Q3 2024 Broadcom Inc Earnings Call

September 5, 2024

Introductions I would like to turn the call over to <unk> head of Investor Relations of Broadcom, Inc.

Thank you operator, and good afternoon, everyone. Joining me on today's call are Hock Tan President and CEO Pearson Peters, Chief Financial Officer, and Charlie Clause, President Semiconductor solutions group.

Hock Tan: Now, turning to semiconductors. In networking, Q3 revenue of $4 billion grew for 3% year on year, representing 55% of semiconductor revenue. This was again driven by strong demand from hyperscalers for both AI networking and on custom AI accelerators. As you know, our hyperscale customers continue to scale up and scale out the AI clusters. Custom AI accelerators grew 3.5 times year on year. In the fabric, Ethernet switching driven by Tomahawk 5 in Jericho 3 AI grew over 4 times year on year. While our optical lasers and pin diodes used in optical interconnect grew 3.4. Meanwhile, BCI Express switches more than double, and we're shipping in volume our industry leading 5 nanometers, 400 gigabits per second Nicks, and 800 gigabits per second GSP.

Hock Tan: Now, turning to semiconductors. In networking, Q3 revenue of $4 billion grew for 3% year on year, representing 55% of semiconductor revenue. This was again driven by strong demand from hyperscalers for both AI networking and on custom AI accelerators. As you know, our hyperscale customers continue to scale up and scale out the AI clusters. Custom AI accelerators grew 3.5 times year on year. In the fabric, Ethernet switching driven by Tomahawk 5 in Jericho 3 AI grew over 4 times year on year. While our optical lasers and pin diodes used in optical interconnect grew 3.4. Meanwhile, BCI Express switches more than double, and we're shipping in volume our industry-leading 5 nanometers, 400 gigabits per second Nicks, and 800 gigabits per second GSP.

Speaker Change: Broadcom distributed a press release and financial tables after the market closed describing our financial performance for the third quarter of fiscal year 2024.

Speaker Change: If you did not receive a copy you may obtain the information from the investors section of <unk> Com's website at Broadcom Dot com.

Speaker Change: This conference call is being webcast live and an audio replay of the call can be accessed for one year through the investors section of Broadcom website.

Speaker Change: During their prepared comments.

Speaker Change: In person will be providing details of our third quarter of fiscal year 'twenty 'twenty four results guide.

Speaker Change: Guidance for our fourth quarter of fiscal year, 'twenty 'twenty four as long as commentary regarding the business environment.

Speaker Change: We will take questions. After the end of our prepared comments.

Speaker Change: 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 board looking statements made on this call.

I'm going to make a video for you.

Speaker Change: In addition to U S GAAP reporting Brian.

Music

Speaker Change: Broadcom reports certain financial measures on a non-GAAP basis.

Hock Tan: So now let me give you more color on a networking product which are not used in AI. Actually, it indicated last quarter, we believe we hit bottom in Q2, and in Q3, non-AI networking was up actually 17% sequentially, even as it was down 41% year-on-year. We expect this level of revenue to sustain EQ4, and the year-on-year decline to moderate to 30%. So in adding the strength we continue to see in AI, we expect total networking revenue to grow over 40% year-on-year in Q4.

Hock Tan: So now let me give you more color on a networking product which are not used in AI. Actually, it indicated last quarter, we believe we hit bottom in Q2, and in Q3, non-AI networking was up actually 17% sequentially, even as it was down 41% year-on-year. We expect this level of revenue to sustain EQ4 and the year-on-year decline to moderate to 30%. So in adding the strength we continue to see in AI, we expect total networking revenue to grow over 40% year-on-year in Q4.

Speaker Change: A reconciliation between GAAP and non-GAAP measures is included in the tables attached to todays press release.

Speaker Change: Comments made during today's call will primarily refer to are non-GAAP financial results.

Speaker Change: I will now I'll turn the call over to Hawk.

Speaker Change: Thank you gene.

Speaker Change: And thanks to everyone for joining us today.

Speaker Change: In the fiscal Q3 2020 people.

Consolidated net revenue all those being born in the 1 billion was up 47% you're on mute.

Speaker Change: <unk> operating profit was 44%.

Speaker Change: <unk> Com distributed a press release and financial tables. After the market closed describing our financial performance for the third quarter of fiscal year 2024.

These strong results reflect the three key factors.

Hock Tan: Across enterprise infrastructure, we see the same trend of recovery in service storage. Our Q3 service storage connectivity revenue was $8.861 million, up 5% sequentially and down 25% year-on-year. In Q4, we expect service storage revenue to grow mid to high single digit, but sequentially, even as revenue is expected to be down high single digit percent year-on-year. Moving on to wireless, Q3 revenue, wireless revenue of $1.7 billion grew 1% year-on-year, representing 23% of semiconductor revenue. In Q4, reflecting the launch of next generation devices and our North American customers, we expect wireless revenue to actually grow over 20% sequentially, even as it will be relatively flat year-on-year.

Speaker Change: One.

Speaker Change: AI revenue couldn't do.

Speaker Change: To grow and grow strongly.

Speaker Change: You did not receive a copy you may obtain the information from the investors section of <unk> website at Broadcom dotcom.

Speaker Change: To Vmware and bookings continue do a salaried.

Speaker Change: This conference call is being webcast slides and an audio replay of the call can be accessed for one year to the investors section of Broadcom website.

Speaker Change: Mm three.

Speaker Change: No I'm sorry.

Speaker Change: Semiconductor revenue.

Speaker Change: Stabilize.

Before I give you more color on the on our two reporting segments. Let me give you a quick update on guidance.

Speaker Change: During their prepared comments.

Speaker Change: And then we'll be providing details of our third quarter fiscal year 2024 results guys.

Speaker Change: Guidance for our fourth quarter fiscal year, 2024, as well as commentary regarding the business environment.

Speaker Change: Buses are you providing annual guidance with quarterly updates and it's really to run the process of integrating Vmware.

Speaker Change: We'll take questions. After the end of our prepared comments.

Things are now much more stable.

Speaker Change: And when the first Oh.

Speaker Change: And we are in the final quarter of 'twenty 'twenty four.

Speaker Change: So instead of giving you annual guidance, we know reverted to providing quarterly guidance.

Speaker Change: In addition to U S GAAP reporting.

Speaker Change: Broadcom reports certain financial measures on a non-GAAP basis.

For Q4.

Speaker Change: Starting with software.

[noise] group into three infrastructure software segment revenue of $5.8 billion was up 200 per same year on year driven by a point.

Speaker Change: A reconciliation between GAAP and non-GAAP measures is included in the tables attached to todays press release.

Speaker Change: Comments made during today's call will primarily refer to are non-GAAP financial results.

Hock Tan: On to broadband, Q3 revenue declined 49% year-on-year to $557 million, and represented 8% of semiconductor revenue. Broadband remains weak on a continued pause in capital and service provider spending. And in Q4, we expect broadband to continue to be down over 40% year-on-year, but we do expect that recovery to begin in 25%.

Speaker Change: A billion in revenue contribution from Vmware.

Hawk: I will now I will turn the call over to Hawk.

Thank you gene.

Speaker Change: The transformation of the business model of Vmware.

And thank you everyone for joining us today.

Speaker Change: We didn't use to progress very well.

Hawk: And on the fiscal Q3 2024.

Speaker Change: In fact last week, we held a well attended Vmware explore conference in Las Vegas.

Speaker Change: Consolidated net revenue.

Hock Tan: And in Q4, we expect broadband to continue to be down over 40% year-on-year, but we do expect that recovery to begin in 25%. Finally, Q3 does receive the $164 million decline that he won per cent year-on-year. We believe we are approaching bottom in Q3, as Q4 is expected to recover sequentially. Year-on-year, Q4 industry sales will still be down approximately 20%.

Speaker Change: Pinpoint 1 billion was up.

Speaker Change: Our first as a combined company.

47% year on year.

Speaker Change: And then once all about promoting Vmware Cloud Foundation all V. C F, which is the full software stack that virtual lines as an entire data center and.

Speaker Change: And operating profit of 44% year on.

Yeah.

Speaker Change: These strong results reflect three key factors.

Hock Tan: Finally, Q3 does receive the $164 million decline that he won per cent year-on-year. We believe we are approaching bottom in Q3, as Q4 is expected to recover sequentially. Year-on-year, Q4 industry sales will still be down approximately 20%.

Speaker Change: One.

Speaker Change: AI revenue continues to grow and grow strongly too.

Speaker Change: And Creed.

Speaker Change: Private cloud environment on Prem for enterprises.

Speaker Change: Vmware bookings continue through accelerated.

Speaker Change: The success.

Speaker Change: All of this strategy.

Speaker Change: Mm three.

Speaker Change: No.

Speaker Change: As reflected in our performance in fiscal Q3.

Speaker Change: Semiconductor revenue.

Speaker Change: S specialize.

Hock Tan: In summary, here are the trends we are seeing in semiconductors. In any case, we have reached bottom in our non-AI markets, and we are expecting recovery in Q4. AI demand remains strong, and we expect to thank you in Q4. AI revenue to grow sequentially 10% to over $3.5 billion. This won't translate to AI revenue of $12 billion for fiscal 24, up from our prime guidance of over $11 billion.

We bought more than 15 million CPU cost.

Before I give you more color on the two reporting segments. Let me give you a quick update on guidance no. We started the year of providing annual guidance with quarterly updates.

Speaker Change: V C S representing over 80% of the total V. M M product, we bought during the quarter and this translates.

Speaker Change: Doing an online booking venue or a b b as I have described before of $2 5 billion during Q3.

Speaker Change: It's really run the process of integrating Vmware.

Speaker Change: Things are now much more stable.

Speaker Change: We ended the first.

Speaker Change: And we're in the final quarter of 220 people.

Speaker Change: 32% from the preceding quarter.

Speaker Change: So instead of giving you annual guidance, we now refer to providing quarterly guidance.

Speaker Change: Meanwhile, we continue to drive down costs, and Vmware, we broaden Vmware spending down to one 3 million in Q3 from one six in Q2.

Speaker Change: For Q4.

Hock Tan: Putting it all together with software, here's our forecast for Q4. We expect Q4 to make another revenue of approximately $8 billion, up 9% year-on-year. For infrastructure software, we expect revenue to be about $6 billion. So we are guiding Q4 consolidated revenue to be approximately $14 billion, which is up 51% year-on-year. We also expect this will drive Q4 consolidated adjusted EBDA to approximate to achieve approximately 64% of revenue. This Q4 guidance would imply we are reading the outlook for fiscal 2024 revenue to $51.5 billion. And adjusted EBDA for the year to 61.5%.

Speaker Change: Starting with software.

Speaker Change: In Q2.

Speaker Change: <unk> three <unk>.

Speaker Change: And when we acquired the B M with Biogen wants to deliver adjusted EBITDA of $85 billion within three years of their condition.

Chuck: Chuck just software segment revenue all five.

Speaker Change: Billions of.

Speaker Change: <unk> was up 200 per same year on year, driven by three 8 billion in revenue contribution from Vmware.

Speaker Change: We are well on the path to achieving or even exceeding these EBITDA goals.

The transformation of the business model of Vmware continues to progress very well.

And then the next physical 20 plus.

Speaker Change: Now turning to semiconductors in networking.

Speaker Change: Last week, we held a well attended Vmware explore conference in Las Vegas.

Speaker Change: <unk> revenue of $4 billion grew 43% year on year, representing 55% of semiconductor revenue.

Speaker Change: I want first as a combined company.

Speaker Change: And once all about promoting Vmware cloud foundation, all of ECS, which is the full software stack.

Speaker Change: This once again driven by strong demand from Hyperscale is for both AI networking and all custom AI accelerators.

Speaker Change: Actual lives as an entire data center.

Speaker Change: As you know our hyperscale customers continue to scale up.

Speaker Change: And create a private cloud environment on Prem.

Speaker Change: Oh, Yeah AI clusters.

Speaker Change: All enterprises.

Speaker Change: The success of the.

Speaker Change: Custom and salaries this group three and a half times year on year.

Kirsten Spears: And with that, let me turn the call over to Chris. Thank you, Hawk. Let me now provide additional detail on our Q3 financial performance. Consolidys revenue with 13.1 billion for the quarter of 47% from a year ago, excluding the contribution from VMware. Q3 revenue increased 4% year-on-year. Growth margins were 77.4% of revenue in the quarter. R&D was 1.5 billion, and consolidated operating expenses were 2.2 billion, up year-on-year primarily due to consolidation of VMware. Q3 operating income was $7.9 billion and was up 44% from a year ago, with operating margin at 61% of revenue. Excluding transition costs, operating profit of $8 billion was up 45% from a year ago, with operating margin of 62% of revenue.

Kirsten Spears: And with that, let me turn the call over to Chris.

Speaker Change: This strategy.

Speaker Change: To reflect.

Speaker Change: In our performance in fiscal Q3.

Speaker Change: In the February.

Kirsten Spears: Thank you, Hawk. Let me now provide additional detail on our Q3 financial performance. Consolidys revenue with 13.1 billion for the quarter of 47% from a year ago, excluding the contribution from VMware. Q3 revenue increased 4% year-on-year. Growth margins were 77.4% of revenue in the quarter. R&D was 1.5 billion, and consolidated operating expenses were 2.2 billion, up year-on-year primarily due to consolidation of VMware. Q3 operating income was $7.9 billion and was up 44% from a year ago, with operating margin at 61% of revenue. Excluding transition costs, operating profit of $8 billion was up 45% from a year ago, with operating margin of 62% of revenue.

Speaker Change: Ethernet switching.

Speaker Change: We bought more than 15 million CPU cost on V. C F representing over 80% of the total V. M. M product, we both during the quarter and this translates into an annualized booking value all ABB.

Speaker Change: And by Tomahawk.

Speaker Change: And Jared gold three.

Grew over four times year on year, while I'll think of lasers and opinion values using optical interconnect grew threefold.

Speaker Change: Meanwhile, in PCI Express switch has more than doubled and we're shipping in volume all industry, leaving five nanometers 400 gig.

Speaker Change: I had described before of $2 5 billion during Q3 up 32% from the preceding quarter.

Speaker Change: Got it.

Speaker Change: Can make.

Speaker Change: And 800 gigabit per second speeds.

Speaker Change: Meanwhile, we continue to drive down costs, and Vmware, we broaden Vmware spending down to one 3 million in Q3 from one six in Q2.

Speaker Change: So now let me give you more color on our networking products, which are not views in the AI.

Speaker Change: And so we had indicated last quarter, we believe we hit bottom in Q2.

Speaker Change: And when we acquired V M. When targeting wants to deliver adjusted EBITDA of $85 billion within three years of their condition.

And in country.

Speaker Change: <unk> AI networking was.

Speaker Change: Actually 17% sequentially.

Speaker Change: We are well on the path to achieving or even exceeding these EBITDA goal.

Speaker Change: Even and it was down 41% year on year.

Kirsten Spears: Adjusted EBDA was $8.2 billion or 63% of revenue. This figure excludes $149 million of depreciation.

Kirsten Spears: Adjusted EBDA was $8.2 billion, or 63% of revenue.

We expect this level of revenue to sustain in Q4 and the year on year declines to moderate to 30%.

Kirsten Spears: This figure excludes $149 million of depreciation.

Speaker Change: And then the next fiscal 'twenty five.

Kirsten Spears: Now a review of the P&L for our two segments, starting with Semis. Revenue for a semiconductor solution segment was $7.3 billion and represented 56% of total revenue in the quarter. This was up 5% year-on-year. Growth margins for atomic conductor solution segment were approximately 68%, down 270 basis points year on year, driven primarily by a higher mix of custom AI accelerators. Operating expenses increased 11% a year on year to 881 million on increased investment in R&D, resulting in semiconductor operating margins of 56%. Now moving on to infrastructure software revenue for infrastructure software with 5.8 billion of 200% a year on year, primarily due to the contribution of the employer and represented 44% of revenue.

Speaker Change: Now turning to semiconductors.

Kirsten Spears: Now a review of the P&L for our two segments, starting with Semis. Revenue for a semiconductor solution segment was $7.3 billion and represented 56% of total revenue in the quarter. This was up 5% year-on-year. Grows margins for a semi-conductor solution segment were approximately 68%, down 270 basis points a year on year, driven primarily by a higher mix of custom AI accelerators. Operating expenses increased 11% year on year to 881 million on increased investment in R&D, resulting in semi-conductor operating margins of 56%.

So in adding the strength, we've got opinions of seeing AI.

Speaker Change: Networking.

Speaker Change: Q3 revenue of $4 billion grew 43% year on year, representing 55% of semiconductor revenue.

Speaker Change: We expect total networking revenue to grow over 40%.

Speaker Change: On a year on year in Q4.

This was again driven by strong demand from Hyperscale is for bold AI networking and all.

Speaker Change: Our cross enterprise infrastructure, we have.

Speaker Change: See the same trend of recovery in the storage.

Speaker Change: The AI accelerators.

Speaker Change: As you know our hyperscale customers continue to scale up and scale, our AI clusters.

Speaker Change: Our Q3 for the storage connectivity revenue was eight $861 million up 5% sequentially.

Speaker Change: Custom AI accelerators grow three and a half times year on year.

Speaker Change: And down 25% you don't yet in.

In the February.

Speaker Change: In Q4, we expect server storage revenue to grow mid to high single digit.

Speaker Change: Ethernet switching driven by Tomahawk.

Kirsten Spears: Now moving on to infrastructure software. Revenue for infrastructure software with 5.8 billion of 200% year on year, primarily due to the contribution of the employer, and represented 44% of revenue. Grows margins for infrastructure software were 90% in the quarter, and operating expenses were 1.3 billion in the quarter, resulting in infrastructure software operating margin of 67%. Excluding transition costs, operating margin was 69%.

Jared: And Jared gold three AI grew.

Speaker Change: Sequentially, even as revenue.

Jared: Crew over four times year on year, while I'll take the lasers and the P values using optical interconnects grew threefold.

Speaker Change: I expect it to be down high single digits.

Speaker Change: And yet.

Operator: Welcome to Broadcom's Inc. 3rd Quarter Fiscal Year, 2024 Financial Results Conference Call.

Speaker Change: Moving on to wireless.

Speaker Change: Q3 revenue wireless revenue of $1 $7 billion grew 1% year on year, representing 23% of semiconductor revenue.

Kirsten Spears: Growth margins for infrastructure software were 90% in the quarter, and operating expenses were 1.3 billion in the quarter, resulting in infrastructure software operating margin of 67%. Excluding transition costs, operating margin was 69%. Moving on to cash flow, free cash flow on the quarter was 4.8 billion and represented 37% of revenue. Excluding cash used to restructuring and integration of 529 million, free cash flow the 5.3 billion were up 14% year on year and represented 41% of revenue. Free cash flow as a percentage of revenue has declined from the same quarter a year ago due to higher cash interest expense from debt related to the VMware acquisition and higher cash taxes due to a higher mix of US income and the continued delay in the reenactment of section 174. We spent 172 million on capital expenditures. The sales outstanding were 32 days in the quarter, in line with the year ago. We ended the third quarter with inventory at 1.9 billion, up 3% sequentially. Note that we continue to remain disciplined on how we manage inventory across the ecosystem. We ended the third quarter with 10 billion of cash from 72.3 billion of growth principal debt. During the quarter, we replaced 5 billion of floating rate notes with new six senior notes. We used the proceeds from the completed sale of the end-user computing business to KKR and cash on hand to reduce floating rate debt by an additional 4.2 billion.

Jared: While the PCI express switches more than doubled and we're shipping in volume our industry, leading five nanometer 400 gig.

Ji Yoo: At this time for opening remarks and introductions, I would like to turn the call over to Ji Yoo, Head of Investor Relations of Broadcom Inc. Thank you, operator, and good afternoon, everyone. Joining me on today's call are Hock Tan, President and CEO, Kirsten Spears, Chief Financial Officer, and Charlie Kawwas, President Semiconductor Solutions Group.

Speaker Change: They can make.

And in Q4, reflecting the launch of next generation devices, and our North American customer.

Speaker Change: And 800 gigabit per second speeds.

