Q4 2023 VMware Inc Earnings Call
[music].
Bye.
Yeah.
Welcome to Broadcom Inc.'s fourth quarter and fiscal year 2023 Financial Results Conference Call. At this time, for opening remarks and introductions, I would like to turn the call over to Gu, Head of Investor Relations of Broadcom Inc. The floor is yours.
Welcome to Broadcom, Inc, 's fourth quarter and fiscal year 2023 financial results conference call. At this time for opening remarks, and introductions I would like to turn the call over to <unk> head of Investor Relations of Broadcom, Inc. The floor is yours.
Gu: Thank you, operator, and good afternoon, everyone joining me on today's call. Our president and CEO .
Thank you operator, and good afternoon, everyone. Joining me on today's call are Hock Tan President and CEO.
Gu: Kirsten Spears, Chief Financial Officer, and Charlie Kowals, President, Semiconductor Solutions Group.
Kirsten Spears, Chief Financial Officer, and Charlie Clause, President Semiconductor solutions group.
Gu: Broadcom distributed a press release and financial tables after the market closed, describing our financial performance for the fourth quarter and fiscal year 2023.
Broadcom distributed a press release and financial tables after the market closed describing our financial performance for the fourth quarter and fiscal year 2023.
Gu: If you did not receive a copy, you may obtain the information from the Investor section of Broadcom's website at Broadcom.com.
You did not receive a copy you may obtain the information from the investors section of Broadcom website at Broadcom Dot com.
Gu: This conference call is being webcast live and an audio replay of the call can be accessed for one ear through the investor section of Broadcom's website.
This conference call is being webcast live and then audio replay of the call can be accessed for one year to the investors section of Broadcom website.
Gu: During the prepared comments, Hawk and Kirsten will be providing details of our fourth quarter and fiscal year 2023 results.
During the prepared comments hock in person will be providing details of our fourth quarter and fiscal year 2023 results guidance for our fiscal year 'twenty 'twenty four as well as commentary regarding the business environment well.
Gu: guidance for our fiscal year 2024 as well as commentary regarding the business environment. We'll take questions after the end of our
We will take questions after the end of it.
Gu: 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.
Comment.
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.
Gu: In addition to U.S. GAAP reporting, Broadcom reports certain financial measures on a non-GAAP basis.
In addition to U S GAAP reporting Broadcom reports certain financial measures on a non-GAAP basis.
Gu: A reconciliation between GAAP and non-GAAP measures is included in the tables attached to today's press release.
Reconciliation between GAAP and non-GAAP measures is included in the tables attached to todays press release.
Gu: Comments made during today's call will primarily refer to our non-GAAP financial results. I'll now turn the call
Comments made during today's call will primarily refer to are non-GAAP financial results.
I'll now turn the call over to <unk>.
Gu: Thank you, Ji, and thank you, everyone, for joining us today.
Thank you gene and thank you everyone for joining us today.
Gu: In our fiscal Q4-23, consolidated net revenue was $9.3 billion.
In our fiscal Q4 'twenty three.
Consolidated net revenue was $9 $3 billion.
Gu: up 4% year-on-year and very much as we had guided at a large conference call. Semiconductor solutions revenue increased 3% year-on-year to $7.3 billion and infrastructure software revenue grew 7% year-on-year to $2 billion.
Up 4% year on year and very much as we had guided.
In the last conference call.
Semiconductor solutions revenue increase increased 3% year on year to seven 3 billion and infrastructure software revenue grew 7% year on year to 2 billion.
Gu: Overall while infrastructure software remains very stable, semiconductor is continuing the cyclical slowdown at enterprises and telcos that we have been seeing over the past six months.
Overall, while infrastructure software and remains very stable.
Semiconductor is couldn't be nearing the cyclical slowdown.
Enterprises, and Dell coals that we have been seeing over the past six months.
Gu: However, hyperscalers remain strong.
However, hyperscale has remained strong.
Gu: Generative AI revenue driven by internet solutions.
January.
Our revenue driven by Ethernet solutions and custom salary.
Gu: and custom AI accelerators, represented close to 1.5 billion in Q4, or 20% of semiconductor revenue. While the rest of the semiconductor revenue continued to be rather stable at around $6 billion.
Celebrate this represented close to $1 5 billion in Q4 or 20% of semiconductor revenue, while the rest of the semiconductor revenue.
Continue to be rather stable at around $6 billion.
Gu: Moving on to results for the year, for fiscal 2023, consolidated revenue hit a record $35.8 billion, growing 8% year on year. And since 2020, even though we have not made an acquisition, we have shown a robust trajectory of growth, driven by semiconductor growing at.
Moving on to results for the year for fiscal 'twenty to 'twenty three.
Consolidated revenue hit a record $35 8 billion growing 8% year on year.
Since 'twenty 'twenty, even though we have not made an acquisition we have shown a robust trajectory of growth driven by semiconductor growing it and.
Gu: and 18% CAGR over the past three years.
And 18% over the past three years.
Gu: In fiscal 2023, operating profit grew by 9% year-on-year, and our free cash flow grew 8% year-on-year to $17.6 billion, or 49% of revenue.
In fiscal 2023 operating profit grew by 9% year on year, and our free cash flow grew 8% year on year to $17 $6 billion or 49% of revenue.
Gu: We return $13.5 billion in cash to our shareholders through dividends and stock buybacks.
We returned $13 $5 billion in cash to our shareholders through dividends and stock buybacks.
Gu: As you well know, we just closed the acquisition of VMware on November 22nd, just about 4 weeks into Broadcom's fiscal 2024.
Yeah.
As you well know we just closed the acquisition of Vmware on November 22nd just about four weeks into Broadcom as fiscal 'twenty 'twenty four.
Gu: We are now refocusing VMware on its core business of creating private and hybrid cloud environments among large enterprises globally and divesting non-core assets.
We are now refocusing Vmware on its core business of creating private and hybrid cloud environments.
Large enterprises globally.
Divesting non core assets.
Gu: Reflecting the consolidation of a restructured VMA into our 2024 outlook, we forecast our fiscal year 2024 consolidated revenue to be $50 billion.
Reflecting the consolidation of our restructured VM weigh into our 2024 outlook, we forecast our fiscal year 'twenty for consolidated revenue to be $50 billion, we expect the integration to take about a year.
Gu: We expect the integration to take about a year and will require close to $1 billion in transition spending, which will largely be done as we exit fiscal 2024. Regardless, we expect our fiscal year 2024 adjusted EBITDA to be approximately 60%.
And we're required to close to $1 billion in transmission spending which will largely be done as we exit fiscal 'twenty four regardless, we expect our fiscal year 2020, adjusted EBITDA to be approximately 60%.
Gu: Kirsten will give you more details in her section.
Of revenue.
Kiss then we'll give you more details in her section.
Kirsten Spears: Now let me give you more color on our two reporting segments, and I'll start with software.
Now, let me give you more color on our two reporting segments and I'll start with softwood.
Kirsten Spears: In Q4, as you know, there's no VMware revenue. And the infrastructure software business of CA, Symantec, and Brocade grew 7% year on year to $2 billion.
In Q4, as you know there's no Vmware revenue.
And the infrastructure software business of CA, Symantec, and Brocade grew 7% year on year to $2 billion.
Kirsten Spears: Consolidated renewal rates average 119% over expiring contracts, and in our strategic accounts we actually average 130%. Over 90% of the renewal value represented recurring subscription and maintenance.
Right.
Consolidator renewal rates every 219% over expiring contracts and in our strategic accounts, we actually averaged 130%.
Over 90% of the renewal value represented recurring subscription and maintenance.
Kirsten Spears: Renewal rates average 116% over expiring contracts and in strategic accounts we average 124%.
For the year.
The new water rates averaged 116% over expiring contracts and in strategic accounts, we have reached 124%.
Kirsten Spears: Revenue in fiscal 2023 was
Revenue in fiscal 2023 was seven 6 billion up 3% year on year.
Kirsten Spears: $7.6 billion, up 3% year-on-year, and our expectation for Fiscal 24 is for this revenue to be $8 billion, which is 4% year-on-year.
Expectation for fiscal 'twenty four is for these revenue to be $8 billion, which is 4%.
On years.
For the 'twenty 'twenty four outlook. We're excited to now include Vmware as we all know.
Kirsten Spears: We are excited to now include VMware. As we all know, VMware has the leading technology to virtualize entire data centers, not just compute. And by doing so, create private clouds on-prem.
<unk> has the leading technology to Virtualized, our entire data centers, not just compute and by doing so creates private clouds on Prem our strategy going forward is simply to enable global enterprises to run their applications.
