Q4 2024 Broadcom Inc Earnings Call
Okay.
Speaker Change: Welcome to the Broadcom, Inc, fourth quarter and fiscal year 2024 financial results Conference call. At this time for opening remarks, and introductions I would like to turn the call over to <unk> head of Investor Relations of Broadcom, Inc.
Speaker Change: Thank you Sherry and good afternoon, everyone. Joining me on today's call are Hock Tan President and CEO.
Speaker Change: Since their chief financial Officer, and Charlie cause President semiconductor solutions group.
Speaker Change: Broadcom distributed a press release and financial tables after the market close describing our financial performance for the fourth quarter and fiscal year 'twenty 'twenty four.
Speaker Change: You did not receive a copy you may obtain the information from the investors section of Broadcom website at Broadcom Dot com.
Speaker Change: This conference call is being webcast live and then audio replay of the conference call can be accessed for one year to the investors section on the website.
Speaker Change: During the prepared comments Hawkins Kirsten will be providing details of our fourth quarter and fiscal year 2024 results.
Speaker Change: Guidance for our first quarter of fiscal year 2025, as well 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 forward looking statements made on this call.
Speaker Change: In addition to U S GAAP reporting.
Speaker Change: Com reports certain financial measures on a non-GAAP basis.
Speaker Change: A reconciliation between GAAP and non-GAAP measures is included in the tables attached to todays press release comp.
Speaker Change: Comments made during today's call will primarily refer to are non-GAAP financial results.
Speaker Change: I will now turn the call over to Hawk.
Speaker Change: Yes.
Hawk: Thank you Qi <unk>.
Hawk: And thank you everyone for joining us today.
Hawk: Well this has been a transformative year for Broadcom.
Our fiscal year 'twenty 'twenty four consolidated revenue grew 44% year over year to a record <unk>.
Hawk: One $6 billion.
Hawk: Excluding Vmware.
Hawk: Our revenue grew over 9% organically.
Hawk: Fiscal 'twenty four operating operating profit excluding transition costs grew 42% year over year, and we return a record $22 billion in cash to our shareholders.
Hawk: 45% year on year.
Hawk: Dividends buybacks and eliminations.
Hawk: There were two significant drivers of this transformation this year.
Hawk: First.
We closed the acquisition of EMEA.
Hawk: Early weeks of fiscal 'twenty four.
Hawk: And then focus Vmware on its technology leadership in data Center virtualization.
The integration of Vmware is largely complete revs.
Hawk: Revenue is on a growth trajectory and operating margin reached 70% exiting 2024.
Hawk: We are well on the path to delivering incremental adjusted EBITDA at a level that.
Hawk: That significantly exceeds the $8 5 billion, we communicated when we announced the deal.
Hawk: We're planning to achieve this much earlier than our initial target of three years.
Hawk: The second driver in 2024 was AI.
Hawk: Our AI revenue, which came from strength in custom AI accelerators, or XP use and networking grew 220% from $3 $8 billion in fiscal 'twenty three to $12 2 billion.
Hawk: Fiscal 'twenty, four and represented 41% of our semiconductor revenue.
Hawk: Drove semiconductor revenue up to a record $1 billion during the year.
Hawk: Yeah.
Hawk: Okay.
Hawk: Let's move on to the fourth quarter and give you more color.
Hawk: Consolidated net revenue.
Hawk: $14 $1 billion was up 51% year on year excluding.
Hawk: Excluding Vmware.
Hawk: Organic growth was 11% in.
<unk> operating profit of $8 $8 billion was up 53% year on year.
Hawk: For the details on infrastructure software in Q4.
Hawk: This infrastructure software segment revenue was $5 8 billion.
Hawk: 196% year on year flat sequentially.
Hawk: Even as multiple deals slip over into Q1.
Hawk: In Vmware.
Hawk: We booked $21 million total CPU cores in the quarter versus $19 million a quarter ago.