Kirsten Spears: Moving on to cash flow, free cash flow on the quarter was 4.8 billion and represented 37% of revenues. Excluding cash used to restructuring an integration of 529 million, free cash flow of 5.3 billion was up 14% year on year and represented 41% of revenue. Free cash flow was a percentage of revenue has declined from the same quarter a year ago due to higher cash interest expense from debt related to the VMware acquisition and higher cash taxes due to a higher mix of US income and the continued delay in the reenactment of Section 174.

Speaker Change: So now let me give you more color on our networking products, which are not used in the AI.

Speaker Change: We expect wireless revenue revenue to actually grow over 20% sequentially.

Ji Yoo: Broadcom distributed approximately some financial tables after the market closed, describing our financial performance for the 3rd quarter of fiscal year, 2024. If you did not receive a copy, you may obtain the information from the Investor section of Broadcom's website at broadcom.com. This conference call is being webcast live, and an audio replay of the call can be accessed for one year through the Investor section of Broadcom's website.

Speaker Change: Andrea indicated last quarter, we believe we hit bottom in Q2.

Speaker Change: Even as these will be relatively flat year on year.

Speaker Change: And in Q3.

Speaker Change: Onto broadband Q3 revenue declined 49% year on year to $557 million, representing 8% of semiconductor revenue.

Andrea: One AI networking was actually 17% sequentially.

Andrea: Even as it was down 41% year on year.

Speaker Change: We expect this level of revenue to sustain in Q4 and the year on year declines to moderate to 30%.

Speaker Change: Demand remains weak on a continued pause in telco and service provider spending.

Speaker Change: And in Q4, we expect broadband continues to be down over 40% year on year.

Speaker Change: So in adding the strength, we continue to see an AI.

Ji Yoo: During the prepared comments, Hock and Kirsten will be providing details of our 3rd quarter of fiscal year, 2024 results, guidance for our 4th quarter of fiscal year, 2024, as well as commentary regarding the business environment. We'll take questions after the end of our prepared comments.

Kirsten Spears: We spent 172 million on capital expenditures. Day sales outstanding were 32 days in the quarter, in line with the year ago. We ended the third quarter with inventory at 1.9 billion, up 3% sequentially. Note that we continue to remain disciplined on how we manage inventory across the ecosystem.

Speaker Change: We expect networking revenue to grow over 40% year on year on year in Q4.

Speaker Change: But we do expect that recovery to begin in 2005.

Speaker Change: Finally.

Speaker Change: Q3, industrial resales of $164 million the claims that he 1% year on year. We believe we are approaching bottom in Q3 as Q4 refills I expect it to recover sequentially.

Speaker Change: Our cross enterprise infrastructure.

Ji Yoo: 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 board looking statements made on this call. In addition to US gap reporting, Broadcom reports certain financial measures on a non-GAAP basis. A reconciliation between gap and non-GAAP measures is included in the tables attached to today's press release. Comments made during today's call will primarily refer to our non-GAAP financial results.

Speaker Change: See the same trend of recovery in server storage.

Kirsten Spears: We ended the third quarter with 10 billion of cash and 72.3 billion of growth principal debt. During the quarter, we replaced 5 billion of floating rate notes with new 6th senior notes. We used the proceeds from the completed sale of the emlairs and user computing business to KKR and cash on hand to reduce floating rate debt by an additional 4.2 billion. Following these actions, the weighted average could fund rate and years to maturity of our 53 billion at 6th rate debt is 3.6% and 7.7 years, respectively.

Speaker Change: Our Q3 server storage connectivity revenue was eight $861 million.

Speaker Change: Year on year in Q4, industrial resales will still be down approximately 20%.

Speaker Change: And 5% sequentially.

Speaker Change: And down 25% year on year in.

Speaker Change: In summary, she had to try.

Speaker Change: In Q4, we expect server storage revenue to grow mid to high single digit.

Speaker Change: Interesting in semiconductors and negative days.

Speaker Change: We have reached bottom in our non <unk> markets and we're expecting a recovery in Q4.

Sequentially, even as revenue.

Kirsten Spears: Following these actions, the weighted average could fund rate and years to maturity of our 53 billion at 6 rate debt is 3.6 percent and 7.7 years, respectively. The weighted average could fund rate and years to maturity of our 19 billion in floating rate debt is 6.7 percent and 3.1 years, respectively. We expect to repay approximately 1.9 billion at 6 rate senior notes due to 1.24. Turning to capital allocation in Q3, we paid stock over 2.5 billion of cash dividends, which based on a split adjusted quarterly common stock count represented a cash dividend of 52.5 cents per share. For Q4, we are rounding up the quarterly cash dividend of 53 cents per share. In Q3, the split adjusted non-gap diluted share count was 4.92 billion, in line with expectations. We paid 1.4 billion with holding taxes due to investing of employee equity, resulting in the elimination of 8.4 million ABTO share Sanders, MQ-4. We expect a non-gap diluted share count to be approximately 4.91 billion shares.

Speaker Change: I expect it to be down high single digit percent year on year.

Speaker Change: AIA demand remained strong.

Speaker Change: Moving on to wireless.

Speaker Change: And we expect Q in Q4, <unk> revenue to grow sequentially, 10% to over $3 $5 billion.

Hock Tan: I will now turn the call over to Hock. Thank you, G. And thank you everyone for joining us today. In our fiscal year, 2024, consolidated net revenue of $13.1 billion was up 47% year-on-year. And operating profit was up 44% year-on-year. These strong results reflected three key factors. One, AI revenue continues to grow and grow strongly. Two, VMware booking continues to accelerate. And three, non-AI semiconductor revenue has stabilized.

Speaker Change: Q3 revenue wireless revenue of $1 $7 billion grew 1% year on year, representing 23% of semiconductor revenue.

Speaker Change: This would translate to AI revenue of $12 billion for fiscal 'twenty for us.

Kirsten Spears: We expect to repay approximately 1.9 billion of 6th rate senior notes due to 1.4.

Speaker Change: And in Q4, reflecting the launch of next generation devices, and our North American customer.

Speaker Change: From Bryan Gunderson.

Speaker Change: The $11 billion.

Kirsten Spears: Turning to capital allocation, in June 3 we paid stock over 2.5 billion of cash dividends, which based on a split-adjusted quarterly common stock count represented a cash dividend of 52.3 billion. For Q4, we are rounding up the quarterly cash dividend of 53 cents per share. In Q3, the split-adjusted non-GAAP diluted share count was 4.92 billion, in line with expectations. We paid 1.4 billion of withholding taxes due to investing of employee equity, resulting in the elimination of 8.4 million ABTO shares. Sanders, MQ-4, we expect a non-GAAP diluted share count to be approximately 4.91 billion shares.

Putting it all together with software is a forecast for Q4.

Speaker Change: We expect wireless revenue revenue to actually grow over 20% sequentially.

Speaker Change: We expect Q4 semiconductor revenue of approximately $8 billion up 9% year on year.

Speaker Change: Even as it will be relatively flat year on year.

Speaker Change: Yeah.

Speaker Change: Onto broadband Q3 revenue declined 49% year on year to $557 million, representing 8% of semiconductor revenue.

Speaker Change: For infrastructure software, Inc. We expect revenue to be about $6 billion. So.

Speaker Change: So we are guiding Q4 consolidated revenue to be approximately $14 billion, which is up 51% year on year.

<unk> remains the weight on a continued pause in telco and service provider spending and in Q4, we expect broadband continues to be down over 40% year on year, but we do expect that recovery to begin in 2005.

We also expect this will drive Q on Q4 consolidated adjusted EBITDA through a broker to achieve approximately 64% of revenue.

Hock Tan: Before I give you more color on our two reporting statements, let me give you a quick update on guidance. Now, we started the year providing annual guidance with quarterly updates and we run the process of integrating VMware. Pins are now much more stable, and we're in the final quarter of 2024.

Kirsten Spears: Now on to guidance. Our guidance for Q-4 is for consolidated revenue of 14 billion and adjusted EBITDA to approximately 64%. For modeling purposes, we expect consolidated growth margins to be down approximately 100 basis points sequentially on the higher revenue mix of semiconductors and product mix within semiconductors. Gap net income and cash flows in Q-4 are impacted by higher taxes, restructuring, and integration-related cash costs due to the EMWR acquisition. As Hock just discussed, we are resuming quarterly revenue and adjusted EBITDA guidance for fiscal 2025. As fiscal year 24 has been a transition and integration year, following the EMWR deal close.

Speaker Change: Finally Q.

Speaker Change: These Q4 guidance would imply we are raising the outlook for fiscal 2020 full revenue to $51 $5 billion.

Speaker Change: Q3, industrial <unk> sales of $164 million the claims that he 1% year on year. We believe we are approaching Boston in Q3 as Q4 <unk> sales are expected to recover sequentially yes.

Speaker Change: And adjusted EBITDA for the year to 61, 5%.

Speaker Change: Year on year in Q4, industrial resales will still be down approximately 20%.

Hock Tan: So in state of giving you annual guidance, we now revert to providing a quarterly guidance for Q4. Starting with software, it includes three infrastructure software statement revenue of $5.8 billion dollars worth up to 100% year on year, driven by $3.8 billion in revenue contribution from VMware. The transformation of the business model of VMware continues to progress very well. In fact, lastly, we help a well-entended VMware Explorer conference in Las Vegas, our first as a combined company. This event was all about promoting VMware Cloud Foundation of VCS, which is the full software that virtualizes and diets data centers, and creates a private cloud environment. This event is a very common on-prem for enterprises.

Speaker Change: And with that let me turn the call over to Chris.

Chris: Thank you Hock, let me now provide additional detail on our Q3 financial performance.

Speaker Change: In summary here the trends we are seeing in semiconductors in aggregate.

Kirsten Spears: As Hock just discussed, we are resuming quarterly revenue and adjusted EBITDA guidance for fiscal 2025. As fiscal year 24 has been a transition and integration year, following the EMWR deal close.

Speaker Change: Consolidated revenue was $13 1 billion for the quarter up 47% from a year ago exclude.

Speaker Change: We have reached bottom in our non <unk> markets and we are expecting a recovery in Q4.

Speaker Change: Excluding the contribution from Vmware Q3 revenue increased 4% year on year.

Speaker Change: AIA demand remained strong.

Kirsten Spears: That concludes my prepared remarks.

Speaker Change: And we expect Q in Q4 <unk>.

Operator: Our operators, please open up the call for questions. Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, 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.

Operator: Our operators, please open up the call for questions.

Speaker Change: Gross margins were 77, 4% of revenue in the quarter.

Speaker Change: Revenue to grow sequentially, 10% to over $3 5 billion.

Operator: Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, press star 11 again.

Speaker Change: R&D was $1 5 billion in consolidated operating expenses were $2 2 billion up year on year, primarily due to the consolidation of Vmware.

Speaker Change: This would translate to AI revenue of $12 billion for fiscal 2004, <unk> up from our prior guidance.

Operator: Due to time restraints, we ask that you please limit yourself to one question. Please stand by while we compile the Q&A roster.

Speaker Change: $11 billion.

Speaker Change: Q3, operating income was $7 9 billion and was up 44% from a year ago.

Speaker Change: Putting it all together with software is a forecast for Q4.

Vivek Arya: And our first question will come from the line of Vivek Arya with Bank of America. Your line is open. Thanks for taking my question. Just a clarification, Hock, and then the question. So I think AI revenue roughly 3.1 isch billion in Q3, flat isch sequentially. What was the mix in terms of compute versus networking? And in the 3.5 billion for Q4, what do you see as that mix?

Vivek Arya: And our first question will come from the line of Vivek Arya with Bank of America.

Speaker Change: Operating margin at 61% of revenue.

Speaker Change: We expect Q4 semiconductor revenue, albeit approximately $8 billion.

Speaker Change: Excluding transition cost operating profit of 8 billion was up 45% from a year ago with operating margin of 62% of revenue.

Vivek Arya: Your line is open. Thanks for taking my question.

Hock Tan: Just a clarification, Hock, and then the question. So I think AI revenue roughly 3.1 isch billion in Q3, flat isch sequentially. What was the mix in terms of compute versus networking? And in the 3.5 billion for Q4, what do you see as that mix?

Speaker Change: Up 9% year on year.

Speaker Change: Paul.

software, Inc.: <unk> software, Inc. We expect revenue to be about $6 billion.

Speaker Change: Adjusted EBITDA was $8 2 billion or 63% of revenue. This figure excludes 129 million of depreciation.

Speaker Change: So we are guiding Q4 consolidated revenue to be approximately $14 billion, which is up 51% year on year.

Hock Tan: The success of this strategy is reflected in our performance in fiscal Q3. We built more than 15 million CPU costs of VCS, representing over 80% of the total VMware products we built during the quarter. This translates into an annualized booking value, or ABB, as I had described before, of $2.5 billion during Q3, up 32% from the preceding quarter. Meanwhile, if we continue to drive down costs in VMware, we brought VMware spending down to 1.3 million in Q3 from 1.6 in Q2.

Vivek Arya: And then, as we get into fiscal 25, I realize you're not guiding overall AI. But just how's your general kind of confidence and visibility? Do you think that Broadcom can kind of grow in line or better than the overall AI silicon industry in fiscal 25?

Speaker Change: Now one of the view of the P&L for our two segments starting with families.

Hock Tan: And then, as we get into fiscal 25, I realize you're not guiding overall AI. But just how's your general kind of confidence and visibility? Do you think that Broadcom can kind of grow in line or better than the overall AI silicon industry in fiscal 25?

Speaker Change: We also expect this will drive Q comes into Q4.

Speaker Change: Revenue for our semiconductor solutions segment was $7 3 billion and represented 56% of total revenue in the quarter.

Speaker Change: Solid data that adjusted EBITDA to our promise to achieve approximately 64% of revenue.

Speaker Change: It was up 5% year on year.

Hock Tan: Yes. Well, as we indicated in the last couple of earnings calls, for this past quarter, I think we're talking about two thirds in compute and wondered in networking. And we kind of expect Q4 to run the similar trend.

Speaker Change: Gross margins for our semiconductor solutions segment were approximately 68% down 270 basis points year on year, driven primarily by a higher mix of custom and AI accelerators.

Speaker Change: This Q4 guidance would imply we are raising the outlook for fiscal 2020 full revenue to $51 5 billion and adjusted EBITDA for the year to 61, 5%.

Speaker Change: Operating expenses increased 11% year on year to 881 million, an increase investment in R&D, resulting in semiconductor operating margins up 56%.

Speaker Change: And with that let me turn the call over to Kurt.

Hock Tan: And as far to answer your second part, no, we don't guide for yet for fiscal 25. But we do expect fiscal 25 to continue to be strong, to show strong growth on our AI revenue.

Kurt: Thank you Hock, let me now provide additional detail on our Q3 financial performance.

Speaker Change: Now moving on to infrastructure software.

Kurt: Consolidated revenue was $13 1 billion for the quarter up 47% from a year ago excluding.

Speaker Change: Revenue for infrastructure software with $5 8 billion up 200% year on year, primarily due to the contribution of Vmware and represented 44% of revenue.

Hock Tan: When we acquired VMware, our target was to deliver adjusted EBDA of $8.5 billion within 3 years of their acquisition. We are well on the path to achieving or even exceeding this EBDA goal in the next fiscal 25.

Kurt: Excluding the contribution from Vmware Q3 revenue increased 4% year on year.

Operator: Thank you.

Speaker Change: Gross margins for infrastructure software, where 90% in the quarter and operating expenses were $1 3 billion in the quarter, resulting in infrastructure software operating margin up 67%.

William Stein: One moment for our next question. And that will come from the line of William Stein with two securities. Your line is open. Great. Thanks for taking my question. One of the things that we've picked up from both suppliers and the broader ecosystem in AI, I think we've heard this from Nvidia as well, that there was a shift in their revenue in the quarter, somewhat away from cloud service providers towards enterprise. and I wondered if that might potentially have a slowing effect on your revenue outlook in this end market because your participation is really pretty focused on the cloud customers.

Speaker Change: Gross margins were 77, 4% of revenue in the quarter.

William Stein: One moment for our next question. And that will come from the line of William Stein with two securities. Your line is open. Great. Thanks for taking my question.

Speaker Change: R&D was $1 5 billion in consolidated operating expenses were $2 2 billion.

Speaker Change: Excluding transition costs operating margin was 69%.

Hock Tan: Now, turning to semiconductors. In networking, Q3 revenue of $4 billion grew for 3% year on year, representing 55% of semiconductor revenue. This was again driven by strong demand from hyperscalers for both AI networking and of custom AI accelerators. As you know, our hyperscalers continue to scale out and scale out their AI clusters. Custom AI accelerators grow 3.5 times year on year. In the fabric, Ethernet switching, driven by Tomahawk 5 and Jericho 3 AI crew over 4 times year and year, while our optical lasers and pin diodes use an optical interconnect crew 3-4. Meanwhile, PCI Express switches more than double, and we're shipping in volume, our industry leading by nanometers, 400 gigabits per second nix, and 800 gigabits per second GSP.

William Stein: One of the things that we've picked up from both suppliers and the broader ecosystem in AI, I think we've heard this from Nvidia as well, that there was a shift in their revenue in the quarter, somewhat away from cloud service providers towards enterprise. and I wondered if that might potentially have a slowing effect on your revenue outlook in this end market because your participation is really pretty focused on the cloud customers. I wonder if you're seeing that if you view it as a challenge or maybe you have a contrary view. Thank you.

Speaker Change: Year on year, primarily due to the consolidation of Vmware.

Speaker Change: Moving on to cash flow free cash flow in the quarter with $4 8 billion and represented 37% of revenues, excluding cash used for restructuring and integration of 529 million free cash flows of $5 3 billion were up 14% year on year and represented 41% of revenue.

Speaker Change: Q3, operating income was $7 9 billion and was up 44% from a year ago with operating margin at 61% of revenue.

Speaker Change: Excluding transition cost operating profit of $8 billion was up 45% from a year ago with operating margin of 62% of revenue.

Speaker Change: Free cash flow as a percentage of revenue has declined from the same quarter a year ago due to higher cash interest expense from debt related to the Vmware acquisition and higher cash taxes due to a higher mix of U S income and the continued delay in the re enactment of section 174.

Speaker Change: Adjusted EBITDA was $8 2 billion or 63% of revenue this figure excludes $149 million of depreciation.

William Stein: I wonder if you're seeing that if you view it as a challenge or maybe you have a contrary view. Thank you.

Speaker Change: Now a review of the P&L for our two segments starting with families.

Speaker Change: We spent 172 million on capital expenditures.

Speaker Change: Revenue for our semiconductor solutions segment was $7 3 billion and represented 56% of total revenue in the quarter.

Speaker Change: Days sales outstanding were 32 days in the quarter in line with a year ago. We ended the third quarter with inventory at 1.9 billion up 3% sequentially, noting that we continue to remain disciplined on how we manage inventory across the ecosystem.

Hock Tan: Well, that's an interesting question in terms of the shift, but see, we do not focus very much on the enterprise AI market, as you know. Well, our products in AI are largely very much largely focused especially on the AI salary or XP use site, but even so more so in just as much on that working site, on hyper scaling, on cloud, those three large platforms and some digital needs what you call big guys. We don't deal very much on AI with enterprise, so we obviously don't see that trend. Thank you.

Speaker Change: It was up 5% year on year.

Speaker Change: Gross margins for our semiconductor solutions segment were approximately 68% down 270 basis points year on year, driven primarily by a higher mix of custom and AI accelerators.

Speaker Change: We ended the third quarter with $10 billion of cash and $72 3 billion up gross principal debt during the quarter. We replaced 5 billion of floating rate notes with you.

Speaker Change: Operating expenses increased 11% year on year to 881 million an increased investment in R&D, resulting in semiconductor operating margins at 56%.

Speaker Change: <unk> senior notes, we used the proceeds from the completed sale of an <unk> end user computing business to KKR and cash on hand to reduce floating rate debt by an additional $4 2 billion.

Hock Tan: So now let me give you more color on our networking products, which are not used in AI. As we had indicated last quarter, we believe we hit bottom in Q2 and in Q3, non-AI networking was up actually 17% sequentially, even as it was down 41% year-on-year. We expect this level of revenue to sustain in Q4 and the year-on-year declined to moderate to 30%. So in adding the strength we continue to see in AI, we expect total networking revenue to grow over 40% year-on-year in Q4.