Kirsten Spears: Our strategy going forward is simply to enable global enterprises to run their applications across their data centers as well as on public clouds by consuming VMware's higher value software stack.
Yeah, the data centers as well as on par on public clouds like consuming Vmware is higher value software stack.
Kirsten Spears: and to attract and keep these workloads across the environment, we are investing in a rich catalogue of microservices tools.
And to try and keep this workloads across the environment. We are investing in our reach catalog of micro services tools.
This will be our focus in.
Kirsten Spears: and the non-core businesses of end-user computing and carbon blank will be
In the non core businesses of end user computing.
And carbon black will be divested.
Kirsten Spears: So for 2024, based on 11 months of contribution from VMware, we expect.
So for 2024 based on 11 months of contribution from Vmware.
Kirsten Spears: VMware to contribute $12 billion in revenue.
We expect <unk> to contribute $12 billion in revenue.
Kirsten Spears: And on a consolidated basis, we expect our infrastructure software revenue in 2024 to be $20 billion.
And on a consolidated basis, we expect our infrastructure software revenue in 2024 to be $20 billion.
Turning now to semiconductor segment, let me, let me give you more color by end markets.
Kirsten Spears: Let me let me give you more colors by end market
Kirsten Spears: Q4 net working revenue of $3.1 billion grew 23% year on year.
Q4 networking revenue of $3 1 billion grew 23% year on year.
Kirsten Spears: representing 42% of our semiconductor revenue.
Representing 42% of our semiconductor revenue.
Kirsten Spears: This was primarily driven by strong demand from hyperscalers for our custom AI accelerators.
This was primarily driven by strong demand from Hyperscale is for our custom AI accelerators.
Kirsten Spears: and as well for our networking switches, routers, and NICs, network interface cards, dedicated to scaling our AI data centers. As you know.
And as well for our networking switches routers.
Our next network interface cards that dedicated towards scaling our AI data centers.
As you know.
Kirsten Spears: Ethernet is the standard protocol in front-end networks.
Even this Ethernet as the standard probe.
Protocol in front, and then works hi.
Kirsten Spears: Hyperscalers are also deploying Ethernet predominantly in their AI networks.
Hyper scale is also deploying Ethernet.
Nominally in the AI networks.
Kirsten Spears: In fiscal 23, net working revenue grew 21% year-on-year to $10.8 billion.
In fiscal 'twenty three.
Networking revenue grew 21% year on year to $10 billion.
Kirsten Spears: If we exclude the AI accelerators.
If we exclude the AI accelerators.
Kirsten Spears: Networking connectivity represented about $8 billion, and this is purely.
Net working connectivity represented about $8 billion and this is purely silicon.
Kirsten Spears: not systems, not tables, nor subsystems.
Not systems not cables nor subsystems.
Kirsten Spears: In fiscal 2024, we expect networking revenue to grow 30% year-on-year, driven by accelerating deployments of networking connectivity.
In fiscal 'twenty 'twenty, four we expect networking revenue to grow 30% year on year, driven by accelerating deployment of networking connectivity.
Kirsten Spears: and expansion of AI accelerators in hyperscalers.
And expansion of AI accelerators in hyper scaler.
Moving to wireless.
Kirsten Spears: Consistent with the seasonal launch by a North American customer, Q4 wireless revenue of $2 billion increased 23% sequentially.
Consistent with the seasonal launch by our North American customer Q4 wireless revenue of two 2 billion increased 23% sequentially.
Kirsten Spears: and declined 3% year-on-year, representing 27% of semiconductor revenue. In fiscal 23, wireless revenue was relatively flat at $7.3 billion, just down 2% year-on-year.
And declined 3% year on year, representing 27% of semiconductor revenue in fiscal 'twenty three wireless revenue was relatively flat at $7 3 billion.
Just down 2% year on year.
Kirsten Spears: The engagement with our North American customer continues to be deep, strategic, and multi-year. And accordingly, in fiscal 24, we expect wireless revenue to again remain stable year on year.
The engagement with our North American customer continues to be deep strategic and multiyear and accordingly in fiscal 'twenty four.
Expect wireless revenue to gain remained stable year on year.
Kirsten Spears: Next, our Q4 server storage connectivity revenue was $1 billion, or 14% of semiconductor revenue, and down 17% year on year. In fiscal 23, server storage connectivity was $4.5 billion, up 11% year on year.
Next our Q4 server storage connectivity connectivity revenue was $1 billion or 14% of semiconductor revenue and down 17% year on year in fiscal 2003 server storage connectivity was $4 5 billion.
<unk>.
Up 11% year on year.
Kirsten Spears: And going to fiscal 24, we expect service storage revenue to decline mid to high teens percentage year-on-year, driven by the cyclical weakness that began late 23.
And you're going to fiscal 'twenty four we expect server storage revenue to decline mid to high teens percentage year on year, driven by the cyclical weakness that began late 'twenty three.
Kirsten Spears: And moving on to broadband, Q4 revenue declined 9% year-on-year to $950 million in line with expectations and represented 13% of semiconductor revenue.
Yeah.
And moving onto broadband Q4 revenue declined 9% year on year to $950 million in line with expectations and represented 13% of semiconductor revenue.
Kirsten Spears: And in fiscal 23, broadband revenue was $4.5 billion and up 8% year on year.
And in fiscal 'twenty, three broadband revenue was $4 5 billion and up 8% year on year.
Kirsten Spears: Moving on to Fiscal 24, we expect broadband revenue to be down low to mid-teens percentage year-on-year, and reflecting again the further slowdown as the cyclical weakness at service providers that began in late-23 continues into Fiscal 24.
Moving onto fiscal 'twenty, four we expect broadband revenue to be down low to mid teens percentage year on year, and reflecting again, the further slowdown as the cyclical weakness at service providers.
And that began in late 'twenty three continues into fiscal 'twenty four.
Kirsten Spears: And finally, Q4 industrial sales of $236 million was stable year-on-year. In fiscal 23, industrial resales were $962 million.
And finally Q4 industrial sales of $236 million was stable year on year in fiscal 'twenty three industrial resales.
$962 million.
Kirsten Spears: Fiscal 24, we expect industrial sales to be down low single digits year on year.
Tim.
Fiscal 'twenty four we expect industrial sales to be down low single digits.
Yes.
So in summary.
Kirsten Spears: Fiscal 23 semiconductor solutions revenue was up 9% year-on-year to $28.2 billion. Revenue from generative AI in fiscal 23 reached 15% of semiconductor revenue, in line with our expectations.
Fiscal 'twenty three semiconductor solutions revenue was up 9% year on year to $28 2 billion revenue from generating for AI in fiscal 'twenty three.
15% of semiconductor revenue revenue in line with our expectation.
Kirsten Spears: And moving on to fiscal 24, we forecast semiconductor solutions revenue to be up mid to high single-digit percent year-on-year. We expect revenue from generative AI to represent more than 25 percent of the semiconductor revenue consistent with prior guidance.
And moving on to fiscal 'twenty, four we forecast semiconductor solutions revenue to be up.
Mid to high single digits percent year on year, we expect revenue from generative AI to represent to represent more than 25% of the semiconductor revenue.
System.
Kirsten Spears: which more than offset the lack of growth from non-AI semiconductor revenue.
Prior guidance.
Which more than offset the lack of growth from non AI semiconductor revenue.
Kirsten Spears: With the consolidation of VMware, bringing our infrastructure software segment revenue to $20 billion, and the semiconductor segment holding at mid-high single-digit growth year-on-year, we are therefore guiding our fiscal 2024 revenue to be $50 billion.
Sure.
With the consolidation of Vmware, bringing our infrastructure software segment revenue to $20 billion and the semiconductor segment holding at mid high single digit growth year on year, we had therefore guiding our fiscal 'twenty for revenue to be $50 billion.
Speaker Change: which represents 40% year-on-year growth from fiscal 23. With that, let me turn the call over to Kirsten.
Which represents 40% year on year growth from fiscal 'twenty three.
With that let me turn the call over to <unk>.
Kirsten Spears: Thank you, Hawk. Let me now provide additional detail on our Q4 financial performance.
Thank you hock.
We now provide additional detail on our Q4 financial performance.
Kirsten Spears: Consolidated revenue was $9.3 billion for the quarter, up 4% from a year ago. Gross margins were 74.3% of revenue in the quarter, in line with our expectations.
Consolidated revenue was $9 3 billion for the quarter up 4% from a year ago gross margins were 74, 3% of revenue in the quarter in line with our expectations.
