
Our solutions, which we put in place.
Basically for a new generation, leading edge servers out there from the guys, who do those servers and and with those new generation.
That better margin.
All in all I guess, the additional input I put in is.
A lot more new generation products coming out now happens to be in 'twenty. Two we're seeing happen and of course, we are in this environment thankfully able to pass on our cost increases to our supply.
Supply to customers.
And that all adds up to a fairly decent gross margin set of results, but do not let that be an indicator. Please.
It is something that will be a two to 300 basis points expansion year on year. We still believe normal situation is still be just on average 100 basis point expansion.
Got it but as long as you can keep the new products coming we should still be able to see that 100 basis points even from here yes.
And by the way, it's not just me having to come on new products, that's a pool.
The customers the applications.
Markets.
<unk> and that's the beautiful thing about the semiconductors and technology is always there always is a need for next generation better products, whether it's performance power whatever is always as a pool and that product lifecycle is what enables us.
To drop with develop this new products.
And our margins will keep expanding.
Got it helpful. Thank you so much.
Sure.
Thank you. Our next question will come from Ross Seymore with Deutsche Bank. Please go ahead.
Hi, Thanks for letting me ask a question.
For the information on the backlog for the semi business. It's good to see that rising as much as it did sequentially, especially considering the lead times stayed flat while the magnitude is impressive I really wanted to ask about the profile of that and how it may or may not be changing soon is that additional backlog comes in given all the moving parts between enterprise and cloud and broad.
Banded wireless et cetera, any sort of changes in the profile of that backlog that you find to be interesting either in a positive or negative sense, it'll give us a clue about the future growth drivers for your company.
Well, that's a good question and I implied in some my point in some of my remarks, but let me take it directly into.
Enterprise enterprise demand spending.
Is the strongest driver that we're seeing today.
And it should be it should be no surprise, because something we have said since last quarter and the quarter before enterprise has.
Recovered more than recover is going is on fire is the best way to describe it enterprise spending on the IP.
As we perceive it on fire.
And we are seeing a big part of that.
That's not to say that hybrid cloud and telcos are not adding to it but not as strong as enterprise recovery.
Any any negative surprises in that you talked about the positive side is there anything that's been surprising on the negative side.
No not really it's just a.
Thats I.
I think there's a lot of pent up spending that's a lot of need for a lot of enterprises to upgrade.
And that's also what's driving and as I indicated in my remarks.
Lot of on Prem campus switching investment going in.
I mean look at even Broadcom, we've been using Wi Fi in our hotspots in our excess gateways in the true the campus.
A key part of it is wireless connectivity Wi Fi so to speak I mean, we've been running Wi Fi five for many years now is the time to move to Wi Fi six <unk>.
And we're not the only one we're seeing across the board very strong demand from lots of enterprises wanting to upgrade and connectivity.
Offices start to slowly open up.
Thank you.
Sure.
Thank you. Our next question will come from John Pitzer with Credit Suisse. Please go ahead.
Yes, guys. Thanks for let me ask the question.
<unk>.
Usually at this point in the cycle with lead times extended as much as they are and you guys getting pricing.
The big concern on Wall Street is to what extent is the demand youre seeing real demand versus perhaps your customers building inventory and I know you are less consumer focused than most and so maybe inventory builds are less relevant and some of these infrastructure markets, but I'm wondering if you could give us your perspective on.
Or at least what do you guys tried to do to scrub the backlog to make sure. It's good demand and if you think it's good demand I'm kind of curious you've always had a very realistic view of what the long term growth rate for your semi should be semi business should be is that beginning to change and like many of your peers, who will put up a higher.
Kind of new CAGR are you willing to go there right now.
Let's answer the first question.
First let me go to the last one and the best and yen, but on the first pump <unk> Stadium.
In previous earnings calls.
And.
The more than happy to reiterate at tier which is.
We are very very concerned obviously that you could ease we could easily build inventory.
<unk> response of our demur.
The demand environment.
Just because just because we ship according what customer sending in orders us as their customer request dates. So we don't we actually.
Spend huge amount of bandwidth of our operations and salespeople in this environment to make sure we get products.