Speaker Change: Now moving on to infrastructure software.

Speaker Change: Revenue for infrastructure software with $5 8 billion up 200% year on year, primarily due to the contribution of the Embraer and represented 44% of revenue.

Following these actions the weighted average coupon rate in years to maturity of our 53 billion at fixed rate debt is three 6% and 7.7 years respectively.

Operator: Thank you.

Speaker Change: Weighted average coupon rate at years to maturity of our 19 billion in floating rate debt is six 7% and three one years, respectively. We expect to repay approximately $1 9 billion of fixed rate senior notes due in Q4.

Operator: One moment for our next question, and that will come from the line of Ross Seymour with Deutsche Bank. Your line is open.

Ross Seymour: One moment for our next question, and that will come from the line of Ross Seymour with Deutsche Bank. Your line is open.

Ross Seymour: I think so I ask you a question. One to pivot over to the software side of things. Hawk, it seems like obviously the VMware business had a great fiscal third quarter.

Speaker Change: Excluding transition costs operating margin was 69%.

Speaker Change: Turning to capital allocation in Q3, we paid stockholders, two and a half billion of cash dividends, which based on a split adjusted quarterly common stock count represented a cash dividend of 52.5 cents per share for Q4, we are rounding out the quarterly cash dividend of <unk> 53 per share.

Speaker Change: Moving on to cash flow free cash flow in the quarter with $4 8 billion and represented 37% of revenues, excluding cash used for restructuring and integration of $529 million pre cash flows of $5 3 billion were up 14% year on year and represented 41% of revenue.

Ross Seymour: It seems like the classic Broadcom software fell off, so I guess the two-part question is what happened in the classic Broadcom side of things to create that volatility, and are we now kind of reaching that $4 billion base in the fourth quarter that you talked about with VMware? And if so, what are the puts and takes in the growth rate as we look into the future on that business? But also those subscriptions like this are for the full stack of VCF, and that has been very successful, as indicated given the high ratio of VCF subscribers and new subscribers that we have achieved.

Hock Tan: It seems like the classic Broadcom software fell off, so I guess the two-part question is what happened in the classic Broadcom side of things to create that volatility, and are we now kind of reaching that $4 billion base in the fourth quarter that you talked about with VMware? And if so, what are the puts and takes in the growth rate as we look into the future on that business? But also those subscriptions like this are for the full stack of VCF, and that has been very successful, as indicated given the high ratio of VCF subscribers and new subscribers that we have achieved.

Hock Tan: Across enterprise infrastructure, we see the same trend of recovery in service storage. Our Q3 service storage connectivity revenue was $8,861 million, up 5% sequentially, and down 25% year-on-year. In Q4, we expect service storage revenue to grow mid to high single digit per cent sequentially, even as revenue is expected to be down high single digit per cent year-on-year. Moving on to wireless, Q3 revenue, wireless revenue of $1.7 billion grew 1% year-on-year, representing 23% of semiconductor revenue. And in Q4, reflecting the launch of next generation devices and our North American customers, we expect wireless revenue to actually grow over 20% sequentially, even as it will be relatively flat year-on-year.

Speaker Change: In Q3, the split adjusted non-GAAP diluted share count was $4 92 billion inline with expectations, we paid $1 4 billion of withholding taxes due on vesting of employee equity, resulting in the elimination of $8 4 million a V. G L shares in.

Speaker Change: And the continued delay in the re enactment of section 174.

Speaker Change: In Q4, we expect a non-GAAP diluted share count to be approximately 4.91 billion shares.

Speaker Change: We spent 172 million on capital expenditures.

Speaker Change: Days sales outstanding were 32 days in the quarter in line with a year ago. We ended the third quarter with inventory of $1 9 billion up 3% sequentially.

Speaker Change: Now onto guidance our guidance for Q4 is for consolidated revenue of 14 billion and adjusted EBITDA of approximately 64%.

Speaker Change: We continue to remain disciplined on how we manage inventory across the ecosystem.

For modeling purposes, we expect consolidated gross margins to be down approximately 100 basis points sequentially on the higher revenue mix of semiconductors and product mix within semiconductors.

We ended the third quarter with $10 million of cash and $72 3 billion of gross principal debt during the quarter. We replaced 5 billion of floating rate notes with new fixed senior notes. We used the proceeds from the completed sale of an <unk> end user computing business to KKR and cash on hand.

Speaker Change: GAAP net income and cash flows in Q4 are impacted by higher taxes restructuring and integration related cash costs due to the TMR acquisition.

Hock Tan: And we see this trend continuing in Q4, and very much so, and was very likely through into 25. So, in terms of directional trend, other than the indication of giving you then the guidance and giving you 24 in Q4 24, directionally we continue to see accelerated booking and, by extension, accelerated group. Thank you. One moment for our next question.

Hock Tan: And we see this trend continuing in Q4, and very much so, and was very likely through into 25.

Speaker Change: Talk just discussed we are resuming quarterly revenue and adjusted EBITDA guidance for fiscal 2025 at fiscal year 'twenty four has been a transition and integration here following the Vmware deal close.

Speaker Change: To reduce floating rate debt by an additional $4 2 billion.

Hock Tan: So, in terms of directional trend, other than the indication of giving you then the guidance and giving you 24 in Q4 24, directionally we continue to see accelerated booking and, by extension, accelerated group. Thank you.

Speaker Change: Following these actions the weighted average coupon rate in years to maturity of our $53 billion in fixed rate debt is three 6% and seven seven years, respectively.

Speaker Change: That concludes my prepared remarks, operator, please open up the call for questions.

Hock Tan: On to broadband, Q3 revenue declined 49% year-on-year to $557 million. Ren represented 8% of semiconductor revenue. Broadband remains weak on a continued pause in tail call and service provider spending. And in Q4, we expect broadband to continue to be down over 40% year-on-year.

Speaker Change: The weighted average coupon rate in years to maturity of our 19 billion in floating rate debt is six 7% and three one years, respectively. We expect to repay approximately $1 9 billion of fixed rate senior notes due in Q4.

Speaker Change: Thank you to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question 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.

Hock Tan: But we do expect that recovery to begin in 25.

Stacy Rasgon: One moment for our next question. And that will come from the line of Stacy Rasgon with Bernstein Research. Your line is open. Hi guys, thanks for taking my questions. I have two short ones, one on each segment. On some of these, you know, the non-AI networking was like more than 50% below where it was running before it rolled off. And clearly the other businesses are also way below their peaks. Is there any reason why those shouldn't event? Is this just sick, or something else going on? Is there any reason why those shouldn't get back to prior levels once recovery happens?

Stacy Rasgon: And that will come from the line of Stacy Rasgon with Bernstein Research. Your line is open. Hi guys, thanks for taking my questions. I have two short ones, one on each segment. On some of these, you know, the non-AI networking was like more than 50% below where it was running before it rolled off. And clearly, the other businesses are also way below their peaks. Is there any reason why those shouldn't event? Is this just sick, or something else going on? Is there any reason why those shouldn't get back to prior levels once recovery happens? And then on the software side, you know, so the non-VMware pieces looks like it's back to that two billionish recorder level or so that it was at before.

Speaker Change: Turning to capital allocation in Q3, we paid stockholders two 5 billion of cash dividends, which based on a split adjusted quarterly common stock count represented a cash dividend of 52 five cents per share for Q4, we are rounding out the quarterly cash dividend of <unk> 53 per share.

Speaker Change: Yeah.

Speaker Change: And our first question will come from the line of Judy ARIA with Bank of America. Your line is open.

Hock Tan: Finally, Q3 does receive the $164 million decline that he won per cent year-on-year. We believe we are approaching bottom in Q3, as Q4 receives expected to recover sequentially. Year-on-year Q4 industry sales will still be down approximately 20%.

Speaker Change: Thanks for taking my question just a clarification Hawk and then the question. So I think he had revenue roughly one one ish billion in Q3.

Speaker Change: In Q3, the split adjusted non-GAAP diluted share count was $4 92 billion in line with expectations, we paid $1 4 billion in withholding taxes due on vesting of employee equity, resulting in the elimination of $8 4 million a VEGF shares.

Speaker Change: Flattish sequentially, what was the mix in terms of compute versus networking and the $3 5 billion for Q4, what do you see that mix and then as we get into fiscal 'twenty five I realize you're not guiding overall AI, but just how's your general confidence in and visibility do you think that broadcom can kind of grow in line or better than.

Stacy Rasgon: And then on the software side, you know, so the non-VMware pieces looks like it's back to that two billionish recorder level or so that it was at before. Is that just brocade falling off? And is this sort of two billionish recorder? Is that is that bottomed as well? Is that the right level we ought to be thinking about the growth of the non-VMware software business as we go forward from here?

Hock Tan: In summary, here are the trends we are seeing in semiconductors. In any case, we have reached bottom in our non-AI markets and we are expecting recovery in Q4. AI demand remains strong and we expect to thank you in Q4 AI revenue to grow sequentially 10% to over $3.5 billion. This won't translate to AI revenue of $12 billion for fiscal 24 up from our prime guidance of over $11 billion.

Stacy Rasgon: Is that just brocade falling off? And is this sort of two billionish recorder? Is that is that bottomed as well? Is that the right level we ought to be thinking about the growth of the non-VMware software business as we go forward from here?

Speaker Change: In Q4, we expect non-GAAP diluted share count to be approximately 4.91 billion shares.

Speaker Change: The overall AI silicon industry in fiscal 'twenty five.

Speaker Change: Now onto guidance our guidance for Q4 is for consolidated revenue of 14 billion and adjusted EBITDA of approximately 64%.

Speaker Change: Yes.

Well as we indicated in the last.

Hock Tan: Yeah, on the semi side, the answer is very simple. We have got, as you all know, we've gone through your typical down cycle of semiconductors. And I'm referring particularly to non-AI, and we have talked about that before. We've gone through a down cycle, and I've been asked the ecosystem as many of our customers, but the broad ecosystems ecosystems work on an adjustment in the end entry levels at all at all stages in the supply chain. And we're not totally; we are not immune from it, obviously, as we try to insulate ourselves from it as much as possible.

Speaker Change: Our earnings calls for a defense quarter I think we're talking about towards the end in compute and Wanda in networking.

Speaker Change: For modeling purposes, we expect consolidated gross margins to be down approximately 100 basis points sequentially on the higher revenue mix of semiconductors and product mix within semiconductors.

Speaker Change: And we kind of expect Q4 to run the similar trend.

Speaker Change: GAAP net income and cash flows in Q4 are impacted by higher taxes restructuring and integration related cash card didn't EMR acquisition.

And as fun to answer your second one.

Speaker Change: No. We don't guide at all yet for fiscal 'twenty defined but we do expect fiscal 'twenty five to continue to be strong.

Hock Tan: Putting it all together with software, here's our forecast for Q4. We expect Q4 semiconductor revenue of approximately $8 billion, up 9% year on year. For infrastructure software, we expect revenue to be about $6 billion. So we are guiding Q4 consolidated revenue to be approximately $14 billion, which is up 51% year on year. We also expect these won't drive Q4 consolidated adjusted EBDA to approximately 64% of revenue. These Q4 guidance would imply we are reading the outlook for fiscal 2024 revenue to $51.5 billion. And adjusted EBDA for the year to 61.5%.

Speaker Change: To show strong growth.

Speaker Change: AI revenue.

Speaker Change: That concludes my prepared remarks, operator, please open up the call for questions.

Speaker Change: Thank you.

Speaker Change: Thank you one moment for our next question.

Hock Tan: We've gone through it, and our designs on the indications we have seen very clearly is we have, in fact, passed through the bottom. The best indicator is the bookings we are receiving. In non-AI, our bookings include three of non-AI and semiconductor demand. It's up 20%, and so that's also where well on the way to recovery. By end markets, as I indicated, the level of the amount of recovery that timing or recovery somewhat varies, but we're seeing largely on enterprise enterprise data center and the price IT spending with past the bottom. And we are in Q3, what in fact sequentially recovery from the bottom of, we believe Q2 or Q1 this fiscal year and we'll see Q4 continuing that recovery and obviously now view into 25 and in terms of the cycle.

Speaker Change: And that will come from the line of William Stein with Chewy Securities. Your line is open.

Speaker Change: Thanks for taking my question Hock.

Speaker Change: One of the things that we've picked up.

Speaker Change: From both suppliers and the broader ecosystem and AI I think we heard this from in video as well, but there was a shift in.

Speaker Change: Yeah.

Speaker Change: And our first question will come from the line of <unk> with Bank of America. Your line is open.

Speaker Change: Their revenue in the quarter.

Speaker Change: Somewhat away from cloud service providers towards enterprise.

Speaker Change: Thanks for taking my question just a clarification Hakan then the question. So I think he had revenue roughly seaborne one ish billion in Q3.

Speaker Change: And.

Speaker Change: I wondered if that might potentially.

Speaker Change: Potentially have.

Speaker Change: Slowing effect on your revenue outlook in this end market because your participation that's really pretty focused on the on the cloud customers.

Speaker Change: Flattish sequentially, what was the mix in terms of compute versus networking and that and the $3 5 billion for Q4, what do you see that mix and then as we get into fiscal 'twenty five I realize you're not guiding overall AI, but just how's your general confidence and visibility do you think that broadcom can kind of grow in line or better than.

Kirsten Spears: And with that, let me turn it all over to Curtis. Thank you, Hawk. Let me now provide additional detail on our Q3 financial performance. Consolidied revenue with 13.1 billion for the quarter of 47% from a year ago, excluding the contribution from VMware, Q3 revenue increased 4% year on year. Growth margins were 77.4% of revenue in the quarter. R&D was 1.5 billion, and consolidated operating expenses were 2.2 billion, up year on year primarily due to consolidation of VMware.

Speaker Change: Wonder if you're seeing.

Speaker Change: Seen that if you view it as a challenge or maybe you have.

Speaker Change: A contrary view thank you.

Speaker Change: Okay, well, that's an interesting question in terms of the ships, but let's see we too long.

Speaker Change: The overall AI silicon industry in fiscal 'twenty five.

Speaker Change: Yes.

Speaker Change: Well as we indicated in the last.

Speaker Change: Our focus very much on enterprise AI market as you know.

Speaker Change: Earnings call.

Speaker Change: This past quarter I think we're talking about towards the end of in our compute and wandered in networking.

Speaker Change: Well as all products in the AI are largely very much largely full because especially on the it.

Hock Tan: Broadband, we are not seeing it yet in terms of the bottom, but we see that as close to bottom in the center here again. Bookings are up from where it used to be. And so we're very, we're very, very clean and thinking that broadly we have, as a whole, non-AI semiconductor, we've gone through the down cycle; it's on an uptick. And like all previous cycles, my sense to you know, Stacy, is we will get up back to the level we used to be. There's no reason at all why it doesn't. And given the rate of bookings, it will go.

Speaker Change: And we kind of expect Q4 to run the similar trend.

Speaker Change: Salaries or SBU sites, but even so I'm also and just this month on the networking side on <unk>.

Speaker Change: And it's fun to answer your second one.

Kirsten Spears: Q3 operating income was $7.9 billion and was up 44% from a year ago with operating margin at 61% of revenue. Excluding transition costs, operating profit of $8 billion was up 45% from a year ago with operating margin of 62% of revenue. Adjusted EBDA was $8.2 billion or 63% of revenue. This figure excludes 149 million of depreciation.

Speaker Change: Hyperscale is on cloud those suites lunch platform and some.

Speaker Change: No. We don't guide at all yet for fiscal 'twenty defined but we do expect fiscal 'twenty five to continue to be strong to ensure strong growth on our AI revenue.

Speaker Change: Digital natives why do you go big guys, we don't feel very much on the <unk> with enterprise.

Speaker Change: We obviously don't see that trend.

Okay.

Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And that will come from the line of Ross Seymore with Deutsche Bank. Your line is open.

Speaker Change: And that will come from the line of William Stein with Chewy Securities. Your line is open.

Speaker Change: Hi, Thanks for let me ask you a question I wanted to pivot over to the software side of things Hark. It seems like you know obviously, the Vmware business had a great fiscal third quarter. It seems like the classic Broadcom software fell off so I guess, the two part question as well.

Hock Tan: I dare say, even put a thought in your mind that as AI. for me, Enterprise, Enterprise, Enterprise is all across and digital natives. You need to upgrade service, you need to upgrade storage, you need to upgrade networking, connectivity across the entire ecosystem. And if anything else, we are headed, we can be headed for a site upcycle timing precisely when we're not sure about an upcycle. That could even, actually me or even surpass what our previous upcycles would be, simply because the amount of bandwidth you need, the amount of commitment to manage the store, manage all those four loads that come out of AI would just put me to refresh and upgrade hardware.

William Stein: Great. Thanks for taking my question Hock.

Kirsten Spears: Now a review of the P&L for our two segments, starting with semis. Revenue for a semiconductor solution segment was $7.3 billion and represented 56% of total revenue in the quarter. This was up 5% year on year. Gross margins for atomic conductor solution segment were approximately 68% down 270 basis points year-on-year driven primarily by a higher mix of custom AI accelerators. Operating expenses increased 11% year-on-year to 881 million on increased investment in R&D resulting in semiconductor operating margins of 56%.

Speaker Change: What are the things that we've picked up.

Speaker Change: From both suppliers and the broader ecosystem.

Speaker Change: I think we heard this from in video as well, but there was a shift.

What happened in the classic Broadcom side of things to create that volatility in and are we now kind of reaching that 4 billion dollar base in the fourth quarter that you talked about with Vmware and kind of if so what are the puts and takes in the growth rate as we look into the future on that business.

Speaker Change: And their revenue in the quarter.

Speaker Change: Somewhat away from cloud service providers towards enterprise.

Speaker Change: And you know.

Speaker Change: I wondered if that might potentially.

Speaker Change: Potentially have.

Speaker Change: Slowing effect on your revenue outlook in this end market because your participation that's really pretty focused on the on the cloud customers.

Speaker Change: Well.

Speaker Change: Yeah.

As far as soon as we indicated to the Vmware pencils continues to bode very.

Speaker Change: Wonder if you are seeing.

Speaker Change: Very well.

Speaker Change: Seen that if you view it as a challenge or maybe you have.

Speaker Change: As we convert our customers I'm very much too in two ways one from perpetual to subscription license, but also those subscription licenses.

Speaker Change: Contrary view thank you.

Kirsten Spears: Now moving on to infrastructure software. Revenue for infrastructure software with 5.8 billion of 200% year-on-year primarily due to the contribution of the employer and represented 44% of revenue. Gross margins for infrastructure software were 90% in the quarter and operating expenses were 1.3 billion in the quarter, resulting in infrastructure software operating margin of 67%. Excluding transition costs, operating margin was 69%.

Speaker Change: Okay, well, that's an interesting question in terms of the ships, but let's see we too long.

For the full stack of V C S.

Speaker Change: Focused very much on enterprise AI market as you know.

Hock Tan: So that's my two sensors on where we're hidden from this downcycle. So my belief is 24. What was the lowest point where they are uptake? As part of the reasons, we are stating it very clearly: on the software side, your question. No, I think we have reached a level of stability that puts in faith, brocade; one of those things goes up and down very well. And that's largely it. But on the non-VMware revenue on software revenue, I think we reach a level of very clear stability. And what we are looking towards more is how VMware picks up over the next several years ahead.

Hock Tan: So that's my two sensors on where we're hidden from this downcycle. So my belief is 24. What was the lowest point where they are uptake?

Speaker Change: And that has been very successful as I indicated.

Speaker Change: Well as all products in the AI are largely very much largely focus, especially on the AI.

Speaker Change: The high ratio of D. C. S subscribers, new subscribers that we have achieved and we see this trend continuing.

Hock Tan: As part of the reasons, we are stating it very clearly: on the software side, your question. No, I think we have reached a level of stability that puts in faith, brocade; one of those things goes up and down very well. And that's largely it. But on the non-VMware revenue on software revenue, I think we reach a level of very clear stability. And what we are looking towards more is how VMware picks up over the next several years ahead. Got it. That's helpful. Thank you, huh? Thank you.