Kirsten Spears: Operating expenses were $1.2 billion flat year on year. R&D of $940 million was also stable year on year.
Operating expenses were $1 2 billion flat year on year R&D of $940 million was also stable year on year.
Kirsten Spears: Operating income for the quarter was $5.7 billion and was up 4% from a year ago, with operating margin at $60 billion.
Operating income for the quarter was $5 7 billion and was up 4% from a year ago.
With operating margin at 62% of revenue.
Kirsten Spears: adjusted EBITDA with $6 billion, or 65% of revenue, in line with expectations.
Adjusted EBITDA was 6 billion or 65% of revenue in line with expectations.
Kirsten Spears: This figure excludes $124 million of depreciation. Now a review of the P&L for our two segments.
This figure excludes 124 million of depreciation.
Now a review of the P&L for our two segments.
Starting with our semiconductor segment.
Kirsten Spears: Revenue for our semiconductor solution segment was $7.3 billion and represented 79% of total revenue in the quarter. This was up 3%
Revenue for our semiconductor solutions segment was $7 3 billion and represented 79% of total revenue in the quarter. This was up 3% year on year.
Kirsten Spears: Gross margins for our semiconductor solution segment were approximately 70%, down 110 basis points year on year, driven primarily by product mix within our semiconductor and market.
Gross margins for our semiconductor solutions segment for approximately 70% down 110 basis points year on year, driven primarily by product mix within our semiconductor end markets.
Kirsten Spears: Operating expenses were stable year-on-year at $822 million, resulting in operating profit growth of 2% year-on-year and semiconductor operating margins of 58%. Now moving on to our infrastructure.
Operating expenses were stable year on year, 800, $822 million, resulting in operating profit growth of 2% year on year and semiconductor operating margins of 58%.
Now moving onto our infrastructure software segment.
Kirsten Spears: Revenue for infrastructure software was $2 billion, up 7% year-on-year, and represented 21% of revenue. Gross margins for infrastructure software were 92% in the quarter, and operating expenses were $339 million in the quarter. Q4 operating profit grew 12% year-on-year, with infrastructure software operating margin at 75%.
Revenue for infrastructure software with $2 billion up 7% year on year and represented 21% of revenue gross margins for infrastructure software, where 92% in the quarter and operating expenses were $339 million in the quarter Q4 operating profit grew 12% year on year with.
Infrastructure software operating margin at 75%.
Kirsten Spears: Now moving on to cash flow. Free cash flow in the quarter was $4.7 billion and represented 51% of revenues in Q4.
Now moving on to cash flow free cash flow in the quarter was $4 7 billion and represented 51% of revenues in Q4.
Kirsten Spears: We spent $105 million on capital expenditure.
We spent 105 million on capital expenditures.
Kirsten Spears: Day sales outstanding were 31 days in the fourth quarter, compared to 30 days in the third. We ended the fourth quarter with inventory of $1.9 billion, up 3% sequentially. We continue to remain disciplined on how we manage inventory across the ecosystem. We exited the quarter with 76 days of inventory on hand, down 80 days in Q3.
Days sales outstanding were 31 days in the fourth quarter compared to 30 days in the third we ended the fourth quarter with inventory of $1 9 billion up 3% sequentially. We continue to remain disciplined on how we manage inventory across the ecosystem, we exited the quarter with 76 days of inventory on hand down.
80 days.
Kirsten Spears: We ended the fourth quarter with $14.2 billion of cash and $39.2 billion of gross debt, of which $1.6 billion is short term.
In Q3.
We ended the fourth quarter with $14 2 billion of cash and $39 2 billion of gross debt of which $1 6 billion in short term.
Kirsten Spears: Now let me recap our financial performance for fiscal 2023. Our revenue hit a record $35.8 billion, growing 8% year-on-year. Semiconductor revenue was $28.2 billion, up 9% year-over-year.
Now, let me recap our financial performance for fiscal 2023, our revenue hit a record $35 8 billion growing 8% year on year semiconductor revenue was $28 2 billion up 9% year over year infrastructure software revenue was $7 6 billion up 3% year on.
Kirsten Spears: Infrastructure software revenue was $7.6 billion, up 3% year-on-year. Gross margin for the year was 74.7%, down 90 basis points from a year ago. Operating expenses were $4.6 billion, down 4% year-on-year.
<unk> gross margin for the year was 74, 7% down 90 basis points from a year ago operating expenses were $4 6 billion down 4% year on year.
Kirsten Spears: Fiscal 2023 operating income was $22.1 billion, up 9% year-over-year, and represented 62% of net revenue. Adjusted EBITDA was $23.2 billion, up 10% year-over-year, and represented 65% of net revenue.
Fiscal 2023 operating income was $22 1 billion up 9% year over year and represented 62% of net revenue adjusted EBITDA was $23 2 billion up 10% year over year and represented 65% of net revenue.
Kirsten Spears: This figure excludes 502 million of depreciation.
This figure excludes $502 million of depreciation we.
Kirsten Spears: We spent $452 million on capital expenditures and free cash flow grew 8% year-on-year to $17.6 billion, or 49% of fiscal 2023 revenue.
We spent $452 million on capital expenditures and free cash flow grew 8% year on year to $17 6 billion or 49% at fiscal 2023 revenue.
Kirsten Spears: Now turning to capital allocation, for fiscal 2023, we spent $15.3 billion consisting of $7.6 billion in the form of cash dividends and $7.7 billion in share repurchases and eliminations. We ended the year with $7.2 billion of authorized share repurchase programs remaining. With the VMware deal closed, we have resumed repurchasing shares under our existing program.
Now turning to capital allocation for fiscal 2023, we spent $15 3 billion consisting of $7 6 billion in the form of cash dividends and $7 7 billion in share repurchases and eliminations. We ended the year with $7 2 billion of authorized share repurchase programs remain.
With the Vmware deal closed we have resumed repurchasing shares under our existing program.
Kirsten Spears: In fiscal year 2024, including the incremental shares from the acquisition of VMware and excluding the potential impact of any share repurchases, we expect the non-GAAP diluted share count to be approximately 494 million.
In fiscal year 2024, including the incremental shares from the acquisition of Vmware and excluding the potential impact of any share repurchases, we expect our non-GAAP diluted share count to be approximately $494 million.
Kirsten Spears: Aligned with our ability to generate increased cash flows in the preceding year and now off of a larger share count base from the acquisition of VMware, we are announcing an increase in our quarterly common stock cash dividend in Q1 fiscal 2024 to $5.25 per share, an increase of 14% from the prior quarter. We intend to maintain this target quarterly dividend throughout fiscal 24 subject to quarterly board approval.
Aligned with our ability to generate increased cash flows in the preceding year and now off of a larger share count base from the acquisition of Vmware, We are announcing an increase in our quarterly common stock cash dividend in Q1 fiscal 2024 to $5 25 per share an increase of 14%.
From the prior quarter, we intend to maintain this target quarterly dividend throughout fiscal 'twenty four subject to quarterly board approval.
Kirsten Spears: This implies our fiscal 2024 annual common stock dividend to be a record $21 per share. I would like to highlight that this represents the 13th consecutive increase in annual dividends since we initiated dividends in fiscal 2011.
This implies our fiscal 2024 annual common stock dividend to be a record $21 per share I would like to highlight that this represents the 13th consecutive increase and annual dividend since we initiated dividends in fiscal 2011 now.
Kirsten Spears: Now on to guidance. As Hawk discussed with the recent closing of our VMware acquisition and the integration process, which will take at least one year, for fiscal 2024, we will provide our outlook for the full year instead of quarterly guidance.
Now onto guidance.
As hock discussed with the recent closing of our Vmware acquisition and the integration process, which will take at least one year for fiscal 2024, we will provide our outlook for the full year instead of quarterly guidance.
Kirsten Spears: Based on current business trends and conditions, our guidance for fiscal year 2024 is for consolidated revenues of 50 billion. Within this, our fiscal year 2024 semiconductor revenue is expected to grow mid to high single digit percent year on year.
Based on current business trends and conditions, our guidance for fiscal 'twenty year 2024 is for consolidated revenues of 50 billion within this are.
Our fiscal year 2020 for semiconductor revenue is expected to grow mid to high single digit percent year on year, our fiscal year 2020 for infrastructure software segment revenue from continuing operations is expected to be 20 billion, including 8 billion from CA Symantec enterprise and brocade.
Kirsten Spears: Our fiscal year 2024 infrastructure software segment revenue from continuing operations is expected to be $20 billion, including $8 billion from CA, Symantec Enterprise, and Brocade, and $12 billion from VMware.