To any particular customer just when they need it.
Any early in and hopefully not too late either because we'd like to address customer.
Real need in that regard, but what is very very important to us is not to ship excessively and built inventory whether it's in the customer inventory in distribution, though the nice thing about our business and semiconductor is this <unk>.
75% of our revenue comes from just about 100 customers and direct.
The last 25% go through distribution and 75% direct to 100 customers, who have announced salespeople we have enough visibility on these customers to know exactly pretty closely related thing.
What they need and shipped to one day and to what exactly they need and when we do all then I'd said it before and less earnings.
True end demand growth.
Through growth.
And we have been seeing in 'twenty, one it was about 20%.
One year improvement.
Now we now take on the fact that material costs have gone up in 'twenty. Two so there is an addition beyond 20%, but I still believe is about 20%.
And rich Wonder Allianz in this in this environment because the last up cycle, we saw in 2017.
It was 20% year on year improvement it was even stronger than that and by the way we sell mostly those big call system on a chip into Amy platform that our customer bills and sales out we do all that and generally we get very good visibility.
We want to sell more of the peripheral chips the secondary chips that adds up to the total platform.
And that cost a fraction of what our system on a chip cost than perhaps you will not have that visibility and we believe there are a lot of pockets of those inventory in the wrong places because of unbalance chip.
<unk> <unk>.
Sitting out there.
If you will for example, if you are building a data center and unique.
Tomahawk Falls believe me you will not buy more than 1050 them out for us.
But if you're buying a <unk>.
Tate your regulator.
Youll, probably by 2000 3000 of those voltage regulators just in case and Thats. The difference in one of the things. So we think we get a good sense of whats out there.
And the kicker here is the price is the price increase that must pass on because of wafer cost and substrate cost increases, which makes it go over perhaps what we think is a sustainable level now to answer your longer term question.
No I don't thing on a long term say next 10 years would that CAGR change.
I think people, who say that CAGR change frankly, probably dreaming because there is no evidence on our site to show why this industry, which is relatively mature semiconductor industry should suddenly spiral into different groups.
Trend growth growth rate, we've seen in the last 10 years compounded roughly 5% annual growth rate and there's nothing to indicate frankly, why you would not be that way for the next long term.
Venues now you won't be 5% every year, obviously, we're not at 5% this year, but on a long term I still think that trend has not changed.
Perfect. Thank you very much sure.
Thank you. Our next question will come from <unk> Hari with Goldman Sachs. Please go ahead.
Great. Thank you so much for taking the question Hock I wanted to ask for your thoughts on.
On capital allocation.
It's been a while since your last meaningful acquisition.
A lot of things are going on from a macro perspective.
Sure.
Rates are going up and obviously the economies are little bit squishy.
You just spent $2 $7 billion on buybacks, just curious how youre thinking about allocation of capital any changes to how you think about M&A.
And your appetite for M&A going forward. Thank you so much.
You know well.
Really.
Last quarter, we are very clear about kettles capital allocation plan.
At least for 2022.
Which is frankly.
We're still looking for acquisitions will just been very very.
As we usually do being very thoughtful and selective about the assets, we would acquire but very much. So we're still in the market to look forward.
Good at Great falls to acquire and we have the capacity to handle it and in the meantime, given two years 2020 two when we haven't done anything on acquisitions and have been earning and generating lots of cash.
We have taken on other other than paying dividends and maintaining the policy on dividends that we have outlined for the long term, we have decided for fiscal 'twenty tool for <unk> 22 to put out that buyback program of $10 billion.
We have spent $2 7 billion of it so far.
And we have probably most of the year to go and we'll probably use all we will likely use all of it up evenly over the next.
Nine months of the remaining year.
And then nothing has changed but and we believe we still have the capacity to do a good sized acquisition.
Thank you so much.
Yeah.
Thank you. Our next question will come from Pierre <unk> with New Street Research. Please go ahead.
Hi, Thank you for taking my question.
<unk>.
I'd love to hear.
What about that you're getting.
Give us.
Nah hooked on you.
Hum.
Asia business you know.
Eating.