Speaker Change: Salaries or SBU site, but even so I'm also and just as much on the networking site on <unk>.

Speaker Change: In Q4, and very much so and wasn't very lightly through into 'twenty five.

Kirsten Spears: Moving on to cash flow. Free cash flow in the quarter was 4.8 billion and represented 37% of revenue. Excluding cash used to restructuring an integration of 529 million. Free cash flow of 5.3 billion were up 14% year-on-year and represented 41% of revenue. Free cash flow was a percentage of revenue had declined from the same quarter a year ago due to higher cash interest expense from debt related to the VMware acquisition and higher cash taxes due to a higher mix of US income and the continued delay in the reenactment of section 174.

Speaker Change: Hyperscale is on cloud those series launch platform and some.

Speaker Change: So in terms of directional trend other than the indication I'm, giving you think than the guy didn't Thanksgiving in 'twenty four and in Q4 of 20 people.

Speaker Change: Digital natives, while you go big guys, we don't deal very much on AI with enterprise.

Speaker Change: We obviously don't see that trend.

Speaker Change: Directionally, we continue to see accelerated bookings.

Speaker Change: Okay.

Speaker Change: And by extension accelerated growth.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And that will come from the line of Ross Seymore with Deutsche Bank. Your line is open.

Speaker Change: Thank you one moment our next question.

Ross Seymore: Hi, Thanks can I ask you a question I wanted to pivot over to the software side of things Hark. It seems like you know obviously, the Vmware business had a great fiscal third quarter. It seems like the classic Broadcom software fell off so I guess, the two part question as well.

Speaker Change: And that will come from the line of Stacy <unk> with Bernstein Research. Your line is open.

Operator: Got it. That's helpful.

Operator: Thank you, huh? Thank you.

Ben Reitzes: One moment for our next question. Hello, and that will come from the line of Ben Reatsis with Melius Research. Your line is open. Thanks a lot for the question. Haqqa wanted to ask you about semiconductors, your AI revenue. If you could just clarify some of your comments. Was the third quarter 3.1-ish in line with your expectations? And was anything weaker than expected? And then with this sequential growth, the three and a half, where are you expecting that to come from? And then, if you don't mind, you said next year, AI revenue should grow quite a bit.

Kirsten Spears: We spent 172 million on capital expenditures. Day sales outstanding were 32 days in the quarter in line with the year ago. We ended the third quarter with inventory at 1.9 billion, up 3% sequentially. Note that we continue to remain disciplined on how we manage inventory across the ecosystem.

Speaker Change: Hi, guys. Thanks for taking my questions.

Two short ones one on each segment so on Sundays.

Speaker Change: What happened in the classic Broadcom side of things to create that volatility and are we now kind of reaching that 4 billion dollar base in the fourth quarter that you talked about with Vmware and kind of if so what are the puts and takes in the growth rate as we look into the future on that business.

Speaker Change: Not only networking like more than 50% below where it was running before it rolled off and clearly the other businesses are also way below their peaks.

Speaker Change: Is there any reason why those shouldn't event and this is this just cyclic or something else going on is there any reason why they shouldn't get back.

Kirsten Spears: We ended the third quarter with 10 billion of cash and 72.3 billion of growth principal debt. During the quarter we replaced 5 billion of floating rate notes with new six senior notes. We used the proceeds from the completed sale of the inwards and user computing business to KKR and cash on hand to reduce floating rate debt by an additional 4.2 billion. Following these actions the weighted average component rate and year's maturity of our 53 billion at 6 rate debt is 3.6% and 7.7 years respectively. The weighted average component rate and year's maturity of our 19 billion in floating rate debt is 6.7% and 3.1 years respectively. We expect to repay approximately 1.9 billion at 6 rate senior notes to 1.4.

Speaker Change: Well.

The prior levels once the recovery happens and then on the software side.

Speaker Change: Yeah.

Speaker Change: As far as soon as we indicated the Vmware expenses continues to boom.

Speaker Change: So the non via more pieces it looks like it's back to that $2 billion ish a quarter level. So that it was there before is that just brocade falling off and is this sort of $2 billion this quarter.

Speaker Change: Very well.

Speaker Change: Uh huh.

Speaker Change: We converted our customers I'm very much too in two ways, one from perpetual to subscription license, but also those subscription licenses.

Ben Reitzes: I was just wondering if that was due to any additional customers within your hyperscaler and consumer internet portfolio. Thanks.

Speaker Change: Is that is that bottomed as well is that the right level, we ought to be thinking about the growth up in the non be aware, our soccer business as we go forward from here.

Ben Reitzes: I was just wondering if that was due to any additional customers within your hyperscaler and consumer internet portfolio. Thanks.

Speaker Change: Yeah on the semi side.

Hock Tan: Well, our number in the third quarter is very much in line. What we expect AI revenue to be. And our revenue in Q4 was for our forecast for Q4. It was giving us the basis to the logic. And to step it up, and to step up our guidance for AI revenue for the full year to over $2 billion. So it's nothing else that continues to indicate up to us that next year will continue to be strong. And again, it's all actually hyperscalous cloud and digital natives. And it's again a mix of AI accelerators and networking.

Hock Tan: Well, our number in third quarter is very much in line. What we expect AI revenue to be. And our revenue in Q4 was for our forecast for Q4. It was giving us the basis to the logic. And to step it up, and to step up our guidance for AI revenue for the full year to over $2 billion. So it's nothing else that continues to indicate up to us that next year will continue to be strong. And again, it's all actually hyperscalous cloud and digital natives. And it's again a mix of AI accelerators and networking. And it's also largely based on backlog we have in place.

Speaker Change: For the full stack of V C.

Speaker Change: And so is there a simple way.

Speaker Change: As you all know we've gone through.

Speaker Change: And that has been various potential as I indicated given the high ratio of DCF subscribers, new subscribers that we have achieved and we see this trend continuing.

Speaker Change: Your typical down cycle, all semiconductors, and remember I'm, referring particularly to non AI and we have talked about them before meant that we've gone through a down cycle.

Speaker Change: And I'm I'm as the ecosystem as many of our customers, but the broader ecosystems.

Speaker Change: Q4, and very much so and Basel very likely through into 'twenty five.

Kirsten Spears: Turning to capital allocation. In Q3 we paid stock over 2.5 billion of cash dividends which based on a split adjusted quarterly common stock count represented a cash dividend of 52.5 cents per share. For Q4 we are rounding up the quarterly cash dividend of 53 cents per share. In Q3 the split adjusted non-gap diluted share count was 4.92 billion in line with expectations. We paid 1.4 billion with holding taxes due to investing of employee equity resulting in the elimination of 8.4 million ABGO shares. Rakers, MQ4, we expect a non-gap to looted share count to be approximately 4.91 billion shares.

In terms of directional trend other than the indication I'm, giving you and then the guidance that we're giving you at 24 and in Q fall 'twenty fall.

Speaker Change: On.

Speaker Change: Oh invent an adjustment.

Speaker Change: Inventory levels at all at all stages in the supply chain.

Speaker Change: We're not totally we are not immune from it obviously as we try to insulate ourselves.

Speaker Change: Directionally, we continue to see accelerated bookings and by extension accelerated growth.

Speaker Change: Sales for me that as much as possible, we're gone through it and all the signs on the indications we have seen very clearly is we have in fact pass through the bottom.

Speaker Change: Thank you one moment our next question.

Hock Tan: And it's also largely based on backlog we have in place. for that. Beyond that, and he shows a growth. Beyond that, no, we're not guiding you beyond the backlog we have. So, I kind of answer your question indirectly on, do I have any more customers? We shall see.

Stacy <unk>: And that will come from the line of Stacy <unk> with Bernstein Research. Your line is open.

Speaker Change: The best indicator is the bookings we are receiving in non AI all the bookings in Q3.

Hock Tan: for that. Beyond that, and he shows a growth. Beyond that, no, we're not guiding you beyond the backlog we have.

Stacy <unk>: Hi, guys. Thanks for taking my questions.

Speaker Change: Often on the AI semiconductor demand.

Stacy <unk>: I have two short ones one on each segment so on Sundays.

Kirsten Spears: Now on to guidance. Our guidance for Q4 is for consolidated revenue of 14 billion and adjusted EBITDA approximately 64 percent. For modeling purposes, we expect consolidated growth margins to be down approximately 100 basis points sequentially on the higher revenue mix of semiconductors and product mix within semiconductors.

Speaker Change: It's up 20%.

Speaker Change: Then another area networking like more than 50% below where it was running before it rolled off and clearly the other businesses are also way below their peaks.

Hock Tan: So, I kind of answer your question indirectly on, do I have any more customers? We shall see.

Speaker Change: And so that also is we are well on our way to a recovery now by end markets as I indicated that the loans the level of the amount of recoveries and the timing of recovery someone batteries, but we are seeing largely on enterprise enterprise.

Operator: Okay, thank you, Hock. Thank you. One moment for our next question.

Speaker Change: Is there any reason why those shouldn't event and this is this just sick or something else going on is there any reason why they shouldn't get back to prior levels. Once recovery happens and then on the software side.

Operator: Okay, thank you, Hock. Thank you.

Karl Ackerman: One moment for our next question. And that will come from the line of Karl Ackerman. Ackerman with BNP Paribas, your line is open. Yes, thank you.

Karl Ackerman: And that will come from the line of Karl Ackerman. Ackerman with BNP Paribas, your line is open. Yes, thank you.

Kirsten Spears: Gap net income and cash flows in Q4 are impacted by higher taxes, restructuring and integration related cash costs due to the EMWR acquisition. As Hock just discussed, we are resuming quarterly revenue and adjusted EBITDA guidance for fiscal 2025, and fiscal year 24 has been a transition and integration year following the EMWR deal close.

Speaker Change: Data Center enterprise spending we had passed the both of them.

Speaker Change: So the non Vmware pieces, it looks like it's back to that $2 billion ish a quarter level. So that it was there before is that just brocade falling off and is this sort of $2 billion ish a quarter.

Kirsten Spears: Kirsten, I was hoping you could speak to the relocation of IP back to the US that is causing a 4.5 billion-dollar tax liability. Historically, Broadcom has read domiciled ahead of a pending transaction, and I'm getting questions from investors. If this action may relate to any asset sales as a company seeks to pay down debt, so it's good to clarify that. That would be helpful. Thank you. Yeah, no, it was just timing of when we chose to do at this time. And no, it doesn't have anything to do with that. It's just we relocated the IP, and that caused the 4 billion-dollar charge.

Speaker Change: And we are in country, what's in fact sequentially a recovery from the Baltimore, We believe Q2 or Q1 of this fiscal year and you'll see Q4 couldn't duty.

Speaker Change: Is that is that bottomed as well is that the right level, we ought to be thinking about the growth up with an idea of where our software business as we go forward from here.

Speaker Change: Yeah.

Speaker Change: D nailing that recovery.

Sami: Sami site the answers.

Speaker Change: And obviously in our view into 'twenty five.

Kirsten Spears: That concludes my prepared remarks.

Speaker Change: Some of them, we have got as you all know we've gone through.

Operator: Operators, please open up the call for questions. Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, 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.

Speaker Change: In terms of the site the broadband.

Speaker Change: Do you all typical down cycle, all semiconductors, and im referring particularly to non AI and we have talked about them before meantime, we've gone through a down cycle.

Speaker Change: We are not seeing it yet in terms of the bottom.

Speaker Change: We see that as close to the bottom in the center here again bookings Oh from where it used to be.

Kirsten Spears: The offset to that is a deferred tax liability. So think about it's non-cash or a little cash impact to that. Thank you.

Kirsten Spears: The offset to that is a deferred tax liability. So think about it's non-cash or a little cash impact to that.

Speaker Change: And so we're very we are very very clean and I'm thinking that broadly we have.

Speaker Change: And I am as equal system as many of our customers, but the project goes ecosystems.

Timothy Arcuri: One moment for our next question. And now we'll come from the line of Timothy Arcuri with UBS. Your line is open. Thanks a lot. Hock, I wanted to ask about the growth rate in your AI revenue versus what we're seeing on the GPU side. Your AI revenue grew in the same zip code this year as what the GPU compute's growing. And you did say that it would be up next year, but your main customers ramping a new version of their custom basic next year and there's some thought that they might shift some of their purchasing back to GPUs next year.

Speaker Change: It's a whole non AI semiconductors.

Vivek Arya: Our first question will come from the line of Vivic Arya with Bank of America. Your line is open. Thanks for taking my question. Just a clarification, Hock, and then the question. So I think AI revenue roughly 3.1 isch billion in Q3, flat isch sequentially. What was the mix in terms of compute versus networking and the 3.5 billion for Q4? What do you see as that mix? And then as you get into fiscal 25, I realize you're not guiding overall AI.

Speaker Change: On.

Speaker Change: One through the down cycle is on an uptake and light all previous cycles.

Speaker Change: And adjustment.

Speaker Change: Inventory levels at all and all stages in the supply chain and we're not totally we're not immune from it obviously as we try to insulate ourselves from it as much as possible we're gone through it and all of the signs on the indications we have seen very clearly is.

Speaker Change: My sense of you know Stacy is we will get back to the levels. We used to be there's no reason at all why does them and given the rate of bookings.

It won't go I didn't say it doesn't create a.

Speaker Change: In fact pass through to the bottom line.

Speaker Change: Don in your mind that.

Best indicator is the bookings we are receiving in non AI.

Speaker Change: As a I.

Vivek Arya: But just how's your general kind of confidence and visibility? Do you think that Broadcom can kind of grow in line or better than the overall AI Silicon industry in fiscal 25? Yes. Well, as we indicated in the last morning call, for this past quarter, I think we're talking about two thirds in compute and wonder in networking. And we cannot expect Q4 to run the similar trend. And as far to answer your second question, but no, we don't guide for yet for fiscal 25, but we do expect fiscal 25 to continue to be strong, to show strong growth on our AI revenue. Thank you. One moment for our next question.

Speaker Change: Bromine.

Timothy Arcuri: So do you think that the growth of your AI revenue should still approximately track how much GPU compute's going to grow next year? If you can give us any qualitative or quantitative thoughts, there. That would be great. Thank you. Yeah, so the question Hock really is around the growth rate of your AI revenue versus what we're seeing on the GPU side because this year you grew about the same as what GPU compute's growing. And the question is, is there anything happening next year that would change that equation so that your growth rate of your AI revenue would be materially different than what GPU compute's growing next year?

Speaker Change: Enterprise and.

Speaker Change: Bookings in Q3 of.

Brian: Brian Enterprises, all across and digital natives.

Speaker Change: Nuomi AI semiconductor demand.

You need to upgrade the service you need to upgrade the storage you need to upgrade networking connectivity.

Speaker Change: It's up 28%.

Speaker Change: And so that Delta is this we are well on our way to a recovery now by end markets as I indicated the level of the amount of recoveries and the timing of recovery somewhat batteries, but we are seeing largely on enterprise enterprise.

Speaker Change: <unk> is going to die.

Equal system.

Speaker Change: And if anything else, we've got he doesn't rico behavior, all sides of the up cycle.

Speaker Change: Timing precisely when we're not sure, but an up cycle that could even.

I'll, even above what our previous up cycles would be simply because.

Speaker Change: Data Center enterprise ICT spending with past the bulk of the well.

Speaker Change: The amount of bandwidth you need the mono compete do manage to install and manage all of those loans that come out of a I would just.

Speaker Change: And we are in Q3 was in fact sequentially a recovery from the Baltimore, We believe Q2 or Q1 of this fiscal year and you'll see Q4 could duty continuing debt recovery.

Hock Tan: You know, that's a very difficult question for me to answer because it comes in two parts, right?

Speaker Change: Need to refresh and upgrade hardware.

Hock Tan: You know, that's a very difficult question for me to answer because it comes in two parts, right?

Speaker Change: So that's my two cents worth on where we're headed from this from this down cycle. So right believe me into 'twenty fall, while the Boston North point uptick.

Hock Tan: In terms of GPU growth, you should ask the guy who does much on GPU GPU, which is obviously in video, and I don't see in I don't play in the enterprise market at all. See, that's part of the market I don't see. Having said that, they do both play at someone in the hyper-scale where I'm totally focused on doing so. That's really very, and that's really no connection one with the other. But it is in the right. But enough for me to say long term. I'm saying, actually and thoughtfully, long term, the large hyperscalers, few and large hyperscalers with very large platforms, huge consumer platforms, subscriber bays, have the entire model predicated on running a lot of large language models, a lot of AI requirements, workloads that we're talking about.

Speaker Change: And obviously in our view into 25 independent of the cycle broadband.

Speaker Change: We're not seeing it yet in terms of the bottom.

William Stein: And that will come from the line of William Stein with Truist Securities. Your line is open. Great. Thanks for taking my question. One of the things that we've picked up from both suppliers and the broader ecosystem in AI. I think we've heard this from NVIDIA as well, but there was a shift in their revenue in the quarter somewhat away from cloud service providers towards enterprise, and I wondered if that might potentially have a slowing effect on your revenue outlook in this end market because your participation is really pretty focused on the cloud customers. I wonder if you're seeing that if you view it as a challenge or maybe you have a contrary view. Thank you.

Speaker Change: One of the reasons, we are stating it very clearly.

Speaker Change: We see that as close to bottom in the center here again bookings are up from where it used to be.

Speaker Change: On the software defined your question no I think we have reached a level of stability that puts and takes brocade spot. One of those then it goes up and down very vulnerable.

Speaker Change: And so we're very we are very very clean and I'm thinking that broadly we have that's a whole non AI semiconductors, we've gone through the down cycle is on an uptick.

Speaker Change: And that's largely them.

Speaker Change: But on the non <unk> revenue on the software revenue I think would reach a level of very clear stability.

Speaker Change: In light all previous cycles.

Stacy <unk>: My sense of you know Stacy is.

Speaker Change: And.

Speaker Change: What we are looking towards more is how V M win.

Stacy <unk>: We will get back to the level, we used to be there's no reason at all why does them and given the rate of bookings.

Speaker Change: Big over the next.

Speaker Change: So a year on year in Manhattan.

Stacy <unk>: Logo.

Stacy <unk>: I'd say even in Korea.

Speaker Change: Got it that's helpful. Thank you Bob.

Don: Don in your mind that.

Speaker Change: Thank you one moment for our next question.

A.I.: A I.

Speaker Change: Pardon me.

Speaker Change: Enterprise and.

Brian: Brian Enterprises, all across and digital natives.

Hock Tan: Okay, well, that's an interesting question in terms of the shift, but see, we do not focus very much on enterprise AI market as you know will. Our products in AI are largely very much largely focused, especially on the AI salary or XP use site, but even so, also just as much on that working site, on hyperscalers, on cloud. Now, those are its launch platform and some digital needs is what you call big guys. We don't deal very much on AI with enterprise, so we obviously don't see that trend.

Speaker Change: Hello, and that will come from the line of Ben Reitzes with Melleous Research. Your line is open.

Brian: You need to upgrade service you need to upgrade and storage you need to upgrade networking connectivity across the entire.

Speaker Change: Okay. Thanks, a lot for the question.

Hock Tan: There, and you will drive a month of time towards creating as much as possible, their own compute silicon, their own custom accelerators, as a month of time. And we are in the midst of seeing that transition. You should maybe take several years for that to happen. So that is on the different trajectory, a different path, and I'm in that path of doing it, enabling custom accelerators. I'm in that path; I'm not in the path of, in the meantime, a different trajectory of enabling enterprises to do AI on their own workloads. That's more than much in guys.

Speaker Change: Hock I wanted to.

Speaker Change: Ask you about semiconductors AI revenue.

Speaker Change: Equal system.

Brian: And if anything else.

Speaker Change: If you could just clarify some of your comments.

Speaker Change: It doesn't recur behavioral science upcycle.

Operator: Thank you. One moment for our next question.

Speaker Change: Was the third quarter 3.1 ish in line with your expectations.

Speaker Change: Timing of precisely when we're not sure, but an up cycle that could even.

Speaker Change: Was anything weaker than expected and then.

Speaker Change: With the sequential growth for three and a half where are you expecting that to come from and then if you don't mind. You. You said next year AI revenue should grow quite a bit I was just wondering if that was due to any additional customers.