And 12 billion from Vmware.
Kirsten Spears: With regard to VMware, our forecast for fiscal 24 revenue of $12 billion reflects 11 months of contribution from VMware.
With regard to Vmware, our forecast for fiscal 'twenty four revenue up 12 billion reflects 11 months of contribution from Vmware.
Kirsten Spears: This does not include revenue from EUC and carbon black of approximately $2 billion, which we plan to divest.
This does not include revenue from UC and carbon black of approximately $2 billion, which we plan to divest. We are also converting an installed base of licenses that is over 60% perpetual today to one that will be mostly subscription by the end of fiscal 'twenty.
Kirsten Spears: We are also converting an installed base of licenses that is over 60% perpetual today to one that will be mostly subscription by the end of fiscal 2024.
Kirsten Spears: Offsetting these, our new strategy for VMware will accelerate revenue growth over the next three years.
24.
Offsetting these are new strategy for Vmware will accelerate revenue growth over the next three years.
Kirsten Spears: During fiscal 24, we expect to incur about $1 billion of spend related to transitioning VMware into the new Broadcom model.
During fiscal 'twenty, four we expect to incur about $1 billion of spend related to transitioning vmware into the new Broadcom model.
Kirsten Spears: This transition spending will be largely completed by the end of the fiscal year, as our VMware spending run rate at exit fiscal 24 at approximately 1.4 billion per quarter down 40%.
This transition spending will be largely completed by the end of the fiscal year as our Vmware spending run rate exit fiscal 'twenty four at approximately one 4 billion per quarter.
<unk>, 40%.
From a year ago.
Kirsten Spears: So in fiscal year 2024, including VMware, we expect consolidated adjusted EBITDA of approximately 60% of projected revenue.
So in fiscal year 2024, including Vmware, we expect consolidated adjusted EBITDA of approximately 60% of projected revenue.
Speaker Change: That concludes my prepared remarks. Operator, please open up the call for questions.
That concludes my prepared remarks, operator, please open up the call for questions.
Speaker Change: Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. To withdraw your question, please press star 11 again. Due to time restraints, we ask that you please limit yourself to one question. Please stand by while we compile the Q&A roster.
Thank you as a reminder to ask a question you will need to press star one one on your telephone to withdraw your question. Please press star one again due to time restraints. We ask that you. Please limit yourself to one question. Please standby, while we compile the Q&A roster.
Yeah.
Speaker Change: Our first question will come from the line of Vivek Arya with Bank of America. Your line is open.
Yeah.
Our first question will come from the line of Vivek Arya with Bank of America. Your line is open.
Vivek Arya: Thanks for taking my question, Hock. So yesterday, one of your peers suggested that the market for AI accelerators could be as large as $400 billion. So kind of three related questions. What do you think about that number? And then number two, how does Broadcom participate in that, just beyond your large kind of ASIC project on the computer offload side?
Thanks for taking my question.
Yesterday, one of your peers suggested that the market for AI accelerators could be as large as that $400 billion. So kind of three related questions. What do you think about that number and then number two how does broadcom participate on that just beyond your large kind of ASIC.
Project and the compute offload side and then what does this larger AI accelerator market imply for your Ethernet networking business I assume that they are correlated but what is the right way to think about what is presumably a much larger market for us.
Vivek Arya: And then what does this larger AI accelerator market imply for your Ethernet networking business? I assume that they are correlated, but what is the right way to think about what is presumably a much larger market for accelerators and how it impacts Broadcom's growth prospect?
Accelerators, and how it impacts broadcom growth prospects.
Speaker Change: Thank you for those very interesting questions, starting with the first one.
Thank you for those very interesting questions starting with the first fund.
Speaker Change: I mean, what we're seeing is a market that continues to grow, to accelerate. What is also very obvious is very, very dynamic. As architectures...
I mean, it's.
What we're seeing is a market that continues to grow to accelerate.
What is also very obvious is is very very dynamic.
<unk> architectures.
Speaker Change: large language models, software models, continues to change.
Lots of language models software models continues to change.
Speaker Change: I mean, literally change on the fly. We are also seeing the requirements for compute silicon change.
I mean literally change on the fly.
We are also seeing the requirements for compute silicon change.
Speaker Change: And it's very interesting, very fascinating for us, but it also presents quite an interesting opportunity, which is to say that if a customer has a business model that is substantial and have resources, which obviously supports that, it's getting to a stage that it might make a lot of sense to design.
Uh huh.
And.
It's very interesting and very fascinating for us, but it also presents quite a interesting opportunity, which is to say that if a customer has a business model that is substantial and have resources, which obviously supports that.
Is getting to a stage it might make a lot of sense.
Speaker Change: AI compute engines, which comprises memory, as well as the compute engine itself, then that can be tailored.
Design.
Compute engines, which comprises memory as well.
The compute engine itself then that can be.
Speaker Change: or better word, customized for the particular requirements on applications on the particular LLM model. And we're seeing this, as we all are seeing, LLM models continue to change and face the shape of a generative AI.
<unk>.
A better word customized for their particular requirements on applications on the particular LLM model and we're seeing this as we all are seeing L. M models continue to change and face the shape of a January deep AI.
Speaker Change: dynamically change more and more, where training and inference are now starting to
Dynamically change more and more wet training and inference are now starting to.
Speaker Change: in a way converge and the chip designs are changing.
In a way converge.
The chip designs are changing and we're seeing that in the way we design specific custom chips for Hyperscale.
Speaker Change: And we are seeing that in the way we design specific custom chips for hyperscalers.
Speaker Change: Uh, that's interesting. So that's a, that's a very interesting opportunity for us. And as.
That's interesting so that's our view.
That's a very interesting opportunity for us and as.
Speaker Change: indicated in my remarks, we see that revenue as part of networking revenue four billion in networking for AI networks and going doubling almost between 2024. Nothing new, we have said that before and if anything else we arrange we are reinforcing that particular guidance.
I indicated in my remarks.
We see that revenue as part of named looking revenue $4 billion.
And Theyre looking for.
AI networks and growing doubling almost.
In 2024, nothing new we've said that before and if anything else we arrange.
Reinforcing that particular guidance no networking is particularly interesting as you heard in my opening remarks it is accelerating.
Speaker Change: Now, networking is particularly interesting, as you heard in my opening remarks, it is accelerating as fast as our AI accelerators.
As our.
Speaker Change: the compute engines are growing. And we see that growing hand in hand, and it's particularly so as training continues, training of very large language models with very different and very large parameters keep coming.
The AI accelerators, the compute engines.
Growing.
And we see that growing hanging in.
Particularly so as training continues trailing of very large language models with very different and very large per parameters.
Speaker Change: going on and things keep changing. So we've seen no slowdown in fact in the uptake on building out.
Going on and things keep changing so we've seen no slowdown in saying in the uptake on building out.
Speaker Change: these AI networks. If anything else, on average, we are seeing a doubling on size of those networks across the board. So that.
This AI networks, if anything else on average we are seeing a doubling on size of those networks across the board so thats.
Speaker Change: That's a good question. Yeah, I fully concur with
To answer your question, yes, I fully concur with.
Speaker Change: with AMD when they indicate that it looks like demand.
We've.
When they indicate that it looks like demand.
Speaker Change: appears to be accelerating rather than staying stable or decelerating.
Appears to be accelerating rather than staying stable or decelerating.
Thank you.
Thank you one moment for our next question.
Speaker Change: And that will come from the line of Ross Seymour with Deutsche Bank. Your line is open.
And that will come from the line of Ross Seymore with Deutsche Bank. Your line is open.
Ross Seymour: Hi, thanks for letting me ask a question. Just a quick clarification on the question. The clarification is the fiscal year guidance going to be the new protocol, or is that just this quarter? And then the real question, Hawk, is
Hi, Thanks for letting me ask a question just a quick clarification on the question. The clarification is the fiscal year guidance going to be the new protocol or is that just for this quarter and then the real question Hawkins on the Vmware side of things <unk> talked about it potentially accelerating off of that $12 billion base can you just talk about the linearity of it maybe throughout the.
Ross Seymour: On the VMware side of things, Kirsten talked about it potentially accelerating off of that $12 billion base. Can you just talk about the linearity of it maybe throughout the year? Or more importantly, how is it going to be accelerating as people start to look at what the VMware street estimates were before? We know we have to take out the 2 divested operations, but what are the drivers of acceleration and how should we consider the magnitude of that as we look forward?