In semiconductors, and what I'm wondering is how is business trending compared to your other segments.
Do you see your ASX, taking share overall with you.
<unk> clients or is that just growing in line with the rest of the market. It will actually be below the rest of the markets.
Okay.
Let me paraphrase your question and.
The way I would probably be.
<unk> able to answer it and see if its the right thing what Youre, saying is C. We have a we have a product division that does a cut.
Custom chips essentially fall.
Okay.
Usually large customers and that's a good sized business for us and a big part of that business.
What you're saying here.
His address has been used is now currently though not in the past, but more recently in the last few years it towards the Hyperscale.
Players, who are starting to develop one thing to develop.
Customized and dedicate that accelerate this for specific functions and workloads.
<unk> related to <unk>.
Machine learning AI also to do with video Transcoding and also.
Gradually increasing.
Virtualization and orchestration of data centers all of those.
Ah customize silicon accelerators to enable these hyper cloud guys to run their workloads better and more effectively I believe that what's your question and the best way to answer. Your question is year on year. This quarter Q1, we grew revenue in this.
<unk> computing sector, which saw a sinks.
<unk>, 450% revenue.
Yes.
Alright, I hope that answers your question.
Yes. Thank you that's perfect. Thank you so much.
Thank you. Our next question will come from Tim Arcuri with UBS. Please go ahead.
Hi, Thanks, a lot.
A question on your wireless business, it's been very strong, but you've been recently talking about some tradeoffs that you know one of your customers, making is making on the <unk> side, and maybe making it a little even more concentrated on a single customer and I know that you considered selling this business sometime back.
What does that even further.
Further revenue concentration does it does it make you rethink maybe how committed you wanted to to that segment and maybe whether you could redeploy this capital into another market.
Especially as things might be changing on that.
Modem side. Thank you.
Okay. Good question.
My answer will be very simple indirect we have always indicated.
Ireland business.
One customers largely.
Our North American OEM, and you know what they.
They are very good customer and a very strategic and we are not only selling one product was selling multiple.
Products, which are very strategic to us and I believe also vary.
Important and strategic to them.
Which is which is what makes a partnership very sustaining.
I see this as a very long term sustaining partnership in the sense of the products, we develop we collectively call wireless.
Because it goes into <unk>.
Mobile a lot of mobile devices do not entirely but most of it he goes into phones. It goes into wearables It goes into.
<unk> all tablets.
And it goes into it not so mobile, but many of them all into even.
Low notebooks, while they goes into all of this stuff.
And we sell we developed and <unk>.
Providing something like one of about five different critical engine technology products to this same customer. So it is it has.
Over 10 years don't develop into an extremely.
Sustainable and strategic relationship clearly from our side yes.
I'd like to believe from the outside the same thing.
Thanks Chuck.
Thank you. Our next question will come from Edward Snyder with charter equity Research. Please go ahead.
Thank you well since we are talking about wireless I wanted to follow up with that thanks for that answer harsh, but let me step back and maybe look at the longer term on this.
When you bought brocade kind of shifted the narrative from the only really need revenue growth for mobile as well.
Mostly looking for cash flow and high margins, which worked out very well.
And wireless you've got a little bit different animal with Samsung on the way out because they shifted their phone strategy.
More cost centric unless you know less performance wise it made sense for broadcom on to participate there and your largest customer is doing fine it looks like it will be for years, but as we've already seen on the high end, but gee the growth in revenue will go into content is slowing but.
All measures it will likely stagnate in next three to four years and that kind of environment, and especially if you're not doing custom designed anymore.
Give me just a given the revenue may not grow if margins are affecting what do you do with it you've not ever embrace business, where both revenues flat to down and margins are in decline.
The question a lot of folks have is what could you, possibly do it so large in there. So if you see report it's kind of puzzling in three years or four years.
With the strategy be with wireless maybe you could help kind of weighed on that thanks.
Well, that's an interesting thing.
And she is again is all our businesses just wanted to remind you.
In our in our view.
As I said and the view of all semiconductor segments itself.
It's not a high growth business.
You guys like to think big.
Probably there are a few companies out there who are trying to grow.