Speaker Change: Or even surpass what previous up cycles would be simply because.

Speaker Change: The amount of bandwidth you need the mono compete.

Manish install and manage all of those loans that come out of a I would just.

Speaker Change: Within your Hyperscale and consumer Internet portfolio. Thanks.

Speaker Change: Need to refresh and upgrade hardwood.

Speaker Change: Our number of injury.

Third quarter is very much its pretty much in line, what do we expect revenue to be and.

Speaker Change: So that's my two cents on where we're headed from this from this down cycle. So I believe it's 24 was the was the lowest point for the uptake.

Speaker Change: Our revenue in Q4 was one point ahead of our forecast for Q4 is once you're giving us the basis to the Olympics and suspended until stay above our guidance for revenue and for the full year to talk to over $12 billion.

Ross Seymour: And that will come from the line of Ross Seymour with Deutsche Bank. Your line is open. I think so I ask a question.

Speaker Change: As part of the reasons, we are stating it very clearly.

Hock Tan: From the much in guys, obviously, also in the AI, in the hyperscalers today, but there's a process, obviously, of a transition going on. So one doesn't really connect to the other team in that regard, but I would lightly say, obviously, as the transition occurs, we have a good tailwind. For in the business model, we have of providing accelerators and networking to the AI data centers of those large hyperscalers. Right, Doc.

Hock Tan: One to pivot over to the software side of things. Hawk, it seems like obviously the VMware business had a great fiscal third quarter. It seems like the classic Broadcom software fell off, so I guess the two part question is what happened in the classic Broadcom side of things to create that volatility and are we now kind of reaching that $4 billion base in the fourth quarter that you talked about with VMware?

Speaker Change: On the software defined your question no I think we have reached a level of stability.

Speaker Change: Brocade spot one of those then it goes up and down very vulnerable.

Speaker Change: So if nothing else.

Speaker Change: And Thats largely.

Speaker Change: Continues to be indicating to us.

But on the non <unk> revenue.

That next year, we'll complete the trend will continue to be strong and again, it's all largely hyperscale cloud and digital natives and it's again a mix of S.

Speaker Change: Our software revenue I think we reach a level of very clear stability.

Hock Tan: And if so, what are the puts and takes in the growth rate as we look into the future on that business? Well, as I said, as we indicated, the VMware business continues to work very well as we convert our customers very much into ways one from perpetual to subscription license, but also those subscription licenses for the company. So that's a full stack of ETFs. And that has been very successful as I indicated given the high ratio of DCF subscribers and new subscribers that we have achieved and we see this trend continuing in Q4 and very much so and was very likely through into 25. So in terms of directional trend, other than the indication I'm giving you, then the guidance I'm giving you 24 in Q4 24, directionally, we continue to see accelerated bookings and by extension accelerated growth.

Speaker Change: And.

Speaker Change: One we are looking towards more is how vmware.

Operator: Thank you. One moment for our next question.

Speaker Change: Uh huh.

Speaker Change: And salary says.

Speaker Change: Over the next.

Speaker Change: And.

Speaker Change: Year on year and a half.

Speaker Change: Networking and it's also largely based on backlog we have in place.

Operator: Okay. Thank you so much.

Speaker Change: Got it that's helpful. Thanks came up.

Operator: Okay. Thank you so much.

Harsh Kumar: One moment for our next question. And that will come from the line of Harsh Kumar with Piper Sandler. Your line is open. Yeah, I was curious about the profitability of VMware. Historically, your software businesses have had operating margins greater than 70%. VMware, I know, is newer and you're doing things a little different. You're keeping more customers than you historically have kept. But I was curious if you see a similar profile as the rest of your software businesses for VMware after you're done with all the cuts and everything.

Speaker Change: Thank you one moment for our next question.

Speaker Change: For that.

Speaker Change: Beyond that and it shows the growth beyond that no. We're not guiding you beyond the backlog we have.

Speaker Change: Hello, and that will come from the line of Ben Reitzes with Melleous Research. Your line is open.

Speaker Change: So I'd kind of answer your question indirectly on do I have any more customers.

Speaker Change: Okay. Thanks, a lot for the question.

Hock: Hock I wanted to ask.

Speaker Change: We shall see.

I ask you about semiconductors.

Speaker Change: Okay. Thank you hock.

Hock: Revenue.

Speaker Change: If you could just clarify some of your comments.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Was the third quarter 3.1 ish in line with your expectations.

Harsh Kumar: But I was curious if you see a similar profile as the rest of your software businesses for VMware after you're done with all the cuts and everything.

Speaker Change: Oh.

Speaker Change: And that will come from the line of Karl Ackerman with BNP Paribas. Your line is open.

Speaker Change: Was there anything weaker than expected and then.

Karl Ackerman: Yes. Thank you I'm curious to know I was hoping you could speak to the relocation of IP back to the U S that is causing a four and a half million dollars tax liability. Historically broadcom has re domiciled ahead of a pending transaction and I'm getting.

Speaker Change: With the sequential growth for three and a half where are you expecting that to come from and then if you don't mind. You said next year AI revenue should grow quite a bit I was just wondering if that was due to any additional customers.

Hock Tan: Well, I let you draw your own conclusion, Harsh, but I was afraid to lay out, as you probably heard. In Q3, our revenue from VMware was 3.8 billion. And our operating expenses is 1.3 billion. And you can pretty quickly figure out where we're headed in terms of operating margins, and as indicated, it is a margin. And Q4 will continue the trajectory of revenue continuing to grow and expenses starting and still dropping even as it starts to stabilize but continue to reduce.

Hock Tan: Well, I let you draw your own conclusion, Harsh, but I was afraid to lay out, as you probably heard. In Q3, our revenue from VMware was $3.8 billion. And our operating expenses is 1.3 billion. And you can pretty quickly figure out where we're headed in terms of operating margins, and as indicated, it is a margin. And Q4 will continue the trajectory of revenue continuing to grow and expenses starting and still dropping even as it starts to stabilize but continue to reduce.

Speaker Change: You know within your Hyperscale and consumer Internet portfolio. Thanks.

Speaker Change: Questions from investors.

Speaker Change: This action may relate to any asset sales as the company seeks to pay down debt. So to clarify that that'd be helpful. Thank you yeah. No. It was just timing of when we chose to do at this time and no. It doesn't have anything to do with that is just we relocated the IP and that caused the $4 billion charge, the offset to that as a deferred tax liability.

Speaker Change: Our number in third quarter is pretty much in line, while we expect revenue to be in.

Speaker Change: Our revenue in Q4 was one part of that forecast for Q4 is once you're giving us the basis.

Stacy Rasgon: And that will come from the line of Stacy Rasgon with Bernstein Research. Your line is open. Hi guys, thanks for taking my questions.

Speaker Change: So the lunch <unk>.

Speaker Change: So think about it as noncash very little cash impact to that.

Speaker Change: <unk> added on to stay above our guidance for revenue and for the full year to talk to over $12 billion.

Speaker Change: Thank you.

Speaker Change: One moment our next question.

Hock Tan: I have two short ones one on each segment. On some of these, you know, the not only are you networking is like more than 50% below where it was running before it rolled off and clearly the other businesses are also way below their peaks. Is there any reason why those shouldn't event? Is this just sick or something else going on? Is there any reason why those shouldn't get back to prior levels once recovery happens?

Operator: Thank you, Hock. One moment for our next question.

So if nothing else that continues to indicate I hope duos.

Hock Tan: Thank you, Hock.

Speaker Change: And that will come from the line of Timothy Arcuri with UBS. Your line is open.

Operator: One moment for our next question. And that will come from the line of C.J. Muse with Cantor Fitzgerald. Your line is open. Yeah, good afternoon. Thank you for taking the question. I want to focus on software growth margin.

Speaker Change: Next you will continue the trend will continue to be strong and again, it's all largely hyperscale cloud and digital natives and it's again a mix of.

C.J. Muse: And that will come from the line of C.J. Muse with Cantor Fitzgerald.

Timothy Arcuri: Thanks, a lot Hock I wanted to ask about the grocery to newer AI revenue versus what we're seeing on the GPU side. Your you know AI Ah you know revenue grew in the same ZIP code. This year is what the GPU compute is growing and you did say that it would be up next year, but your main customers ramping a new version of their custom basic next year and there's some thought that name.

C.J. Muse: Your line is open. Yeah, good afternoon. Thank you for taking the question. I want to focus on software growth margin. So when you close the acquisition of VMware, we take more from low 90s to, you know, kind of high 80s. And we're now, you know, pushing a bit higher in July. And curious, as we kind of get to that, you know, 4 billion threshold, and you've kind of indicated higher in fiscal 25s, how should we think about the growth margin trajectory overall for software? Well, you know, for us, software growth margin is actually the direct; it's not that relevant.

Speaker Change: Uh huh.

Chris Kaiso: So when you close the acquisition of VMware, we take more from low 90s to, you know, kind of high 80s. And we're now, you know, pushing a bit higher in July. And curious, as we kind of get to that, you know, 4 billion threshold, and you've kind of indicated higher in fiscal 25s, how should we think about the growth margin trajectory overall for software? Well, you know, for us, software growth margin is actually the direct; it's not that relevant. You know that, right? Software is unless I'm running SAS big time. Now, a lot of our products on description, but they're not SAS.

Speaker Change: Accelerate those.

Speaker Change: And.

Hock Tan: And then on the software side, you know, so the non VMware pieces looks like it's back to that two billionish recorder level or so that it was at before. Is that just brocade falling off? And is this sort of two billionish recorder? Is that is that bottomed as well? Is that the right level we ought to be thinking about the growth that for the non VMware software businesses we go forward from here?

Speaker Change: Networking and it's also largely based on backlog we have in place.

Speaker Change: Might shift some of their purchasing back to Gpus next year. So deep deep do you think that the growth of your AI revenue should still approximately track how much GPU compute is going to grow next year. If you can give us any qualitative or quantitative.

Speaker Change: For that.

Speaker Change: Beyond that and it shows the growth beyond that no. We're not guiding you beyond the backlog we have.

Speaker Change: So I'd kind of answer your question indirectly on do I have any more customers [laughter] reached L. T.

Hock Tan: Yeah, on on the semi side, the answer is very simple. We have got as you all know, we've gone through your typical down cycle of semiconductors. And I'm referring particularly to non AI. And we've talked about that before many times. We've gone through a down cycle. And I've been asked the ecosystem as many of our customers, but the broad ecosystems ecosystems work on an adjustment in the end inventory levels at all at all stages in the supply chain.

Speaker Change: You know thoughts there that'd be great. Thank you.

Speaker Change: Mhm.

Speaker Change: I think we had some communications Deb could you repeat the question.

Speaker Change: Yeah.

Hock: Okay. Thank you hock.

Speaker Change: Thank you one moment for our next question.

Hock Tan: You know that, right? Software is unless I'm running SAS big time. Now, a lot of our products on description, but they're not SAS. We have some of our products on SAS Cloud Base. But most of them are not, and our growth margin will be around 90 percent at least.

Speaker Change: Yeah. So the question really is around the growth rate of your AI revenue versus what we're seeing on the GPU side. Because this year you grew about the same as what GPU compute is growing and the question is is there anything happening next year that would change that equation so that your.

Speaker Change: And that will come from the line of Karl Ackerman with BNP Paribas. Your line is open.

Karl Ackerman: Yes. Thank you.

Hock Tan: We have some of our products on SAS Cloud Base. But most of them are not, and our growth margin will be around 90 percent at least.

Karl Ackerman: Curious to know I was hoping you could speak to the relocation of IP back to the U S that is causing a four and a half billion dollar tax liability. Historically broadcom has re domiciled ahead of a pending transaction and I'm getting in.

Speaker Change: Growth rate of your AI revenue would be materially different than what GPU compute growing next year.

Speaker Change #100: That's a very difficult question for me to answer that because it comes in two parts right in terms of GDP growth you showed us.

Speaker Change: Questions from investors.

Speaker Change: This action may relate to any asset sales as the company seeks to pay down debt so to clarify that that'd be helpful. Thank you.

Operator: And one moment for our next question. And that will come from the line of Chris Kaiso with Wolf Research. Your line is open. Yes, thank you. Good evening.

Hock Tan: And we're not hopefully we are not immune for me obviously as we try to insulate ourselves from it as much as possible. We've gone through it and our designs on the indications we have seen very clearly is we have in fact passed through the bottom. The best indicator is the bookings we are receiving. In non AI, our bookings include three of non AI and semiconductor demand was about 20% and so that tells us this we are well on the way to recovery.

Operator: And one moment for our next question. And that will come from the line of Chris Kaiso with Wolf Research. Your line is open. Yes, thank you. Good evening.

The Guy who does mentioned you'd be U a GPU, which is obviously in the media and M D.

Speaker Change: The timing of when we chose to do at this time.

Hock Tan: Now by end markers, as I indicated, the level of the amount of recovery that timing or recovery, someone varies, but we're seeing largely on enterprise enterprise data center and the price ID spending with past the bottom. And we are in Q3 what in fact sequentially a recovery from the bottom of we believe Q2 or Q1 this fiscal year and we'll see Q4 continuing that recovery and obviously now view into 25 and the symptoms of the cycle.

Speaker Change: So it doesn't have anything to do with that is just we relocated the IP and that caused the $4 billion charge, the offset to that as a deferred tax liability.

Speaker Change #101: And I don't see I don't play in the enterprise market at all see that part of the market I don't see having said that they do both play out somewhat in the hyper scale it well I'm totally focus on doing so.

Chris Kaiso: I wonder if you could speak to the custom AI revenue and perhaps the contribution from some of the other customers aside from that largest customer. You know, how meaningful are the other customers in that segment and, you know, what do you expect into next year as some of those newer projects start to ramp? Well, I know. We're dancing around the thing. As I indicated, we're three customers now going on, and they're all three of them are meaningful. Otherwise, we won't call them customers, as the criteria we have used until we can meaningful shimmings out to them on AI accelerators.

Christopher Rowan: I wonder if you could speak to the custom AI revenue and perhaps the contribution from some of the other customers aside from that largest customer. You know, how meaningful are the other customers in that segment and, you know, what do you expect into next year as some of those newer projects start to ramp? Well, I know. We're dancing around the thing. As I indicated, we're three customers now going on, and they're all three of them are meaningful. Otherwise, we won't call them customers, as the criteria we have used until we can meaningful shimmings out to them on AI accelerators.

Speaker Change: So think about it as noncash very little cash impact to that.

Speaker Change: Thank you.

Speaker Change: One moment our next question.

Speaker Change #101: That's really battery and that's really no.

Speaker Change: And that will come from the line of Timothy Arcuri with UBS. Your line is open.

Speaker Change #101: No connection one with the other that ebay is in the right, but not so fine for me to say long term.

Timothy Arcuri: Thanks, a lot Hock I wanted to ask about the growth rate in your AI revenue versus what we're seeing on the GPU side.

Speaker Change #101: I'm, saying that thoughtfully long term.

Speaker Change: Your you know AI.

Timothy Arcuri: Revenue grew in the same ZIP code. This year is what the GPU compute is growing and you did say that it would be up next year, but your main customers ramping a new version of their customer looks like next year and there's some thought that they might shift some of their purchasing back to Gpus next year. So do you think that the growth of your AI revenue should still approximately track how much.

Speaker Change #102: The launch Hyperscale as few and large hyperscale is the very large platforms huge consumer platform subscriber base.

Speaker Change #101: Half of them.

Hock Tan: We do not really consider that as a customer. Simply because it's new, this is an emerging trend. It's not an easy product to deploy for any customer. And so we do not consider the growth of concepts as production volume. These are all production accelerators deploying in data centers of those three customers.

Speaker Change #101: Yeah, and buy them model predicated on Rami bear a lot of large language models, a lot of AI requirement workloads out there.

Speaker Change: GPU compute is going to grow next year, if you can give us any qualitative or quantitative.

Speaker Change #100: You know thoughts there that'd be great. Thank you.

Speaker Change #101: And.

Speaker Change #101: It will drive.

Speaker Change #101: Mental the bank towards creating as much as possible they are on.

Hey, David I think we had some communications Deb could you repeat the question.

Hock Tan: So broad then we are not seeing it yet in terms of the bottom but we see that as close to bottom in the center here again bookings are up from where it used to be. And so we're very, we're very, very clean and thinking that broadly we have as a whole non AI semiconductors, we've gone through the down cycle. It's an uptick and like all previous cycles. My sense of you know, they see is we will get up back to the level we used to be.

Speaker Change #101: <unk>.

Silicon their own custom.

David: Yeah. So the question really is around the growth rate of your AI revenue versus what we're seeing on the GPU side. Because this year you grew about the same as what GPU compute is growing and the question is is there anything happening next year that would change that equation so that your.

Speaker Change #101: Salary base.

Speaker Change #101: As a mental thing and we are in the midst of seeing that transition you should make.

Speaker Change #101: Separately, a few years for that to happen.

Operator: One moment for our next question. And that will come from the line of Christopher Rowan with us. Your line is open. Hi, thanks for the question. My question is actually on storage and hockey bot C gates, hard disk drive, SOC assets earlier in the year. Can you talk about what you actually bought there? What it means in terms of economics for your company and whether this accelerates your storage business over the next few years. Thanks.

Hock Tan: One moment for our next question. And that will come from the line of Christopher Rowan with us. Your line is open. Hi, thanks for the question. My question is actually on storage and hockey bot C gates, hard disk drive, SOC assets earlier in the year. Can you talk about what you actually bought there? What it means in terms of economics for your company and whether this accelerates your storage business over the next few years. Thanks.

Speaker Change #101: So that is on the difference.

Speaker Change #101: Trajectory different pad and I'm in that path.

Speaker Change #102: Growth rate of your AI revenue would be materially different than what GPU compute growing next year.

Speaker Change #101: Doing it enabling customer salaried this I'm isn't that bad.

Speaker Change #103: That's a very difficult question for me to answer because it comes in two parts right.

Speaker Change #103: Non denim pants, all in the meantime, a different trajectory of enabling enterprises to do to do a eye on their own workflows that small done much and guys on some of the merchant guys. Obviously also in the Ah Indeed hyper scaler today.

Speaker Change #104: A GPU growth you showed us.

Speaker Change #105: The Guy who does merchant GPU, a GPU, which is obviously in the media and.

Hock Tan: There's no reason at all why it doesn't and given the rate of bookings it will go. I dare say even put a thought in your mind that as AI, for me, Enterprise, Enterprise, all across and digital natives. You need to upgrade service, you need to upgrade storage, you need to upgrade networking, connectivity across the entire ecosystem. And if anything else, we are headed, we could be headed for a site upcycle timing precisely when we're not sure about an upcycle that could even actually meet or even surpass what our previous upcycles would be.

Speaker Change #106: And I don't see I don't play in the enterprise market at all see that part of their market I don't see having said that they do both play out somewhat.

Speaker Change #104: But that's the process, obviously of a transition going on so one doesn't really connect with the other team in that regard, but I would like me to say, obviously as that transition occurs.

Hock Tan: Oh, this is more of a partnership than anything else. Basically, you know, it's what we essentially created in that transaction was to begin with. We actually believe long term in the sustainability of hard disk drives, media, as a great long term sustainable storage medium, which is, you know, 20, 22, 3, 24, you know, their advice, to going to 30, 40, and even 50. Their advice, a lot of technology along the way, and a lot of that resides in Silicon. So what we're doing in the fact is the collaboration more than anything else, though it's structured, obviously, as a purchase of intellectual property, but we're also taking engineers, designers, combining it with the designers we had, and basically enabling CK and eventually the entire industry to continue a roadmap that goes towards 50 derivites.

Speaker Change #106: The hyper scaler, we're totally focused on doing so.

Speaker Change #106: So.

Speaker Change #107: That's really battery and that's really no.

Speaker Change #107: No connection one with the other that ebay is indirect but not suffice for me to say long term.

Speaker Change #104: We feel we have a good tailwind.

Speaker Change #104: Well in the business model we have.

Speaker Change #104: I'll be providing a summary of those and then looking to the AI data centers those launch hyperscale.