A year or more importantly, how is it going to be accelerating as people start to look at what the Vmware Street estimates, where before we know we have to take out the two divested operations, but what are the drivers of acceleration and how should we consider the magnitude of that as we look forward.
Speaker Change: Yeah, we are in a very interesting but very exciting situation here as we move into the next chapter for VMware. As you say, we focus the business.
We are very very interesting by very exciting situation here as we move into the next chapter for Vmware as I say, we focus the business.
Speaker Change: on VMware Cloud Foundation, which is the full software stack.
On.
Vmware Cloud Foundation, which is the does the full software stack that could that Virtualized data is data centers on Prem.
Speaker Change: that virtualizes data centers on-prem, soup to nuts, totally virtualize it, a cloud environment. And we are converting more and more customers as...
Soup to nuts totally virtualized cloud environment, and we are converting.
More and more customers.
Speaker Change: you know, step by step as they come up for renewals into this higher value stack. And we're doing it on a subscription basis. So become very focused. So we will kick it off.
<unk>.
Step by step as they come up for renewals.
Due to this higher value stack and we're doing it on a subscription basis. So become very focused so we will kick it off.
Speaker Change: at a much lower rate, because subscription generally brings down revenues, as you know, in software, based on revenue recognition. But we see a trajectory of accelerated growth, even in 2024, through 2024, and it just doesn't stop there because it's the math.
Of.
Adam.
Much lower rate because subscription generally brings down revenues as you know in software based on revenue recognition, but we see a trajectory of accelerated growth even in 2024 through 2024 and it just doesn't stop there because as the man.
Speaker Change: and the trajectory. And to answer your question, you're right. We are accelerating from $12 billion. And we're probably seeing a double-digit growth for the next three years. Just by sheer math.
And the trajectory and.
To answer your question, Yes, we are accelerating from $12 billion.
Probably seeing double digit growth for the next three years.
Just by sheer math of.
Speaker Change: selling that higher value virtualization stack versus the.
Selling that higher value.
Virtualization stack versus the.
Speaker Change: very loose component sales in the past, particularly on compute only.
Barry.
Luiz component sales in the past, particularly on compute OLED.
Speaker Change: And on the fiscal year side, is this a one quarter thing, or is this the new way you guys are gonna be doing?
And on the fiscal year side is this a one quarter thing or is this the new way you guys are going to be doing it.
Speaker Change: Oh, that's a good question. Well, we will just give you an indication 2024 because it's an accelerating trend.
That's a good question well you all we will just give you indications 'twenty 'twenty because this accelerating trend.
Speaker Change: Our view is that it is more appropriate and more relevant to getting you guys a sense of where we're headed to turn it to an annual guidance for 24. And we will report results every quarter and update our annual guidance 24 each time we report the quarterly actuals.
Our view is that as a small appropriate and more relevant to getting you guys. A sense of where we are here to get to turn it to our annual guidance for 2004.
We will report results every quarter and update our annual guidance 24, each time, we report the quarterly actuals.
Speaker Change: Thank you. One moment for our next question.
Thank you.
Thank you one moment our next question.
Speaker Change: And that will come from the line of Harlan Sir with J.P. Morgan. Your line is open.
And that will come from the line of Harlan sur with Jpmorgan. Your line is open.
Harlan: Good afternoon. Thanks for taking my question. Um, 1, quick housekeeping item question. So, even off the lower revenue base, starting in fiscal 24 for VMware is the team still targeting 8 and a half billion plus of data in 3 years and then for my main question, Hawk.
Hello, Good afternoon, Thanks for taking my question.
One quick housekeeping item question, so even off the lower revenue base starting in fiscal 'twenty four from Vmware.
Is the team still targeting $8 5 billion plus of EBITDA in three years and then for my main question Hock as you mentioned one of the fastest growing workloads and accelerated compute is accelerated continued in January.
Harlan: As you mentioned, right, one of the fastest growing workloads and accelerated compute is accelerated compute and generative AI and all of these workloads.
And all of these workloads.
Harlan: are increasing at an exponential rate, right? You talked about the benefits to your silicon franchise.
Our increasing at an exponential rate you talked about the benefits to your silicon franchise.
Harlan: But given the significant performance requirements of these workloads, training, inference, it appears that more of the near-term adoption of running these workloads is on bare metal GPU, TPU, accelerated servers. So how is the team exploiting its software-defined data center solutions via either Cloud Foundations or Tenzu to try to help customers focused on AI drive better utilizations, better economics, faster deployments on this very fast-growing part of the world?
But given the significant performance requirements of these workloads right training inference. It appears that more of the near term adoption of running these workloads is on bare metal GPU GPU accelerated servers. So how is the team exploiting a software defined data center solutions either cloud Foundation.
<unk> or <unk> to try to help customers focused on AI sort of drive better utilization better economics faster deployments.
This is a very fast growing part of the market.
Harlan: Well, as you may be aware, in the last VM Explore in Las Vegas, VMware came out and announced in partnership with NVIDIA.
Well.
Yes.
Su.
Be aware.
In the last VM exploring in Las Vegas.
Vmware, Inc came out and announced in partnership with Nvidia.
The Vmware.
Harlan: Private AI Cloud Foundation and another way of describing it is
Private AI Cloud Foundation.
Other way of describing it.
Harlan: VMware, the VMware Cloud Foundation software stack, the whole VCS stack.
Vmware does this.
Vmware Cloud Foundation software stack the old Vcs.
Runs.
Harlan: NVIDIA CUDA runs the NVIDIA GPU. That is the partnership. So if you're an enterprise, it's a very easy step to get into AI analytics, because the data center that you as an enterprise own on-prem that runs VCF.
Nvidia Cuda runs the Nvidia GPU that is the partnership so again enterprise, it's a very easy step to op to to get into AI analytics, because the data center that you use in enterprise on Prem that runs.
Vcs will buy.
Harlan: by default run the NVIDIA GPU software stack as well. In another way to put it, it virtualizes the NVIDIA GPU. That's the VMware software stack as well. So it's a very strong attraction from our perspective to, in fact, accelerate thinking of a lot of enterprise to adopting the whole VCF stack.
By default run.
The Nvidia GPU.
The software stack as well.
Another way to put it virtual alliances the Nvidia GPU, that's the Vmware software stack as well so it's a very strong attraction.
From our perspective to in fact accelerate thinking of a lot of enterprise to adopting the whole wins yet.
Harlan: simply because not only does it virtualize the data centers and make your data on-prem data center much more resilient, easier to manage, lower cost to manage, it has the added benefit, a big attraction these days of being able to.
It simply because not only does it virtualized data centers and make your own data on Prem data center much more resilient easier to manage lower cost manage it has the added benefit that a big attraction this days of being able to buy.
Harlan: by default right away, start running AI workload.
Baidu right away start running.
AI workloads.
Harlan: And then, just on my first question, are you guys still targeting $8.5 billion of EBITDA in three years?
And then.
Just on my first question are you guys still targeting $8 5 billion of EBITDA in three years.
Speaker Change: As Kirsten indicated.
As Kirsten indicated.
Speaker Change: As we exceed fiscal 24, we are practically at a run rate of eight and a half billion dollars EBITDA. Perfect. That's awesome. Thank you.
As we exit fiscal 'twenty four.
We are practically at a run rate of $8 5 billion EBITDA.
EBITDA.
Perfect that's awesome. Thank you.
Thank you one moment our next question.
Speaker Change: And that will come from the line of Stacy Raskon with Bernstein. Your line is open.
And that will come from the line of Stacy <unk> with Bernstein. Your line is open.
Stacy Raskon: Hi, guys. Thanks for taking my question. Christian, along that line, I was wondering, you know, if you're going to do 60% EBITDA margin for the company's full year, how should we think about the beginning and exit rates?
Hi, guys. Thanks for taking my question.
A question along that line I was wondering if you're going to do 60% EBIT margin for the full year, how should we think about the beginning and exit rates.
Stacy Raskon: on on EBITDA margin relative to that four-year total. And I guess aligned with that, I think I heard you say you that VMware OPEX would be down 40% exiting the year versus
On EBITDA margin relative to that full year total and I guess aligned with that I think I heard you say you with Vmware Opex would be down 40% exiting the year versus.
Speaker Change: The entrance rate, I'm actually kind of surprised it's knocked down more. Maybe that's the reinvestment, but is that $1.4 billion per quarter for VMware? That's the right exit rate going for VMware OPEX? And should we grow off of that or what? That's VMware spending, so that's total spending. Yeah, it will be, but let me tell you, Stacy, you're missing the biggest point. We are on a, as I indicated earlier to an earlier question by Vivek, I think.