Business that doesn't grow 5% is what it is.
And so.
So it's a business.
It does grow.
But.
In dollar terms overall mid single digits I would call it a slow growth.
Industry within it however is still evolves new generation of product constantly thats the unusual unique thing about semiconductors.
Gibbs.
Evolving.
Not disruption not disruptive much as people like to say they are disruptive my view is evolutionary.
That evolutionary creates new opportunities for basically selling a better product more available product to the same customer for the similar application.
Any girl and reached a customer can then monetize banked on their own.
And that's really all it is and the and what we are doing here in wireless is no different.
And then there's something also very interesting every product.
Sell in wireless is in effect.
Our non standard product. It is customize it is customized for the needs for the unique needs and.
<unk>.
Of particular.
Requirements of that particular customer that's what makes us so successful and that's what makes the partnership so sustainable.
We develop technology in the form of the products that we do whether its in RF with bar front end module or whether it's <unk> silicon with some SDK a lot of extra case away, whereas some unique high performance mixed signal.
And along product all of which we do to this customer we do it to meet their particular requirements, which allow the product to be at a level that's very different shape.
From the our own space in.
In the competitive space.
And that's why it makes it very unique and that's what makes this thing keep going but we're not looking for in any end market. We are in any product line. We're in fall high growth.
High growth in semiconductors comes in spurts and do not less if anybody tells you otherwise. Please don't believe it because it has never happened.
Thank you.
Thank you and we do have time for one final question from XI Rakesh with Mizuho. Please go ahead.
Yeah, Hey, Hock just a question on the networking side, obviously very strong growth up 33% with the.
With their tomahawk and.
I guess, where do you see the long term growth, meaning and then obviously look at the next 12 to 24 months on the networking side.
I had a follow up thanks.
Okay. The next 12 months.
Pretty good we have visibility and we kind of indicate that in our Enzo.
24 months harder for me to tell you.
You asked me what do you think over the next 10 years.
Daily what it is mid to high single digits.
And because.
That is consistent with already there is no segment don't believe anybody telling otherwise there will have a sustainable growth rate in this space is shay changes maybe.
So, but the next 12 months very good growth rate is what I indicated.
Thanks, and one last question on the software side obviously.
Since December 8th when you announced the big buybacks, obviously softer valuations have become much more attractive and the last you know it might be down 30, 40% there but.
Do you have a target in mind as to walk you thing that software business should be like 24, 25, plus no don't use now are you looking to build it up to half of your business is that long term target that you have.
Putting out there thanks.
Pedro Daily I don't have a strategic plan here Mike.
All our numbers plan.
We know our strategy in acquisitions.
And growing this entire broadcom platform, it's more about locating identifying very very strong.
It's out there.
And which are.
Actionable.
And then making a deal in buying them and integrating into our platform they've got to meet our requirements of quality of the assets of the product out of the business model to some extent the product quality characteristics been.
Very mission critical.
And then after that comes the price fall.
<unk>.
After that as the price because you will recall the way we run those software businesses.
Hence it will be different usually from the way the part D. We buy from Ron.
And because of that we are able to create.
Create the financial returns consistent with our business model that we put in place fairly different from one the existing business model in most software companies out there.
Alright, great. Thanks Hock.
Ladies and gentlemen, thank you for participating in today's question and answer session I would now like to turn the call back over to senior director of Investor Relations for any closing remarks.
Thank you Sherry and clothing, similar to our networking broadband and storage teach ins in fiscal 'twenty, one broadcom and Deutsche Bank will be hosting a teach out of our custom silicon business.
On Tuesday April 19th at 12 P M Eastern nine am Pacific.
Hawk will be joined.
Hi, Frank all storage general manager of our ASIC products Division and Vijay <unk> General manager of our physical layer products Division.
<unk> Com currently plans to report its earnings for the second quarter of fiscal 'twenty two after close of market on Thursday June 2nd.
2022, a public webcast of Broadcom earnings conference call will follow at two P. M Pacific that will conclude our earnings call today. Thank you all for joining.
Sheri you may end the call.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
On the long haul.
Yes.
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Yeah.