Speaker Change #107: I'm, saying that thoughtfully long term.

Speaker Change #107: The large hyperscale is few and large hyperscale is very large platforms huge consumer platform subscriber base.

Speaker Change #104: Right. Okay. Thank you so much.

Speaker Change #104: One moment our next question.

Hock Tan: Simply because the amount of bandwidth you need, the amount of commitment to manage the store, manage all those workloads that come out of AI would just need to refresh and upgrade hardware. So that's my two sensors on where we're headed from this downcycle. So my belief is 24, what's the lowest point where they are uptake. As part of the reasons we are stating it very clearly. On the software side, your question, no, I think we have reached a level of stability, that puts and takes, brokeate, spot one of those and goes up and down very both out.

Speaker Change #104: And that will come from the line of harsh Kumar with Piper Sandler Your line is open.

Speaker Change #107: And.

Speaker Change #107: Yeah, and volume models predicated on Rami, where a lot of large language models a lot of AI requirement workloads out there.

Speaker Change #105: I was curious about the profitability of Vmware historical.

Speaker Change #106: Historically, yes software businesses have had operating margins greater than 70%.

Speaker Change #107: And.

Speaker Change #107: It will drive.

Speaker Change #107: Embraer I know is newer and youre doing things a little different you're keeping more customers than you historically have caps, but I was curious if you see a similar profile as the rest of your software business just for the Embraer after you're done, but with all the cuts and everything.

Speaker Change #108: Wow mental time, two months, creating as much as possible they are on.

Speaker Change #107: Silicon.

Speaker Change #107: Our own custom.

Speaker Change #107: Celebrate with us.

Speaker Change #107: As a mental type and we are in the midst of seeing that a transition you should maybe think settlement a few years.

Well I'll, let you draw your own conclusion harsh, but I was at pains to lay out and two probably huh.

Speaker Change #107: For that to happen.

Speaker Change #109: So that is on the difference.

Speaker Change #108: In Q3, our revenue from the MAA was $3 8 billion and our operating expenses.

Speaker Change #109: Trajectory of different pads and I'm in that path.

Hock Tan: And that's largely it. But on the non VMware revenue, on software revenue, I think we reach a level of very clear stability. And what we are looking towards more is how VMware picks up over the next several years ahead. Got it. That's helpful.

Operator: Thank you.

Speaker Change #109: Doing that enabling customers to celebrate this I'm in that bag.

Speaker Change #108: One 3 billion.

And you can pretty quickly figure out.

Speaker Change #109: I'm not into the pads in the meantime, a different trajectory of enabling enterprises to do to do a eye on their old wounds that small dimension guys on Sunday Monday, guys. Obviously also E E.

Speaker Change #109: In terms of operating margin and as I indicated in EBITDA margin.

Speaker Change #108: And Q4.

Won't continue the trajectory of revenue you.

Speaker Change #108: Continuing to grow and expenses something students dropping even as it starts to stabilize but continuing to reduce.

Speaker Change #110: The hyper scale today.

Ben Reitzes: One moment for our next question. Hello.

Speaker Change #111: That's a process obviously of a transition going on so one doesn't really connect with the other.

Hock Tan: That's our ambition; that's our vision, and you'll be able to do that within five years or less. So that's pretty much what it is. It's a statement of our belief that hard disk drives, near-line hard disk drive storage, will sustain very well over the next five years, if no longer.

Speaker Change #110: Thank you hock.

Hock Tan: And that will come from the line of Ben Reatsis with Melius Research. Your line is open. Okay. Thanks a lot for the question. Haka, I wanted to ask you about semi-conductors, your AI revenue. If you could just clarify some of your comments. Was the third quarter 3.1-ish in line with your expectations? Was anything weaker than expected? And then with this sequential growth, the 3.5, where are you expecting that to come from?

Speaker Change #111: The team in that regard, but I would like me to say, obviously as the transition occurs.

Speaker Change #110: One moment for our next question.

Speaker Change #110: Yeah.

C.J. Muse: And that will come from the line of C. J Muse with Cantor Fitzgerald. Your line is open.

Speaker Change #112: We feel we have a good day.

Speaker Change #112: Louisiana.

Speaker Change #112: Yeah. Good afternoon. Thank you for taking the question I wanted to focus on software gross margin. So when you close the acquisition of B M, where we took more from low ninety's to you know kind of high Eighty's.

Speaker Change #112: Well in the business model, we have of providing accelerators and then looking to the AI data centers those launch hyper scales.

Operator: Thank you all.

Aaron Rakers: One moment for our next question. And that will come from the line of Aaron Rakers with Wells Fargo. Your line is open. Yeah, thanks for taking the question. Kind of thinking strategically as we look forward, you know, ahead to the NVIDIA's Blackwell product cycle, there's been some indications that, you know, possibly Broadcom has an opportunity to participate more deeply in the optical side of that product platform for NVIDIA. I'm curious, do you see that as an opportunity relative to prior generations of NVIDIA just to deepen a participation, or just to participate in general in kind of the areas of VSTs and maybe other things related to the Blackwell cycle from NVIDIA?

Speaker Change #113: Right. Okay. Thank you.

Speaker Change #113: Now you know pushing a bit higher in July and I'm curious as we kind of get.

Speaker Change #113: Yeah.

Speaker Change #114: One moment our next question.

Hock Tan: And then if you don't mind, you said next year AI revenue should grow quite a bit. I was just wondering if that was due to any additional customers within your hyperscaler and consumer internet portfolio. Thanks. Well, our number in third quarter is very much in line. What we expect AI revenue to be. And our revenue in Q4 was focused for Q4. It was giving us the basis to the logic. And to step it up, and to step up our guidance for AI revenue for the full year to over $2 billion.

Speaker Change #114: To that 4 billion threshold and you've kind of indicated higher in fiscal 'twenty fives, how should we think about the gross margin trajectory overall for software.

Speaker Change #115: And that will come from the line of harsh Kumar with Piper Sandler Your line is open.

Harsh Kumar: Yeah, Hi, I was curious about the profitability of Vmware.

Speaker Change #117: Historically, yes software businesses have had operating margins greater than 70%.

Speaker Change #114: Well you know it's a false.

Speaker Change #115: Software gross margin is actually the direct it's not that relevant you know that right. So claims unless I'm Rodney.

Harsh Kumar: Embraer I know is newer and youre doing things a little different you are keeping more customers than you historically have caps, but I was curious if you see a similar profile as the rest of your software business just for the Embraer after you're done, but with all the cuts and everything.

Speaker Change #114: That big time.

Speaker Change #116: Now a lot of our products on a subscription, but then not sex we have from all of our products on premise cloud based but most of them are not and and our gross margin will be around 90%.

Speaker Change #118: Well I'll, let you draw your own conclusion, harsh, but I want to lay out as you probably heard it.

Hock Tan: Thank you.

Hock Tan: That's an interesting question and simple answer. I'm not really participating in NVIDIA, just in roadmap. I'm really not directly in that kind of market, in that kind of product roadmap, that NVIDIA's product roadmap in terms of Blackwell, impressive product on the way to coming out. Now, in terms of base technology, we develop, of course, it could be used, it could be applied, and we're very happy to share that with, as it may be, useful to get into NVIDIA Blackwell, be part of that, or whether it's on the optical side, on the optical component side, which is what you're referring to, or even on the DSP side, in terms of providing the interconnects to enable clusters of Blackwell to be built.

Hock Tan: That's an interesting question and simple answer. I'm not really participating in NVIDIA; just in roadmap. I'm really not directly in that kind of market, in that kind of product roadmap, that NVIDIA's product roadmap in terms of Blackwell, impressive product on the way to coming out. Now, in terms of base technology, we develop, of course, it could be used, it could be applied, and we're very happy to share that with, as it may be, useful to get into NVIDIA Blackwell, be part of that, or whether it's on the optical side, on the optical component side, which is what you're referring to, or even on the DSP side, in terms of providing the interconnects to enable clusters of Blackwell to be built.

Speaker Change #119: In Q3, our revenue from Vmware was $3 8 billion and our operating expenses.

Hock Tan: So if nothing else, that continues to indicate, I hope to us, that next year will continue the trend, will continue to be strong. And again, it's all actually hyperscalous cloud and digital natives. And it's again a mix of AI accelerators and networking. And it's also largely based on backlog we have in place, for that. Beyond that, any shows are growth. Beyond that, no, we're not guiding you beyond the backlog we have. So, I kind of answer your question indirectly on, do I have any more customers? We shall see. Okay, thank you, Hock.

Speaker Change #116: At least.

Speaker Change #119: One three.

Speaker Change #116: And one moment our next question.

Speaker Change #121: And you can pretty quickly figure out where we're headed in terms of operating margin and as I indicated EBITDA margin.

And that will come from the line of Chris Queso with Wolfe Research. Your line is open.

Speaker Change #121: And Q4.

Speaker Change #118: Yes. Thank you good evening I Wonder if you could speak to the.

Speaker Change #121: Won't continue the trajectory of revenue.

Speaker Change #119: The custom AI revenue and perhaps the contribution from some of the other customers.

Speaker Change #121: Continuing to grow and expenses something still dropping even as it starts to stabilize by continuing to reduce.

Aside from that largest customer you know how how meaningful are the other customers in that segment and what do you expect into next year as some of those newer projects start to ramp.

Hock: Thank you hock.

Speaker Change #122: One moment for our next question.

Speaker Change #122: Yeah.

Speaker Change #119: Wow.

Speaker Change #123: And that will come from the line of C. J Muse with Cantor Fitzgerald. Your line is open.

Speaker Change #119: Uh huh.

Speaker Change #120: I know, we're dancing around the thing as I indicated with three customers now going on and they're all three of them are meaningful.

Speaker Change #124: Yeah. Good afternoon. Thank you for taking the question I wanted to focus on software gross margin. So when you closed the acquisition of <unk>, where we take more from low Ninety's to you know kind of high Eighty's.

Hock Tan: That, as far as our engagement in that, we're happy to be part of that ecosystem. As I said, but directly, we're not in that market, as you know.

Karl Ackerman: Thank you, one moment for our next question. And that will come from the line of Karl Ackerman. Ackerman with BNP Paribas, your line is open. Yes, thank you.

Speaker Change #121: Otherwise, we wont call them got some known as the great theater in with us until we get meaningful.

Speaker Change #125: Now pushing a bit higher in July and I'm curious as we kind of get.

Speaker Change #122: Shipments out to them on AI and salaries as we do not really considered that as a customer simply because it's a new this is an emerging trend.

Kirsten Spears: Kirsten, I was hoping you could speak to the relocation of IT back to the U.S, that is causing a 4.5 billion to our tax liability. Historically, Broadcom has read domiciled ahead of a pending transaction and I'm getting questions from investors. It is action may relate to any asset sales as a company seeks to pay down debt. So it's good to clarify that. That would be helpful. Thank you. Yeah, no, it was just timing of when we chose to do it this time.

Joe Moore: One moment for our next question. And that will come from the line of Joe Moore with Morgan Stanley. Your line is open. Great, thank you. I wonder how if you could talk about your thoughts on, on further M&A, you know, is that still on your radar down the road? And, you know, is it, is it, would it, if you did, would it be still software focused or any possibility of semiconductors becoming interesting to you again? Joe, that's a beautiful question. I tell it is bluntly, so they don't disappoint it.

Joe Moore: One moment for our next question. And that will come from the line of Joe Moore with Morgan Stanley. Your line is open. Great, thank you. I wonder how if you could talk about your thoughts on, on further M&A. You know, is that still on your radar down the road? And, you know, is it, is it, would it, if you did, would it be still software focused or any possibility of semiconductors becoming interesting to you again? Joe, that's a beautiful question. I tell it is bluntly so they don't disappoint it.

Speaker Change #126: To that 4 billion threshold and you've kind of indicated higher in fiscal 'twenty fives, how should we think about the gross margin trajectory overall for software.

Speaker Change #122: It's not an easy product to deploy.

Speaker Change #122: For any customer.

Speaker Change #127: Well you know it's a false.

Speaker Change #123: And so we do not consider proof of concepts as production volume. These are all the production.

Software gross margin has actually been the rack is not that relevant you know that right. So all claims unless I'm running.

Kirsten Spears: And no, it doesn't have anything to do with that. It's just we relocated the IP and that caused the 4 billion dollar charge. The offset to that is a deferred tax liability. So think about it's non cash, very little cash impact to that. Thank you.

Speaker Change #123: Salaried those employed in data center AI.

Speaker Change #128: Big time.

Speaker Change #123: AI data centers all of those three.

Now a lot of our products on a subscription, but then not sex we have from all of our products on SaaS cloud based but most of them are not and and our gross margin will be around 90%.

Hock Tan: Right now, I'm having my hands really full and enjoying myself doing it on really turning, transforming the business model of the MWAT. It's a great experience. And you're feeling great about it when you do it. And when you're doing it, it's pretty much running. And you can't wait beyond expectation as we indicate it in that side. So, no, I'm very focused on getting the MWAT, continuing as it continues to accelerate in getting private cars deployed in the largest enterprises in the world. And, you know, Michael, another year, do we have to go to make that transformation totally complete?

Hock Tan: Right now, I'm having my hands really full and enjoying myself doing it on really turning, transforming the business model of the MWAT. It's a great experience. And you're feeling great about it when you do it. And when you're doing it, it's pretty much running. And you can't wait beyond expectation, as we indicate it in that side. So, no, I'm very focused on getting the MWAT, continuing as it continues to accelerate in getting private cars deployed in the largest enterprises in the world. And, you know, Michael, another year, do we have to go to make that transformation totally complete?

Speaker Change #123: Our next question.

Speaker Change #123: And that will come from the line of Christopher Roland with Susquehanna. Your line is open.

Operator: One moment for our next question. And that will come from the line of Timothy Arcuri with UBS. Your line is open. Thanks a lot. I wanted to ask about the growth rate in your AI revenue versus what we're seeing on the GPU side. Your AI revenue grew in the same zip code this year is what the GPU compute is growing. And you did say that it would be up next year but your main customers ramping a new version of their custom basic next year and there's some thought that they might shift some of their purchasing back to GPUs next year.

Speaker Change #124: Oh hi, Thanks for the question. My question is actually on storage and hockey bought Seagate's hard disk drive S. O C assets.

Speaker Change #128: At least.

Speaker Change #129: And one moment our next question.

Operator: So do you think that the growth of your AI revenue should still approximately track how much GPU compute is going to grow next year if you can give us any qualitative or quantitative thoughts there. That would be great. Thank you. I think we had some communication. Could you repeat the question? Yeah, so the question Hawk really is around the growth rate of your AI revenue versus what we're seeing on the GPU side because this year you grew about the same as what GPU compute is growing. And the question is, is there anything happening next year that would change that equation so that your growth rate of your AI revenue would be materially different than what GPU compute is growing next year.

Speaker Change #128: Yes.

Speaker Change #130: And that will come from the line of Chris Caso with Wolfe Research. Your line is open.

Christopher Roland: Earlier in the year can you can you talk about what you actually bought there what it means in terms of economics for your company and whether this accelerates your storage business over the next few years. Thanks.

Chris Caso: Yes. Thank you good evening I Wonder if you could speak to.

Chris Caso: The custom AI revenue and perhaps the contribution from some of the other customers aside.

Aside from that largest customer you know how how meaningful are the other customers in that segment and what do you expect into next year as some.

Speaker Change #124: Oh.

Speaker Change #124: This is more of a partnership than anything else.

Operator: Very clear. Thank you.

Operator: Very clear.

Harlan Sur: One moment for our next question. And that will come from the line of Harlan Sir with J.P. Morgan. Your line is open. Good afternoon. Thanks for taking my question. You know, last quarter, you talked about an acceleration in R&D investments by your AI customers, and you talked about your follow-on wins for their next generation. And XPU ASIC programs. It also looks like they're trying to accelerate their deployment of their TPUs, XPUs, and networking into their data centers here in the second half of the year. We know that on AI accelerators, specifically, supply is quite tight given the co-ass packaging and HPM memory constraints.

Speaker Change #126: Basically you know, it's what we what we essentially.

Chris Caso: Some of those newer projects start to ramp.

Chris Caso: Wow.

Speaker Change #127: Created in that transaction was to begin with we actually believe.

Speaker Change #132: Uh huh.

Speaker Change #133: I know, we're dancing around the thing as I indicated with three customers now going on and they're all three of them are meaningful.

Speaker Change #126: No.

Speaker Change #126: And the sustainability of hard disk drives.

Speaker Change #133: Otherwise, we wont call them customers as the criteria with us until we get meaningful.

Speaker Change #128: Media as a great long term sustainable storage storage from the ultimate people storage medium for those hyperscale as it makes sense no one likely eventually everything goes to flash.

Speaker Change #133: Shipments out to them on AI accelerators, we do not really considered that as a customer simply because it's a new this is an emerging trend.

Speaker Change #129: Kingsville Star undo some hard disk drive storage it will still be meaningful in the.

Hock Tan: That's a very difficult question for me to answer because it comes in two parts. In terms of GPU growth, you should ask the guy who does much on GPU GPU which is obviously in video and I don't see. I don't play in the enterprise market at all see that's one of the market I don't see having said that they do both play at someone in the hyper scale where I'm totally focused on doing so that's really very and that's really no connection one with the other that it is in the right. But enough for me to say long term.

Speaker Change #133: It's not an easy product to deploy.

Speaker Change #129: All of the technology, which is most interesting for us as.

Speaker Change #133: For any customer and so we do not consider proof of concepts as production volume.

Hock Tan: So has the team seen upside orders and demands for XPUs and networking here in the second half. Have you been able to meet that upside demand, or is the team somewhat supply constraint? I guess, in other words, is AI demand greater than your supply here in the second half of the year? Yeah, no. We continue to see orders. We continue to see upside. And you're right in the pattern of that behavior that's doing because it's, you know, as our customers, these are hyperscalers trying to deploy more and more capacity of AI data centers in AI data centers.

Speaker Change #129: A lot of ways to go.

Speaker Change #130: As a as hard disk drives goes on to from where it is today, which is <unk>.

Speaker Change #133: All production.

Speaker Change #133: Accelerate those deployed in data center AI.

Speaker Change #130: Turning to 'twenty three 'twenty four.

Speaker Change #133: AI data centers all of those three.

Speaker Change #130:

Speaker Change #130: Terabytes.

Speaker Change #130: I'm going to 30, 40 and 50.

Speaker Change #134: Our next question.

Speaker Change #130: 50, terabytes, a lot of technology, along the way and one and a lot of that resides in silicon.

And that will come from the line of Christopher Roland with Susquehanna. Your line is open.

Speaker Change #135: Hi, Thanks for the question.

Speaker Change #130: So what we're doing in our bank is the collaboration more than anything else is always structure. Obviously is the acquisition as a purchase of intellectual property, but we're also thinking.

Christopher Roland: My question is actually on storage and hockey bought Seagate's hard disk drive S O C assets.

Hock Tan: I'm saying they actually start fully, long term, the large hyperscalers, few in large hyperscalers, with very large platforms, huge consumer platforms, subscriber base, have the entire model predicated on running a lot of large language models, a lot of AI requirements, work loads out there, and you will drive a lot of time towards creating as much as possible their own compute silicon, their own custom accelerators, as a matter of time, and we are in the midst of seeing that transition, which may take several years for that to happen, so that is on the different trajectory, a different path, and I'm in that path of doing it, enabling custom accelerators. I'm in that path, I'm not in the path of, in the meantime, a different trajectory of enabling enterprises to do AI on their own workloads, that's more than much in guys, but from the much in guy now obviously also in the AI in the hyperscalers today, but that's the process obviously of a transition going on, so one doesn't really connect to the other team in that regard, but I would like me to say obviously as the transition occurs, we have a good tailwind, for in the business model we have of providing accelerators and networking to the AI needed centers of those large hyperscalers.

Speaker Change #137: Earlier in the year can you talk about what you actually bought there.

Hock Tan: And you start to hear them talk in terms of how they don't even talk in terms of how many XPU or GPU classes they talk in. They'll, you know, 500 megawatt, one gigawatt would not share, but people are dreaming that. We do expect to see upside, as we've been seeing recently. We continue to see that probably going forward over the next two or months, especially in related to XPUs getting deployed and creating, getting infrastructure available and rushing to deploy them. Have you been able to meet that upside, or are you somewhat limited by supply constraints?