The entrance rate I'm actually kind of surprised just knocked down more and maybe that's the reinvestment but.
Is that $1 4 billion per quarter for Vmware, that's the right.
Exit rate.
For <unk> via where Opex and should we have to grow off of that or one that vmware spending so that that's total spending yes, it will be.
Safety Youre missing the biggest point we own.
Decatur led to an earlier question by.
Speaker Change: Our revenue during this process, even 12 months, four quarters, is on a growth trajectory, just because of the way the math works. As we sell more and it's on revenue, and we recognize revenue on a readable basis.
Uh huh.
Our revenue during this process, even 12 months four quarters.
On the growth trajectories, just because of the way the math works.
As we sell more and is on revenue and we recognize revenue on a ratable basis.
Speaker Change: Our revenue on a quarterly basis is on a growth trajectory that will keep running and will keep running beyond 2024, but 2024 by itself will be on a revenue trajectory that goes up very rapidly.
Our revenue on a quarterly basis on a growth trajectory that will keep running and we'll keep running beyond 2024 by 2024 by itself won't be on a revenue trajectory that goes up very rapidly.
Speaker Change: So what you have, think about picture it, is a revenue trajectory through 24 that is expanding or growing while the expense, operating expense, total spend, because of reduction of transition expenses is declining.
What do you have thinking about picture. It is a revenue trajectory. That's true 24 that is grow expanding or growing while the expense operating expense.
Total spend because of reduction of transition expenses is declining.
Speaker Change: And that's why we are telling you that by the end of, as we exit fiscal 24, we pretty much get to the guidance we gave you at the beginning of when we announced this deal.
And Thats why we are telling you that by the end of <unk>.
<unk>.
As we exit fiscal 'twenty four we pretty much get to the guide business. We gave you at the beginning of when we announced this deal.
Speaker Change: So what's the total company that a margin say exiting the year than just just a level set?
So what's the total company EBIT margin, let's say exiting the year than just talk just a level set.
Speaker Change: Well, that's a total, we were pretty close to where we are supposed to be before we started this whole exercise.
Well, that's a total to only be it was pretty it can get pretty close to where we are supposed to before we started this whole exercise.
Speaker Change: What was that, 65? I can't remember. It's somewhere between 60 and 65. How's that sound, Stacy? I mean, you just did 65 on it. I think I recall you saying you were going to run VMware at 65. So I guess 65 is the right run, the right exit rate.
What was that 65 I can't remember.
But somewhere between 60 and 65, how does that sound Stacey.
It's been 65 on it so I think I recall, you, saying youre going to run Vmware at 65. So I guess 65 is the right the right exit rate.
Speaker Change: A steady state, you're right, a steady state will get to pretty close to 65 on VMware. Got it. Okay. Helpful.
Yeah.
Steady state.
Youre right its steady state, we will get to pretty close to 60 <unk>.
Got it okay helpful. Thank you guys.
Thank you one moment our next question.
<unk>.
Speaker Change: And that will come from the line of Timothy Arcuri with UBS. Your line is open.
And that will come from the line of Timothy Arcuri with UBS. Your line is open.
Timothy Arcuri: Hi, Hock, in the language for the approvals from China, they noted some restrictive conditions and there were some protections around some, you know, sensitive information from your competitors. Can you detail what these are and does this change your view on the synergies you can drive either cost or, you know, more importantly, revenue?
Hi, Hock.
Language for the approve.
Approvals from China. They noted some restrictive conditions and there were some protections around some sensitive information from your competitors can you detail. What these are and does this change your view on the synergies you can drive either cost or more importantly revenue. Thanks.
Hock: I don't know, I think those conditions are pretty well laid out in the website of the relevant authorities. I frankly don't think that it's very appropriate for me to sit here and repeat all those conditions again. It's right on the website and that's what it is.
Alright.
I think those conditions are pretty well laid out in the website of the relevant authorities.
Frankly, the only thing that is very <unk>.
Appropriate for me to sit here and repeat all of those conditions again.
He is running the web site and Thats what it is.
Speaker Change: Okay, and it doesn't make you think any differently about the, you know, synergies that you can drive from the business? No. Okay. Thanks, Hans.
Okay and it doesn't make you think any differently about the.
The synergies that you can drive from the business.
No.
Okay. Thanks, a lot.
Thank you one moment our next question.
Speaker Change: That will come from the line of Christopher Rowland with Susquehanna, your line is open.
Okay.
That will come from the line of Christopher Rolland with Susquehanna. Your line is open.
Christopher Rowland: Thanks for the question. Congrats on the quarter and closing the VMware deal.
Thanks for the question congrats on the quarter.
In closing with Vmware deal I.
Christopher Rowland: I guess cost of capital has increased since VMware, since the announcement of the deal.
I guess.
Cost of capital has increased since Vmware since the announcement of the deal.
Christopher Rowland: And now that this is closed, I guess, does this affect how you look at your capital allocation strategy going forward?
And now that this is closed.
I guess does this affect how you look at your capital allocation strategy going forward it.
Christopher Rowland: It sounds like you bumped the divvy here, and you restarted your share repurchase now that it's closed.
It sounds like you bounce you bumped the dividend here and you restarted your share repurchase now that it's closed are you going to focus more on repurchases or is it still same old broad broadcom with.
Christopher Rowland: Are you going to focus more on repurchases or is it still same old broadcom with acquisitions in mind as you deliver?
With acquisitions in mind as you Delever.
Christopher Rowland: Always with acquisitions in mind, we're continuing our share repurchase program that we promised, so that's, we're definitely buying back shares. Yes, we, you know, as being Broadcom, we'll de-lever quickly. So we'll keep everything in mind, essentially.
With the acquisitions in mind, we're continuing our share repurchase program that we promise. So that's where we are definitely buying back shares.
Yes.
Being broadcom.
On quickly so everyone keep everything in line essentially.
Christopher Rowland: I'm going to expand a bit on that. We acquired VMware with a pot of cash.
Chris will expand a bit on that.
We acquired <unk>.
Christopher Rowland: Because it took longer, so we got ourselves a pot of cash. And with that, flexibility.
Part of cash.
Because it took longer so we've got ourselves a pot of cash and with that.
The flexibility.
Christopher Rowland: Not only are we able to give dividends to the new shareholders from VMWare's side, we are continuing to complete the commitment we made to you, the shareholders, for the rest of calendar 23 to buy back that $7 billion of shares out there.
Not only are we able to give dividends to the new shareholders from the EMS side.
We are continuing continuing to complete the commitments, we make to you the shareholders to finish for the rest of fiscal for the rest of calendar 'twenty three to buyback that $7 billion of shares out there.
Speaker Change: Great, thanks. And maybe a quick follow up thoughts on just why you didn't offer next quarter in favor of the full year. And if you had any thoughts on the shape of revenue for next year, whether it's back half loaded significantly or pretty linear.
Great. Thanks, and maybe a quick follow up.
Thoughts on just why you didn't offer next quarter in favor of the full year and if you had any thoughts on the shape of revenue for next year, whether it's back half loaded significantly or pretty linear which is border company thats pretty sizeable we are restructuring the business model and we're changing among others.
Speaker Change: We just bought a company that's pretty sizable. We're restructuring the business model, and we're changing, among other things, the business model to a subscription business model, as Kirsten said. And we see, therefore, that trajectory.
<unk> the business model to a subscription business model.
And we see therefore, the trajectory of the revenue.
Speaker Change: of the revenue, a sharp trajectory of growth for the revenue just by sheer conversion to subscription and the fact that we are also upselling a higher value product. The combination of that and the new, in effect, it's the new company.
Our sub trajectory of growth for the revenue just by sheer conversion to subscription and the fact that we are also upselling of higher value products, the combination of debt and the new <unk> as a new company.
Speaker Change: We mix it more, much more.
Makes it more much more.
Speaker Change: sensible, let's put it this way, for us to be able to give you a full year number, then a three-month...
Sensible, let's put this way for us to be able to give you a full year number than three months.
Speaker Change: because spending, transition spending, might slip, might accelerate. Revenue might accelerate, might slip. And giving ourselves three months to tell you what it is, especially on a new environment to us, it's not very, very...
Guidance.
Spending transition spending might slip my accelerate revenue might accelerate my sleep and gift, giving ourselves three months are telling what it is.
Especially on the new environment to us as not very very ill.
Speaker Change: I call it, we are not being good to you guys, the shareholders, but for the full year, I think we have a hell of a lot more confidence we will attain those endpoints at the exit. Very sensible. Thanks and congrats again.