Speaker Change #130: Engineers designers combining it with the designers we had.

Speaker Change #138: What it means in terms of economics for your company.

Speaker Change #130: And he basically enabling seagate and eventually the entire industry.

Speaker Change #139: And whether this accelerates your storage business over the next few years. Thanks.

Speaker Change #130: Continue our roadmap that goes towards 50 terabytes, that's our ambition, that's our vision and to be able to do that within five years or less.

Speaker Change #139: Oh.

Speaker Change #140: This is more of a partnership than anything else.

Speaker Change #140: Basically you know, it's what we what we essentially.

Speaker Change #131: So that's pretty much what it is it's a statement of our belief that obviously the dry near line hard disk drive storage world. So staying very well over the next five years he's gone longer.

Speaker Change #140: Created in that transaction was to begin with we actually believe.

Speaker Change #140: No.

Speaker Change #140: And the sustainability of hard disk drives.

Speaker Change #131: Thank you.

Speaker Change #131: One moment for our next question.

Speaker Change #140: Media as a great long term sustainable storage.

Speaker Change #131: And that will come from the line of Aaron Rakers with Wells Fargo. Your line is open.

Speaker Change #140: Stories from the alternative of storage medium for those hyperscale as it makes sense no one lapping your bedroom and everything goes to flash.

Speaker Change #132: Yeah. Thanks for taking the question, how kind of thinking strategically as we look forward.

Speaker Change #133: Head to invidious blackball product cycle, there's been some indications that you know, possibly broadcom has an opportunity to participate more deeply in the optical side of that product platform for Permian video I'm curious do you see that as an opportunity relative to prior generations of video just to deepen our participation.

Speaker Change #140: Digital Star.

Speaker Change #140: Hard disk drive storage will still be meaningful.

Speaker Change #141: All of the technology, which is most interesting for us as.

Hock Tan: We can meet those upside.

Operator: Okay, thank you, Hock.

Speaker Change #142: A lot of ways to go.

Hock Tan: Okay, thank you, Hock.

Operator: Thanks. One moment for our next question. And that will come from the line of Edward Snyder with Tartar Equity Research. Your line is open. Thank you very much. Hock, that was the perfect segway in my life. My question, you said in the past calls that you thought that AI compute would move away from A6 and go to the Merchant Market, but it looks like the trend is kind of heading the other way. Are you still of the opinion that that's going to be the long-term trend of this? And secondly, as you just pointed out, how is becoming the defining factor for deployment with all the big guys at this point.

Speaker Change #142: They as hard disk drives goes on to from where it is today would you.

Edward Snyder: One moment for our next question. And that will come from the line of Edward Snyder with Tartar Equity Research. Your line is open. Thank you very much. Hock, that was the perfect segway in my life. My question, you said in the past calls that you thought that AI compute would move away from A6 and go to the Merchant Market, but it looks like the trend is kind of heading the other way. Are you still of the opinion that that's going to be the long-term trend of this? And secondly, as you just pointed out, how is becoming the defining factor for deployment with all the big guys at this point.

Speaker Change #134: We're just to participate in general and kind of the areas of Dst's in.

Speaker Change #143: Turning to 'twenty three 'twenty four.

Speaker Change #143:

Speaker Change #134: And maybe other things related to the Blackwell cycle from India. Thank you.

Speaker Change #143: Terabytes.

Speaker Change #144: <unk> going to 30, 40, and even 50.

Speaker Change #134: Well, that's an interesting question and glad the simple answer.

Speaker Change #144: 50 terabytes.

Speaker Change #135: I'm not really participating in investing.

Speaker Change #144: Technology, along the way and one.

Matt.

A lot of that resides in silicon.

And I'm really not directly.

Speaker Change #145: So what we're doing in our bank is a collaboration rather than anything else. It's always structure, obviously is the acquisition.

Speaker Change #136: In that kind of a market in that kind of brought on roadmap does seem to be just brought on enrollment.

Speaker Change #145: Purchase of intellectual property, but we're also thinking.

Speaker Change #136: Bleichwehl impressive brought up.

Speaker Change #137: On the way to coming out are not in terms of based technology, we develop of course.

Edward Snyder: And given the performance of performance per watt, the A6 over GPUs, which is a superior GPU, why shouldn't we see more of these guys moving to customization? I know it takes a long time and takes a lot of funding, etc. But especially as enterprise starts getting more involved with this, they're going to be some applications that are kind of standard across some of the enterprises. Wouldn't even see some of the bigger. I gave a US move to a custom silicon for a specific workload. So basically the overall trend in A6 in AI, thanks.

Hock Tan: And given the performance of performance per watt, the A6 over GPUs, which is a superior GPU, why shouldn't we see more of these guys moving to customization? I know it takes a long time and takes a lot of funding, etc. But especially as enterprise starts getting more involved with this, they're going to be some applications that are kind of standard across some of the enterprises. Wouldn't even see some of the bigger. I gave a US move to a custom silicon for a specific workload. So basically the overall trend in A6 in AI, thanks.

Speaker Change #145: Engineers designers combining it with the designers, we have and basically enabling seagate and eventually the entire industry to continue a roadmap that goes towards 50 terabytes, that's our ambition, that's our vision and to be able to do that.

Speaker Change #138: B use equal be a blind and we're very happy to share that we are in.

Operator: Right, Hawk, okay, thank you so much.

Harsh Kumar: One moment for our next question. And that will come from the line of Harsh Kumar with Piper Chandler, your line is open. Yeah, Hawk, I was curious about the profitability of VMware. Historically, your software businesses have had operating margins greater than 70%. VMware I know is newer and you're doing things a little different, you're keeping more customers than you historically have kept, but I was curious if you see a similar profile as the rest of your software businesses for VMware after you're done with all the cuts and everything.

Speaker Change #138: And as it may be useful to get into it enables black well be part of that.

Hock Tan: Well, I let you draw your own conclusion, Harsh, but I was afraid to lay out as you probably heard, in Q3, our revenue from VMware was $3.8 billion, and our operating expenses is $1.3 billion. And you can pretty quickly figure out where we're headed in terms of operating margins and as indicated, it is a margin. And Q4 will continue the trajectory of revenue continuing to grow and expenses starting and still dropping even as it starts to stabilize, but continue to reduce.

Speaker Change #138: Whether it's on the optical optical components I, just wonder how we bring two or even oh.

Operator: Thank you, Hock.

Speaker Change #145: Within five years or less.

Speaker Change #145: So that's pretty much what it is it's a statement of our belief that obviously the drive near line hard disk drive storage, we'll sustain very well over the next five years he's gone longer.

Speaker Change #138: On the DSP side.

CJ Muse: One moment for our next question. And that will come from the line of CJ Muse with Cancer Fitzgerald. Your line is open. Yeah, good afternoon. Thank you for taking the question.

Speaker Change #139: In terms of providing the interconnects to enable clusters of blank well to be built that has five zone.

Hock Tan: Okay. And did I hear you right to say at the beginning maybe that you mean that then there's a trend towards A6 or XPU from general purpose, GP, right? Yep. You're right. And you're correct in pointing out to me that, hey, I used to think that the general purpose of Merchant Silicon will win at the end of the day. Well, based on the history of semiconductor mostly so far, general purpose, merchant silicon tends to win. But like you, I flipped in my view, and I did that by the way six months ago, maybe even six months ago. But nonetheless, catching up is good.

Hock Tan: Okay. And did I hear you right to say at the beginning maybe that you mean that then there's a trend towards A6 or XPU from general purpose, GP, right? Yep. You're right. And you're correct in pointing out to me that, hey, I used to think that the general purpose of Merchant Silicon will win at the end of the day. Well, based on the history of semiconductor mostly so far, general purpose, merchant silicon tends to win. But like you, I flipped in my view, and I did that, by the way, six months ago, maybe even six months ago. But nonetheless, catching up is good.

Speaker Change #139: Our engagement and that we're happy to be part of that ecosystem as I say, but directly wasn't known in that market as you know.

Speaker Change #145: Thank you.

Speaker Change #146: One moment for our next question.

Speaker Change #139: Yep.

Speaker Change #147: And that will come from the line of Aaron Rakers with Wells Fargo. Your line is open.

Speaker Change #139: One moment our next question.

Speaker Change #139: And that will come from the line of Joe Moore with Morgan Stanley. Your line is open.

Aaron Rakers: Yeah. Thanks for taking the question, how kind of thinking strategically as we look forward.

Speaker Change #140: Great. Thank you I wonder how if you could talk about your thoughts on on further M&A.

Speaker Change #149: Had to invidious Blackwell product cycle, there's been some indications that.

Aaron Rakers: Possibly broadcom has an opportunity to participate more deeply in the optical side of that product platform for Germany. In video I'm curious do you see that as an opportunity relative to prior generations of video just to deepen our participation or just to participate in general and in kind of the areas of <unk> and maybe other.

Speaker Change #141: Is that still on your radar down the road and you know is it is it would it if you did would it be still software focused or any possibility of semiconductors are becoming interesting to you again.

Speaker Change #141: That's a beautiful question.

I've done it is bluntly.

Speaker Change #141: I'm disappointed right now.

Speaker Change #150: Things related to the black oil cycle for them in video. Thank you.

Speaker Change #142: I'm, having my hand, really food and enjoying myself doing in ordinarily burning transforming the business model N V M. What it's a great experience.

Hock Tan: And I actually think so because I actually think that two markets here on AI accelerators: that's one market for enterprises of the world. And none of these enterprises are incapable, nor have the financial resources or interest to create the silicon, their custom silicon, nor the large language models or their software, and the software going maybe to be able to run those AI workloads on custom silicon. There's so much, and there's no reason for them to do it because it's just too expensive to do it. But there are those few cloud guys, hyper scalers with the scale of the platform, and the financial web is all for them to make it totally rational, economically rational, to create their own custom accelerators because...

Hock Tan: And I actually think so because I actually think that two markets here on AI accelerators: that's one market for enterprises of the world. And none of these enterprises are incapable, nor have the financial resources or interest to create the silicon, their custom silicon, nor the large language models or their software, and the software going maybe to be able to run those AI workloads on custom silicon. There's so much, and there's no reason for them to do it because it's just too expensive to do it. But there are those few cloud guys, hyper scalers with the scale of the platform and the financial web is all for them to make it totally rational, economically rational, to create their own custom accelerators because...

Well, that's an interesting question and go out the simple answer.

Speaker Change #151: I'm not really participating in it.

Speaker Change #152: The road map.

You're feeling great about it when you do it and when you're doing it pretty much running.

Speaker Change #153: And I'm really not directly.

In that kind of market in that kind of brought on roadmap does seem to be this brought enrollment in terms of Blackwell impressive product.

Wait beyond expectation as we indicated but so no I'm very focused on getting be anyway.

Hock Tan: I want to focus on software gross margin. So when you close the acquisition of VMware, we take more from low 90s to, you know, kind of high 80s. And we're now, you know, pushing a bit higher in July. And curious, as we kind of get to that, you know, four billion threshold and you've kind of indicated higher in fiscal 25s, how should we think about the gross margin trajectory overall for software?

Speaker Change #153: On the way to coming out.

Speaker Change #142: As it continues to witness salaried.

In terms of base technology, we develop of course.

Speaker Change #143: Are you getting in private cloud deployed in the largest enterprises in the World and you don't Wanna Michael on another you know do we have to go.

Speaker Change #154: Could be us it could be a blind and we are very happy to share that we've.

Speaker Change #154: And then as it may be useful to get into it enabled blank well be part of that or whether it's on the optical optical component side, which is the one you're referring to or even oh.

Speaker Change #143: To make that transformation boldly complete.

Speaker Change #143: Great. Thank you.

Speaker Change #143: One moment for our next question.

Harlan Sur: And that will come from the line of Harlan sur with Jpmorgan. Your line is open.

Speaker Change #154: On the DSP side.

Hock Tan: Well, you know, for us, software gross margin is actually the direct, it's not that relevant, you know that, right? Software is unless I'm running SAS big time. Now, a lot of our products on description, but they're not SAS. We have some of our products on SAS cloud base, but most of them are not. And gross margin will be around 90% at least.

Speaker Change #154: In terms of providing the interconnects to enable clusters of blank well to be built that has five zone.

Speaker Change #145: Good afternoon, and thanks for taking my question you know last quarter, you talked about an acceleration in R&D investments by your customers and you talked about.

Speaker Change #154: Our engagement and that we're happy to be part of that ecosystem as I say, but directly wasn't known in that market as you know.

Speaker Change #146: Follow on wins for their next generation X do you is it programs. It also looks like they're trying to accelerate their deployment.

Hock Tan: It's all, right now, I'm not going to, I'm not trying to open society; it's all about compute engines. It's all about, especially training those large language models and enabling it on your platform. It's all about constrain, to learn a large part about GPUs. Seriously, it's the end-of-point where GPUs are more important than engineers. It does some; I put scalars in terms of how they think. It does GPUs are much more, our XPs are much more important than any desk, the case. What better things to do than bring it to control, or another control of your own desk than me by creating your own custom silicon accelerators.

Operator: It's all, right now, I'm not going to, I'm not trying to open society, it's all about compute engines, it's all about, especially training those large language models and enabling it on your platform, it's all about constraint to learn a large part about GPUs, seriously, it's the end of point where GPUs are more important than engineers, it do some things, it's all about compute engines, it's all about, especially training those large language models and enabling it on your platform, it's all about constraint to learn a large part about GPUs, seriously, it's the end of point where GPUs are more important than engineers, it do some things I put scalars in terms of how they think, those GPUs are much more, or XP use are much more important than engineers, the case, what better things to do than bring it control, I'm in the control of your own destiny by creating your own custom silicon accelerators, and that's what I'm seeing all of them do, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds It's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it It's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds, it's just doing it at different speeds for any closing remarks.

Speaker Change #154: Yep.

Speaker Change #155: One moment our next question.

Speaker Change #147: They're keeping us X P use and networking into their data centers here in the second half of the year, we know that an AI accelerators, specifically supply is quite tight given the cool off packaging and HBM memories constrained. So how has the team seen upside orders and demands for X P used in networking.

Speaker Change #156: And that will come from the line of Joe Moore with Morgan Stanley. Your line is open.

Joe Moore: Great. Thank you I wonder how if you could talk about your thoughts on further M&A.

Hock Tan: And one moment for our next question. And that will come from the line of Chris Caso with Wolf Research. Your line is open. Yes, thank you. Good evening. I wonder if you could speak to the custom AI revenue and perhaps the contribution from some of the other customers aside from that largest customer. You know, how meaningful are the other customers in that segment? And, you know, what do you expect into next year as some of those newer projects start to ramp? Well, I know. We're dancing around the thing.

Joe Moore: Is that still on your radar down the road and you know.

Speaker Change #158: Is it is it would it if you did would it be still software focused or any possibility of semiconductors, becoming interesting to you again.

Speaker Change #148: Here in the second half have you been able to meet that upside demand or is the team somewhat supply constrained I guess in other words.

Speaker Change #159: That's a beautiful question.

Speaker Change #149: Hey, guys demand greater than supply here in the second half of the year.

Speaker Change #160: I can tell it is alarmingly, so theyre not disappointed right now.

Speaker Change #148: Yeah no.

Speaker Change #161: I'm, having my hand, really food and enjoying myself doing in ordinarily learning transforming the business model of <unk>, It's a great experience.

Speaker Change #150: We continue to see August we continue to see upsides and Youre right independent number that'd behavior that is doing it because.

Hock Tan: And that's what I'm seeing all of them do. It's just doing it at different rates, and they're studying at different times, but they all have started, and obviously takes time to get there. But there are a lot of them; there are a lot of learning in the process versus what the biggest guy of them who has done it longer has been doing for seven years. Others are trying to catch up, and it takes time. I'm not saying you'll take seven years; I think you'll be accelerated, but you'll still take some time step by step together.

Speaker Change #150: It's you know it's a our customers. These are hyperscale is.

Speaker Change #162: Thank you feeling great about it when you do it and when you're doing it pretty much running.

Speaker Change #150: Try to deploy.

Speaker Change #163: Wait beyond expectation as we indicated and that's like so no I'm very focused on getting be anyway.

And more capacity of <unk>.

Hock Tan: As I indicated, we're three customers now going on and all three of them are meaningful. Otherwise, we won't call them customers as the criteria we have used until we get meaningful shimmings out to them on AI accelerators. We do not really consider that as a customer simply because it's new. And this is an emerging trend. It's not an easy product to deploy for any customer. And so we do not consider the growth of concepts as production volume. These are all production accelerators deploying in data centers of those three customers.

AI data centers in AI data centers and you start to hear them talk in terms of power. They don't even talk in terms of how many U S. B U R. G. P O closet, it's all in is down.

Speaker Change #163: As it continues to accelerate.

Speaker Change #163: Are you getting private to deploy in the largest enterprises in the world and you know what Michael and another you know do we have to go.

Speaker Change #151: And all of a 500 megawatt one gigawatt, one does not yet but people are streaming debt. So we are and DNA and they did this in April we're getting.

Michael: To make that transformation totally complete.

Michael: Very clear thank you.

Speaker Change #151: I mean, we're getting upsides and I expect that to happen a lot more in 2025, we're.

One moment for our next question.

Hock Tan: But those few hyperscalers, platform guys, won't create their own if they haven't already done it, and start to frame them on their large language models. And that's, yeah, you're right, they will all go in that direction, totally, into anything or we call it XPUs custom silicon. Meanwhile, that's still a market part in enterprise or much in silicon. Right, that basically suggests that you're on the early part of your curve where I'm not trying to call the GPUs or whatever, but you could be getting to something closer to the peak of the GPU market, just because everything, right, the size, the cost, expense and as you spend all this money and you're paying all this money for power, the A6 become more and more attractive. So the curves are going to look different, right?

Harlan Sur: And that will come from the line of Harlan sur with Jpmorgan. Your line is open.

Speaker Change #152: We're not putting that in any guidance or indication of giving you, but I'd fully and what do you see what do you say is exactly right. We do expect to see upsides I sort of Didnt see Ah recently, we continue to see that probably going forward over the next 12 months.

Harlan Sur: Good afternoon, and thanks for taking my question you know Hock last quarter, you talked about an acceleration in R&D investments by your customers and you talked about your follow on wins for their next generation X D. ASIC programs. It also looks like they're trying to accelerate their deployment.

Speaker Change #152: Question related to XP use getting deployed and create getting infrastructure available and rushing to deploy them, we see them quite a bit of debt.

Hock Tan: One moment for our next question. And that will come from the line of Christopher Rowan with your line is open. Hi, thanks for the question. My question is actually on storage and Hockeybot Seagate's hard disk drive, SOC assets earlier in the year. Can you talk about what you actually bought there? What it means in terms of economics for your company and whether this accelerates your storage business over the next few years. Thanks.

Speaker Change #166: They're keeping used X P use and networking into their data centers here in the second half of the year, we know that an AI accelerators, specifically supply is quite tight given the cost of packaging and HBM memories constrained. So how has the team seen upside orders and demands for X P used in networking.

Have you been able to meet that upside or are you somewhat limited by supply constraints.

Speaker Change #152: We can meet those upsides.

Speaker Change #152: Okay. Thank you hock.

Speaker Change #152: Yes.

Speaker Change #167: Here in the second half have you been able to meet that upside demand or is that changed somewhat supply constrained I guess in other words.

Speaker Change #152: One moment our next question.

Speaker Change #152: Okay.

Speaker Change #152: And that will come from the line of Edward Snyder with charter equity Research. Your line is open.

Demand greater than supply here in the second half of the year.

Hock Tan: It's an accelerating curve; maybe think longer than we all want it to happen, but it's definitely accelerating because the signs of those types of demand from those hyperscalers will totally rival that in enterprise.

Thank you very much.

Speaker Change #168: Yeah no.

Speaker Change #153: That was a perfect segue into my question.

Speaker Change #169: We continue to see our.