I call it.
Not been good to you guys the shareholders, but for the full year I think with a hell of a lot more confident we will attain those endpoints at exit.
Very sensible, thanks, and congrats again.
Yes.
One moment for our next question.
Speaker Change: And that will come from the line of Toshia Hari with Goldman Sachs, your line is open.
And that will come from the line of Toshi Hari with Goldman Sachs. Your line is open.
Toshia Hari: Hi, good afternoon. Thank you so much for taking the question. Hawk, I had a question on the semiconductor business and specifically on the non-AI side of things for both networking and server storage connectivity. As you noted, you're obviously going through a cyclical correction. Historically, you've had a pretty good…
Hi, good afternoon. Thank you so much for taking the question Hock I had a question on the semiconductor business and specifically on the non AI side of things.
For both networking and server storage connectivity.
You noted, you're obviously going through a cyclical correction.
Historically, you've had a pretty good.
Toshia Hari: you know, understanding of where customer inventory is, and, you know, when we simply look at their balance sheets for the public.
Understanding of where customer inventory is and.
When we simply look at their balance sheets for the public companies' inventory is pretty elevated particularly on the networking side.
Toshia Hari: companies, inventory is pretty elevated, particularly on the networking side. What is your interpretation of where inventory is for your products? And, you know, how should we think about the timing and pace of recovery as you look into 2024?
What is your interpretation of where inventory is for your products and how.
How should we think about the timing and pace of recovery as you look into 2024. Thank you.
Toshia Hari: In the on our books, you can see inventory for products is pretty damn good, right?
On our books, who can see inventory fall product is pretty darn good right.
Toshia Hari: especially compared to our peers. And that's because we keep it tight. Out in customers, and we don't sell through channels, we don't sell much through channels, we usually do a lot of it direct to our larger customers. We feel they're in good shape, relatively speaking, we're still in good shape. Now, if you ask me, maybe server storage, that could be a little excessive, but not broadband, and certainly not in networking. So.
Especially compared to our peers and that's because we keep it tight out in customers and we don't sell to China, We don't sell much more channels, we usually do a lot of it directly to our logic customers. We feel they are in good shape.
Uh huh.
Relatively speaking we are still in good shape now.
Asked me, maybe server storage that could be a little excessive but non broadband and certainly not in networking.
So overall.
Toshia Hari: On our products, we still feel rather good about it. And the best indication is the level of our own inventory on our own book.
On our products, we feel still feel rather good about it and the best indication is the level of our own inventory on our own books.
Toshia Hari: But what we do see is customers are perhaps much more cautious about
But what we do see is customers are perhaps much more cautious.
About buying more stuff.
Toshia Hari: Not just because they have too much of my inventory, I think because they have too much of everybody else's inventory out there.
Not just because they have too much of my inventory because they have too much of everybody else inventory out there.
Toshia Hari: we tend to see some caution in the way they chose to buy. Having said that, we're still keeping.
We tend to see some caution in the way they choose to buy.
Having said that we're still keeping to our lead times.
Speaker Change: And, Hawk, any comment on sort of the timing or the shape of the recovery on 24? If only I know.
And any comment on sort of the timing or the shape of the recovery in 'twenty four.
If only I know.
Hawk: I mean, I've been speculating to say second half of 24, things will start looking better compared to the first half of 24.
I mean, I'd be speculating to say second half of 'twenty four.
Things will start looking better.
Compared to the first half of 'twenty four.
Fair enough. Thank you.
And one moment our next question.
Speaker Change: And that will come from the line of Carl Ackerman with BNP Paribas. Your line is open.
Yeah.
And that will come from the line of Karl Ackerman with BNP Paribas. Your line is open.
Carl Ackerman: Yes, thank you. Hawk, I was hoping you may discuss the reason for divesting EUC and carbon black. And maybe more importantly, as you think about the growth rate off this $12 billion, Kirsten, could you discuss the opportunity you see in front of you as DRAM memory pooling broadens from the adoption of CXL within data centers that would seem to be a very big opportunity for VMware? Thank you.
Yes. Thank you.
Hock I was hoping you may discuss the reason for divesting <unk> and carbon black.
And maybe more importantly, as you think about the growth rate off this $12 billion.
Kirsten could you discuss the opportunity you see in front of you as DRAM memory pooling brought in from the adoption of <unk> within data centers that would seem to be.
A very big opportunity for Vmware. Thank you.
Hawk: Yeah, what was the first question again? Sorry.
Yeah.
What was the first question again.
Hawk: Okay, why do I chose to sell end-user computing and Carbon Black? Those are...
Uh huh.
Okay, why do I chose to sell end user computing and carbon black dose.
Hawk: Good assets, let's make no mistake, they are very sustaining, they are very stable, good assets.
Good assets, let's make no mistake, they're very sustaining very stable good assets.
Hawk: And why we chose to sell them is typically our playbook.
And why we chose to sell them is typically our playbook.
We focus.
Hawk: very much so on in any acquisition where we see the biggest value for a business model.
Very much so on.
The acquisition, where we see the vet.
The biggest value for our business model.
Hawk: And basically, we then do not want to be distracted by non-call.
And basically we then do not want to be distracted by non call.
Hawk: focus. And VMware for us, it's about core. It's about data centers. It's about core networks.
Focus and Vmware for US is about call is about data centers is about call networks.
Hawk: And so we're now going to invest and focus our sales.
<unk> call compute.
And so we're now going to invest and focus our sales R&D on those core areas of Vmware Cloud Foundation and to US end user computing carbon black good access as they as they may be.
Hawk: R&D on those core areas of VMware Cloud Foundation and to us.
Hawk: End-user computing, carbon black, good assets as they may be, we prefer not to divest.
We prefer not to divest them.
Hawk: We'll find good homes for them, because there are a lot of very interested parties who are more than happy to take those assets. And we'll be very, very thoughtful about where we put those assets eventually, simply because they're critical.
We'll find good homes for them because there are a lot of very interested parties or are more than happy to take those assets and.
And then it will be very very thoughtful about where we positioned.
When we put those assets eventually simply because their customers of many of these two assets. Many of the customers are also the same customers to the Vmware.
Hawk: of many of these two assets, many of the customers are also the same customers.
Hawk: to the VMware Cloud Foundation.
Cloud Foundation.
Okay.
Thank you.
Thank you and one moment for our next question.
Speaker Change: And that will come from the line of Matt Ramsey with TD Cow and your line is open.
And that will come from the line of Matt Ramsay with TD Cowen Your line is open.
Matt Ramsey: Yes, thank you very much. Good afternoon. I guess I'll caveat my question saying that I'm a semiconductor guy rather than a software expert, but I wanted to ask about the plan.
Yes. Thank you very much good afternoon.
Hock I guess I'll caveat my question, saying that I am a semiconductor guy rather than a software expert, but I wanted to.
Ask about the plan to cut.
Matt Ramsey: convert the VMware customer base to subscription models and
Convert the Vmware customer base to subscription models and <unk>.
Matt Ramsey: what you guys did with CA and Symantec. So, are there...
Contrast that with.
What you guys did with CA and Symantec so are there.
Matt Ramsey: We feel like the process is going to be pretty similar.
You feel like the process is going to be pretty similar in duration and success are there or are there differences in maybe.
Matt Ramsey: Duration and success, or are there differences in maybe the customer base, the length of the long tail outside?
Maybe the customer base.
The length of the long tail outside the sort of fortune 1000 type of technologies. There are there any.
Matt Ramsey: Fortune 1000, the type of technologies there. Are there any similarities or differences in the plan there that we?
The similarities or differences in the plan there that we should sort of think about what that might mean for how quickly you can convert that business. Thanks.
Matt Ramsey: sort of think about and what that might mean for how quickly you can convert that.
Matt Ramsey: No, these are very different aspects. Not saying any one is much better than the other, just different. In CA, particularly, where we're mainframe but also some distributed, we focus.
So these are very different assets not seeing anyone that's necessary.
Much better than the other just different.
In CA, particularly where we're mainframe, but also some distributor we focus.
Matt Ramsey: very much, especially on a core customer base.
Very much.
Especially on our core customer base, which represents at that time, we bought it 70% of the overall revenue of those.
Matt Ramsey: which represents at that time we bought it 70% of the overall revenue of CA. We focus on these customers, we focus on supporting them and they're continuing to basically give them really good support, feature requests, growth in their area. And that's how we then focus on Symantec too, which is a small core group of customers.
We focus on these customers, we focus on supporting them.
<unk> been continuing to basically give them really good.
Support feature request growth India area.
And that's how we then full in cement we focus on cement type two which is a smaller core group of customers.
Matt Ramsey: And a big part of it is the technology of CA, especially a mainframe, is honestly, is running a lot of legacy applications that are still very, very much alive today, but customers preferring to run it on those mainframe tools simply because it makes no sense to modernize or change for whatever reason, for their own good reasons.
And a big part of it is the technology LCA, especially a mainframe is honestly is.
Legacy a lot of legacy applications that are still very very much alive today, but customers, preferring to run it on those our mainframe tools simply because it makes no sense to modernize a change for whatever is for their own good reasons.
Matt Ramsey: VMware, however, was selling a product of the present and of the future. It is a growth product to be able to create a virtualized.
Vmware, However was selling a product of the present and the future is a growth product to be able to create a virtual lives.
Matt Ramsey: cloud environment in your own data center on prem for any global company.
Environment in your own data center on Prem for any global company.
Matt Ramsey: You know, the good thing about going to public cloud is it's also totally virtualized, but very resilient when you run a software-defined environment.
The good thing about going to public cloud is also totally virtualized, but very resilient when you run them.
And when you run a software defined environment.
Matt Ramsey: We're creating with VMware the same experience of virtualization of the data center on-prem.
We are creating will be amway, the same experience of virtualization of the data center on Prem.
Matt Ramsey: for those companies, which has workloads, by the way, that are already running.
For those companies, which has workloads by the way that are already running.
Matt Ramsey: VMware products that are applications that are already written on VMware Cloud Foundation. It is then giving these enterprises the opportunity to have a hyperscaler on-pref. That's the plan we're doing, it's plain and simple.
Vmware.
Products.
Application that really drove a reason on Vmware Cloud Foundation is has been giving this enterprises the opportunities to have a hyper scaler on premise.
That's the plan we are doing.
Plain and simple.
Thank you for that and I really appreciate it.
And thank you one moment our next question.
Speaker Change: And that will come from the line of William Stein with Truist. Your line is open.
And that will come from the line of William Stein with <unk>. Your line is open.
William Stein: Great, thanks for taking my question. Hawk, in the past, I think we've all been aware that there's one major customer on the accelerated compute side. I suspect that has broadened and deepened perhaps, and I'm hoping you can give us some characterization of that, maybe the number of customers or projects, how diversified it is at this point. That would really help. Thank you.
Great. Thanks for taking my question.
In the past I think we've all been aware that there is one major customer the.
Accelerated compute side I suspect that has broadened and deepened perhaps.
Hoping you can give us some characterization of that maybe the number of customers or projects how diversified it is at this point.
That would really help thank you.
Okay.
Yes it has.
William Stein: Uh, it has which reflects somewhat my
It has which reflect somewhat my.
William Stein: opening remarks that say that I used to tell you guys, hey, Merchant Silicon will triumph, but I think with the evolution, a very rapid evolution I've been seeing on the AI large language model, generative AI large language models, and the fact that in hardware, one size doesn't fit all.
In the opening remarks that say that I used to tell you guys in general.
Merchant silicon or time.
But I think with the evolution of fairly rapid evolution I have been seeing on the AI and large language model generated.
Language models, and the fact that in hot way one size doesn't fit all.
William Stein: There is variation, depending on the models you run. I would say that if.
There is variation depending on the models you run I would say that if.
William Stein: for some of those hyperscalers with the resources, with the scale.
Some of those Hyperscale is we have the resources.
William Stein: requirements to be able to create.
<unk> the scale.
Our requirements to be able to create.
William Stein: of customized versions of hardware to match with.
Customized versions of hardware to match with.
William Stein: customization of their foundation models and even their application models. We begin to see the effect of that.
Customization of their foundation models and even the application models.
It became that we begin to see the effect of that.
Speaker Change: Other than that, I'd rather not disclose any more to you at this point because we're kind of under NDA all around.
Other than that I'd, rather not disclose anymore to you at this one because we're kind of under.
NDA all round.
Thank you one moment our next question.
Okay.
Speaker Change: And that will come from the line of Harsh Kumar with Piper Sandler, your line is open.
And that will come from the line of harsh Kumar with Piper Sandler Your line is open.
Harsh Kumar: Yeah, Hawk, first of all, congratulations on closing the deal. I know you've been trying to close that for a while. I wanted to, you've had a lot of time, your management's had a lot of time to look at this deal through the process of closing. I was curious what you have seen so far that pleases you the most. And what do you think will be the most challenging aspect of the integration over the next 12 months that you highlighted?
Yes.
Well congratulations on closing the <unk> deal I know you've been trying to close that for a while I wanted to you had a lot of time management's had a lot of time to look at this deal to the process of closing I was curious what you have seen so far that pleases you. The most and what do you think will be the most challenging ASP.
Back to the integration over the next 12 months that you highlighted.
Hawk: Over the past 18 months almost we had on the journey of closing this deal from the date of announcement. You're right, we have had a great opportunity and thanks to a very supportive management team from VMware that engages with us very very well. Again, it's planning.
Wow.
Over the past 18 months, almost we had on the journey of closing this deal from the date of announcement.
We have.
Great opportunity and thanks to our very supportive.
Management team from Vmware.
That engages with us very very well again is planning.
Hawk: cannot we can see we can't touch but it goes a lot of time to plan and think through it also give me a lot of opportunity to go out there and over the past 12-16 months I must have talked one-on-one or in small groups to at least a hundred and fifty CIOs globally of the largest customers of VMware out there and one thing is
We can see we can touch but it goes to a lot of time to plan and thinking through it also gives me a lot of opportunity to go out there and over the past 12 16 months I must have talk one on one or in small groups to at least 150 <unk> globe.
<unk> of the largest customers of Vmware.
And one thing is very clear.
Hawk: The VMware core product, the VMware Cloud Foundations software stack that enables virtualization of not just computing servers, compute.
The Vmware call product, the Vmware Cloud Foundation software stack.
Enables virtualization of not just computing servers compute.
Hawk: storage, networking, as well as orchestration and management layer over that whole stack is something
Storage networking as well as orchestration and management layer over it that holds tank.
Is something.
Hawk: CIOs, head of infrastructure of large, many large companies out there.
Then.
<unk> head of infrastructure of large many large companies out there.
Hawk: really want. They want to be able to deploy, they want to make their data centers which is very heterogeneous now.
Really.
One they want to be able to deploy they want to make their data centers, which is very.
Material genus now between.
Hawk: virtualization of compute to bare metal and a mixed environment with different vendors where each is trying to optimize best of breed to one that is under managing under a single abstraction layer over cross a diversity of hardware. That saves a lot of hardware purchases that creates a lot of cost reduction in the way to manage it. That is.
Virtualization of compute to.
Bare metal.
And the mix environment.
Different vendors, while each is trying to.
Optimize best of breed to one that is under managing under a single abstraction layer of across a diversity of hardware that.
That saves a lot of hardware purchases that that creates a lot of cost reduction in a way to measure that is the value of the technology <unk> brings to bear.
Hawk: the value of the technology VMware brings to bear. And the products are there. For us, it's focusing and execution, which is what you hear us say today, and which is what you hear Kirsten lay out in the numbers we are looking at just in the first year of completion of this acquisition.
Products, our debt for us is focusing and execution, which is what you hear us say that today and which is what you hear and lay out in the numbers. We're looking at just in the first year of completion of this acquisition.
<unk>.
Yes.
Thanks Hock.
Hawk: And that concludes today's question and answer session. I would now like to turn the call back over to Ms. Giu for any closing remarks.
Sure.
And that concludes today's question and answer session I would now like to turn the call back over to MS. Zhu for any closing remarks.
Giu: Thank you, Operator. In closing, Broadcom currently plans to report its earnings for the first quarter of fiscal 24 after close of market on Thursday, March 7, 2024. A public webcast of Broadcom's earnings conference call will follow at 2 p.m. Pacific.
Thank you operator in closing Broadcom currently plans to reported earnings for the first quarter of fiscal 'twenty four after close of market on Thursday March seven 2024.
Public webcast at Broadcom earnings Conference call will follow at two P M Pacific.
Speaker Change: That will conclude our earnings call today. Thank you all for joining. Operator, you may end the call.
That will conclude our earnings call today. Thank you all for joining operator, you may end the call.
Speaker Change: Thank you all for participating, this concludes today's program, you may now disconnect.
Thank you all for participating. This concludes today's program you may now disconnect.
Yeah.
Speaker Change: Thanks for watching!
Okay.
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