Hock Tan: Well, this is more of a partnership than anything else. Basically, you know, it's what we essentially created in that transaction was to begin with, we actually believe, noted in the sustainability of Hock Tan's rights, media, as a great deal. It's a very long-term sustainable storage medium for those high-cost scales. It makes sense. You know, one lightning event, everything goes to flesh. Don't think so. How this drive storage will still be meaningful and the technology, which is most interesting for us, has a lot of ways to go.

Speaker Change #170: August we continuing to see upsides and Youre right independent number that'd behavior. It is doing it because.

Speaker Change #154: You've said in the past calls that you thought that the AI compute will move.

Speaker Change #155: All the way from 86 and go to merchant market, but it looks like the trend kind of heading the other way are you still the opinion that that's going to be the long term trend of this and secondly, as you just pointed out.

Speaker Change #170: It's you know it's a our customers. These are hyperscale is.

Operator: Thank you, and that is all the time we have for our question-and-answer session.

Speaker Change #170: Trying to deploy.

Ji Yoo: I would now like to turn the call over to GPU for any closing remarks. Thank you, operator.

Speaker Change #170: And more capacity of.

Speaker Change #155: Power is becoming the defining factor for deployment with all the big guys. At this point given the performance of our performance per watt with the.

Speaker Change #170: AI data centers in AI data centers and you started to hear them talk in terms of power. They don't even talk to you in terms of how many SBU or GPU closet. It's all in is down.

Operator: Thank you, operator.

Ji Yoo: This quarter, Fraudcom won't be presenting at the Goldman Sachs, Caminacopia, and Technology conference on Wednesday, September 11, in San Francisco. Fraudcom currently plans to report its earnings for the fourth quarter and fiscal year 2024 after the close of market on Thursday, December 12, 2024. A public webcast at Fraudcom's earnings conference call will follow at 2 p.m. Pacific.

Operator: This quarter, Broadcom won't be presenting at the Goldman Sachs, Ciminucopia, and Technology Conference on Wednesday, September 11, in San Francisco. Broadcom currently plans to report its earnings for the fourth quarter and fiscal year 2024 after the close of market on Thursday, December 12, 2024. A public webcast at Broadcom's earnings conference call will follow at 2 PM Pacific.

Speaker Change #156: 86 over Gpus, which is superior to Gpus why shouldn't we see more of these guys movie too to a custom basically I know it takes a long time. It takes a lot of funding etcetera, but especially as enterprise starts getting more involved with this theyre going to be some applications there kind of a standard across some of the enterprises wouldnt, we even see some of the bigger.

Speaker Change #170: And almost 500 megawatt one gigawatt, one does not yet but people streaming debt. So we are and then they and they get this enable we're getting.

Speaker Change #171: <unk>, we're getting upsides and I expect that to happen a lot more in 2025.

Speaker Change #157: Like AWS to custom silicon for specific workloads, so basically the overall trend in Asics.

Ji Yoo: That will conclude our earnings call today. Thank you all for joining.

Operator: That will conclude our earnings call today. Thank you all for joining.

We're not putting that in any guidance or indication, we're giving you, but I'm fully what do you see what do you say, it's exactly right. We do expect to see upsides, so everybody can see.

Operator: Operator, you may end the call.

Operator: This concludes today's program. Thank you all for participating. You may now. Disconnect.

Operator: This concludes today's program. Thank you all for participating. You may now disconnect. Thank you all for joining us today.

Speaker Change #157: Okay and did I hear you right to say at the beginning maybe better than that.

Hock Tan: As they ask how this drives goals on to from where it is today, which is, you know, 22, 23, 24, you know, there are two going to 30, 40, and even 50, there are a lot of technology along the way and a lot of that resides in Silicon. So what we're doing in the fact is collaboration more than anything else, though, is structured, obviously as a purchase of intellectual property, but we're also taking engineers, designers, combining into the designers we have. So that's pretty much what it is. It's a statement of our belief that have this drive, airline have this drive storage will sustain very well over the next five years if done longer.

Speaker Change #157: You meant that.

Speaker Change #157: Then.

Speaker Change #157: There is a trend.

Speaker Change #171: Recently, we continue to see that probably going forward over the next 12 months.

Yes.

Speaker Change #157: I think our XP you from general purpose GPU right.

Speaker Change #172: Rationing related to XP use getting deployed and create getting infrastructure available and rushing to deploy that we'd see them quite a bit of that.

Speaker Change #157: Yep.

Speaker Change #157: Youre right and you're correct in pointing out to me that hey, I used the thing that jumped because.

Speaker Change #157: So again, we'll win at the end of the day well based on history of semiconductors.

Operator: Thank you all.

Have you been able to meet that upside or are you somewhat limited by supply constraints.

Speaker Change #157: The sofa.

Speaker Change #173: We can meet those upsides.

Speaker Change #158: Jumping us some merchant silicon tends to win.

Hock: Perfect. Thank you hock.

Speaker Change #158: Like you I flip in my view.

Speaker Change #173: Thanks.

Speaker Change #174: One moment our next question.

Speaker Change #173: Yes.

Speaker Change #159: And I did that by the way six months last quarter, maybe six months ago, but nonetheless catching them is good.

Speaker Change #173: And that will come from the line of Edward Snyder with charter equity Research. Your line is open.

Edward Snyder: Thank you very much.

Speaker Change #160: And I I interesting, so because I do think that too much because it's here.

Edward Snyder: That was a perfect segue into my question.

Speaker Change #160: On AI accelerators, that's one market for enterprises all of the world.

Edward Snyder: You've said in the past calls that you thought that the AI compute will move away from Asics go to merchant market, but it looks like the trend.

Speaker Change #161: And none of these enterprises are incapable of no in terms of them don't have the financial resources or interest to create the silicon custom silicon.

Speaker Change #176: Heading the other way are you still the opinion that that's going to be the long term trend of this and secondly, as you just pointed out.

Howard is becoming the defining factor for deployment with all the big guys. At this point given the performance of our performance per watt with the.

Speaker Change #161: The launch language models, all the software and the software and going maybe to me here.

Aaron Rakers: One moment for our next question. And that will come from the line of Aaron Rakers with Wells Fargo. Your line is open. Yeah, thanks for taking the question. I'm kind of thinking strategically as we look forward, you know, ahead to the Nvidia's black low product cycle. There's been some indications that, you know, possibly Broadcom has an opportunity to participate more deeply in the optical side of that product platform for an Nvidia.

Speaker Change #161: Ron.

Speaker Change #177: <unk> six over Gpus, which is superior to Gpus why shouldn't we see more of these guys movie to to our customers because I know it takes a long time. It takes a lot of funding etcetera, but especially as enterprise starts getting more involved with this theyre going to be some applications there kind of a standard across somebody yet enterprises wouldnt, we even see some of the bigger.

Speaker Change #161: Those AI workloads on custom silicon so much.

Speaker Change #161: And that's all read them in.

Speaker Change #161: For them to do it because it's just too expensive to do it.

Aaron Rakers: I'm curious, do you see that as an opportunity relative to prior generations of a video just to deepen a participation or just to participate in general in kind of the areas of VSTs and maybe other things related to the black low cycle from India. Thank you.

Speaker Change #161: Yeah those few.

Speaker Change #162: Cloud guys Hyperscale as we've.

Speaker Change #177: Like AWS move to custom silicon for specific workloads, so basically the overall trend in Asics and AI.

Speaker Change #162: Scale of the platform.

And the financial Wherewithal.

Speaker Change #162: For them to make it a totally rational economically rational to create their own.

Speaker Change #178: Okay and did I hear you right to say at the beginning maybe I know that you mentioned.

Speaker Change #178: Then.

Speaker Change #162: And kind of come in salaries because.

Speaker Change #178: There is a trend.

Speaker Change #178: Yes.

Speaker Change #162: It's all right now and I'm not going to I'm not trying to open some size at all.

Speaker Change #179: I think I'll Xb, you from general purpose GPU right.

Speaker Change #178: Yep.

Speaker Change #162: All about compute engines, it's all about right, especially in training those launch language models.

Speaker Change #180: Youre right and you're correct in pointing out to me that hey, I used to think that jumbos.

Hock Tan: And that's an interesting question and simple answer. Or whether it's on the optical component side, which is what you're referring to, or even, you know, the DSP side in terms of providing the interconnects to enable clusters of black well to be built. That as far as our engagement in that, we're happy to be part of that ecosystem, as I say. But directly, what's not in that market, as you know? Yeah.

Speaker Change #180: So again, we'll win at the end of the day well based on history of semiconductors.

Speaker Change #162: And they bleed on your platform.

Speaker Change #163: It's all about constrained to London, a lunch panel about Gpus CRC is getting to a point, where gpus are more important than engineers.

Speaker Change #181: So far.

Speaker Change #181: Purpose, some merchant silicon tends to win.

Speaker Change #163: And do some days I.

Speaker Change #182: Like you I flip in my view.

Speaker Change #163: So scale is in terms of holiday thing.

Speaker Change #163: It doesn't give you much more all XP use are much more important and if that's the case, what what's the better thing to do then bring in.

Speaker Change #182: And I did that by the way six months last quarter, maybe even six months ago, but nonetheless, catching them as good and interesting.

Speaker Change #163: Controlling them.

Speaker Change #183: Interesting, so because I do think that the tool market.

Speaker Change #164: Control of your own destiny by creating your own custom.

Speaker Change #183: On AI accelerators.

Speaker Change #164: So again that celebrate this and that's one.

Speaker Change #183: One market for enterprises, all of the World and none of these enterprises are incapable of no interim and not have the financial resources, our interest to create the silicon custom silicon.

Speaker Change #164: I'm seeing.

Speaker Change #164: All of them do.

It's just doing it at different rates and do it well and they're starting at different times, but they all have stopped doing and obviously it takes time to get that right now.

Speaker Change #183: The launch language models, all the software and the software and going maybe to be helpful.

Speaker Change #164: A lot of them there are a lot of learning in the process versus one.

Speaker Change #183: Ron.

Speaker Change #184: Those are AI workloads on custom silicon still months and there's no reason for them to do it because it's just too expensive to do it.

Speaker Change #164: The biggest guy of them.

And as long as I've been doing for seven years I wasn't trying to catch up and it takes time I'm not saying you will take seven years I think they won't be accelerated but they'll still think something that by the time to get that dose.

Joe Moore: One moment for our next question. And that will come from the line of Joe Moore with Morgan Stanley. Your line is open. Great, thank you. I wonder how if you could talk about your thoughts on, on further M&A, you know, is that still on your radar down the road and, you know, is it, is it, would it, if you did, would it be still software focused or any possibility of semiconductors becoming interesting to you again? Joe, that's a beautiful question. I tell it is bluntly so they don't disappoint it right now.

Speaker Change #185: But yeah those few.

Speaker Change #186: Cloud guys Hyperscale as we've seen.

Speaker Change #164: It does.

Speaker Change #164: Few type of scale on the platform guys. All crazy one did that have an a rating.

Speaker Change #186: Scale of the platform.

Speaker Change #187: And the financial wherewithal to for them to make it a totally rational economically rational to create their own.

Speaker Change #164: And start to train them on their lots of language models.

Speaker Change #164: And that's yeah, you're right it won't they will all go in that direction broadly into.

Speaker Change #187: The government salary because.

Speaker Change #164: Oh, it's I would call it X P use custom silicon. Meanwhile.

Speaker Change #187: It's all right now are not going to and I'm trying to open some sites. It. It's all about compute engines is all about right, especially in training those launch language models.

Hock Tan: I'm having my hands really full and enjoying myself doing it on really turning, transforming the business model of the MWAT. It's a great experience and you're feeling great about it when you do it and when you're doing it's pretty much running with you on expectations. So I'm very focused on getting the MWAT as it continues to accelerate in getting private cars deployed in the largest enterprises in the world. And you know what Michael, another year, two years ago, to make that transformation totally complete.

Speaker Change #164: It's still a market for it.

Speaker Change #165: The enterprise while merchant silicon.

Speaker Change #166: But that basically suggests that you're on the early part of your curve, where I'm not trying to call Gpus, whatever but you could be getting to something closer to the peak of the GPU market just because everything besides the cost expensive as you're spending all this money and paying all the you know.

Operator: Very clear. Thank you.

Speaker Change #187: And enabling it on your platform.

Speaker Change #187: It's all about constrained to London, a lunch panel about Gpus seriously is getting to a point, where gpus are more important than engineers.

And there's some news.

Speaker Change #165: For power.

Speaker Change #167: It's become more and more attractive so the curves are going to look different right.

Speaker Change #188: But the scale is in terms of holiday thing.

Speaker Change #189: Those gpus are much more all XP use are much more important and if that's the case, what what's the better thing to do then bring in the car.

Speaker Change #167: It's an accelerating curve.

Speaker Change #168: Maybe taking longer than we all like it to happen, but it's definitely accelerating because of the size of those and the size of the demand from those hyperscale as well.

Control I'm not in control of your own destiny by creating your own custom.

Speaker Change #190: Silicon them accelerators and that's one.

Speaker Change #168: Totally rival that in the enterprise.

Harlan Sur: One moment for our next question. And that will come from the line of Harlan sir with JP Morgan. Your line is open.

Speaker Change #191: I'm, saying all of them do.

Speaker Change #169: Thank you and that is all the time, we have for a question and answer session I would now like to turn the call over to you for any closing remarks.

Speaker Change #192: It's just doing it at different rates and do it.

Hock Tan: Good afternoon. Thanks for taking my question. You know, hot last quarter, you talked about an acceleration in R&D investments by your AI customers and you talked about your follow on wins for their next generation XPU ASIC program. It also looks like they're trying to accelerate their deployments of their TPUs, XPUs, and networking into their data centers here in the second half of the year. We know that on AI accelerators specifically supplies quite tight, given the cost packaging and HBM memory constraints.

Speaker Change #192: Starting at different times, but they all have stopped done.

Speaker Change #168: Thank you operator.

Speaker Change #192: And obviously it takes time to get that but yeah.

This quarter Broadcom will be presenting at the Goldman Sachs committed healthier and technology conference.

Speaker Change #192: A lot of them there are a lot of learning in the process.

Speaker Change #170: Wednesday September 11th in San Francisco.

Speaker Change #192: One.

Speaker Change #171: Broadcom currently plans to report earnings for the fourth quarter and fiscal year 'twenty 'twenty four.

Speaker Change #192: The biggest guy of them.

Speaker Change #193: Any longer have been doing for seven years I wasn't trying to catch up and it takes time I'm not saying you will take seven years, I think there'll be accelerated but they will still take some time by the time to get that.

Speaker Change #172: After the close of market on Thursday December 12, 2020 for a public webcast conference call will follow at two P M Pacific.

Speaker Change #193: [noise] dose.

Speaker Change #173: That will conclude our earnings call today. Thank you all for joining operator, you may end the call.

Speaker Change #194: Type of scale of the platform guys all created their own if they haven't already done it.

Hock Tan: So has the team seen upside orders and demands for XPUs and networking here in the second half of you've been able to meet that upside demand or is the team somewhat supply constraint against another words is AI demand greater than your supply here in the second half of the year. Yeah, no, we're we continue to see all this we continue to see upside and you're right in the pattern of that behavior that's doing because it's you know, as our customers, these are hyperscalers trying to deploy more and more capacity of AI data centers in AI data centers.

Speaker Change #173: This concludes today's program. Thank you all for participating you may now disconnect.

Speaker Change #194: And start to train them on their lots of language models.

Speaker Change #194: Yeah, you're right you won't they will all go in that direction broadly into.

Speaker Change #195: Oh, it's I would call it X P use custom silicon. Meanwhile.

Speaker Change #195: It's still a market for it.

Speaker Change #195: Enterprise, while merchant silicon.

Speaker Change #196: But basically suggests that you're on the early part of your curve, where I'm not trying to call gpus or whatever but you could be getting to something closer to the peak of the GPU market just because everything besides the cost expensive as you're spending all this money and you're paying all of this.

Speaker Change #195: Demand for power.

Hock Tan: You start to hear them talk in terms of how they don't even talk in terms of how many XPU or GPU class they thought it is now, you know, 500 million one, one giga one was not yet, but people are dreaming that. So we are and they and they get this enable we're getting points, we're getting upsides and I expect that to happen a lot more in 2025. We're not putting that in any guidance or indication we're giving you, but I believe what you see what you said exactly right on, we do expect to see upsides as we've been seeing recently.

Speaker Change #195: It's become more and more attractive so the curves are going to look different right.

Speaker Change #195: It's an accelerating curve.

Speaker Change #195: Maybe taking longer than we'd all like it to happen, but it's definitely accelerating because the size of those and the size of the demand from those hyperscale as well.

Speaker Change #195: Totally rival that in the enterprise.

Speaker Change #197: Thank you and that is all the time, we have for a question and answer session I would now like to turn the call over to you for any closing remarks.

Speaker Change #198: Thank you operator.

Speaker Change #199: This quarter Broadcom will be presenting at the Goldman Sachs committed healthier and technology conference on Wednesday September 11th in San Francisco.

Hock Tan: We continue to see that probably going forward over the next two or months, especially in related to XPUs getting deployed and creating getting infrastructure available and rushing to deploy them. Have you been able to meet that upside, or are you somewhat limited by supply constraints? We can meet those upside.

Speaker Change #199: Broadcom currently plans to report earnings for the fourth quarter and fiscal year 2024. After the close of market on Thursday December 12 2024.

Speaker Change #199: Public webcast at Broadcom to earnings Conference call will follow at two P M Pacific.

Speaker Change #200: That will conclude our earnings call today. Thank you all for joining operator, you may end the call.

Operator: Okay, thank you, Hock.

Speaker Change #201: This concludes today's program. Thank you all for participating you may now disconnect.

Operator: Thanks.

Edward Snyder: One moment for our next question. And that will come from the line of Edward Snyder with Tartar Equity Research. Your line is open.

Speaker Change #201: Okay.

Speaker Change #201: Yeah.

Hock Tan: Thank you very much. Hock, that was a perfect segway in the mind. My question. You've said in the past calls that you thought that AI compute would move away from A6 and go to Merchant Market, but it looks like the trend is kind of heading the other way. Are you still the opinion that that's going to be the long term trend of this? And secondly, as you just pointed out, power is becoming the defining factor for deployment with all the big guys at this point.

Okay.

Speaker Change #201: [music].

Speaker Change #201: Okay.

Speaker Change #201: Yeah.

Hock Tan: And given the performance of performance per watt, with the A6 over GPUs, which is a superior GPUs, why shouldn't we see more of these guys moving to to customization? I know it takes a long time and takes a lot of funding, et cetera, but especially as enterprise starts getting more involved with this, they're going to be some applications that are kind of standard across some of the enterprises wouldn't even see some of the bigger.

Hock Tan: Again, WS move to a custom silicon for a specific workload, so basically the overall trend in A6 in AI, thanks. Okay, and did I hear you right to say at the beginning, maybe that you mean that then there's a trend towards A6 or XPU from general purpose, GP, right? Yep. You're right, and you correct in pointing out to me that, hey, I used to think that gel purpose of merchant silicon will win at the end of the day.

Hock Tan: Well, based on history of semiconductor mostly so far, gel purpose merchant silicon tends to win. But like you, I flipped in my view, and I did that by the way six months ago, maybe six months ago, but nonetheless catching up is good. And I actually think so because I actually think that two markets here on AI accelerators, that's one market for enterprises of the world. And none of the enterprises are incapable nor have the financial resources or interest to create the silicon, their custom silicon, nor the large language models or their software and the software going maybe to be able to run those AI workloads on custom silicon too much.

Hock Tan: And that's only done in for them to do it because it's just too expensive to do it. But there are those few cloud guys, hyper scalers with the scale of the platform and the financial web is all to for them to make it totally rational, economically rational. To create their own custom accelerators because...

Hock Tan: It's all, right now, I'm not going to, I'm not trying to open the sizes, it's all about compute engines, it's all about, especially training those large language models, and enabling it on your platform, it's all about constraint, to learn a large part about GPUs, seriously, it's the end of point where GPUs are more important than engineers, it do some things,[inaudible] That will conclude our earnings call today. Thank you all for joining. Operator, you may end the call. This concludes today's program. Thank you all for participating. You may now disconnect.

Operator: Thank you all for joining us.

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