Hawk: These about 70% represent a Vmware cloud foundation of VCA. The full software stack Virtualized, we can get into your data center.
Hawk: This translated into annualized booking value all HBV as we call. It of $2 7 billion for Vmware in Q4 up from two five in Q3.
Hawk: Since closing the acquisition just over a year ago with sign up over 4500 of our largest 10000 customers for Vcs DCF enabled customers to deploy private cloud environments on Prem <unk>.
Hawk: Alternative to running applications in the public cloud.
Hawk: And in doing all this.
Hawk: We continued to drive down spending in Vmware, we broad spending down to $1 2 billion in Q4 down from one three in Q3.
Speaker Change: By reference PMA spending was averaging over $2 4 billion per quarter, Brian to the acquisition with operating margin less than 30%.
Speaker Change: Moving onto Q1 outlook for infrastructure software.
Speaker Change: We expect Q1 revenue to grow to $6 5 billion up 11% sequentially and 14, 41% up year on year.
Speaker Change: For Vmware.
BV is expected to exceed $3 billion.
Speaker Change: <unk> to $2 7 billion in the preceding quarter.
Speaker Change: Turning to semiconductors.
Speaker Change: Let me give you more details by end markets.
Speaker Change: Networking Q4 revenue of $4 5 billion grew 45% year on year.
Speaker Change: Networking revenue, which represented 76% of networking.
Speaker Change: Grew 158% year on year. This was driven by a doubling of our AI XP shipments to us three hyperscale customers and for earnings growth in AI connectivity revenue driven by.
Speaker Change: Our tomahawk and Jericho shipments globally.
Speaker Change: In Q1.
Speaker Change: We expect the momentum in the AI connectivity to be as strong as small hyperscale is deployed Jericho three AI, India fabrics.
Speaker Change: Our next generation.
Speaker Change: XP use.
Speaker Change: In three nanometers.
Speaker Change: We will be the first of its coming to market in that process.
Speaker Change: We are on track for volume shipments and our Hyperscale customers in the second half of fiscal 'twenty five.
Speaker Change: Turning on to server storage.
Speaker Change: <unk> bought them six months ago, Q4 server storage connectivity revenue has recovered some 20% to $992 million and in Q4, we expect server storage revenue to continue to grow.
Speaker Change: Turning to wireless.
Speaker Change: As we expected seasonal launched by our North American customer.
Speaker Change: Drove Q4 wireless revenue to $2 $2 billion.
Speaker Change: Up 30% sequentially.
Speaker Change: This was up 7% year on year because of contango content.
Speaker Change: We continue to be very engaged with this customer in multiyear roadmaps across various technologies, we have leadership in.
Speaker Change: Including Rs.
Speaker Change: Wi Fi Bluetooth sensing and touch.
Speaker Change: In Q1, reflecting seasonality.
We expect wireless to be down sequentially.
Speaker Change: <unk> still be flat year on year.
Speaker Change: In Q4 broadband reached bottom at.
Speaker Change: $465 million down 51% year on year.
Speaker Change: We have seen significant orders across multiple service providers during this quarter and reflecting this trend. We now expect broadband to show recovery beginning in Q1.
Speaker Change: Finally onto industrial which only represents 1% of the total revenues mentioned on Resales Q4, industrial sales of $173 million declined 27% year on year, we only expect a recovery.
Speaker Change: In the second half 2025.
Speaker Change: Yes.
Speaker Change: Before I sum up and provide you our Q1 fiscal 'twenty five guidance, let me.
Speaker Change: Outline a longer term perspective.
Speaker Change: On how we see our semiconductor business evolving over the next three years.
Speaker Change: On the broad portfolio of non AI semiconductors.
Speaker Change: It's multiple end markets.
Speaker Change: We saw a silica cyclical bottom in fiscal 'twenty four.
Speaker Change: $17 8 billion.
Speaker Change: We expect a recovery from this level.
Ed.
Speaker Change: The industry's cost historical growth rate of mid single digits.
Speaker Change: In sharp contrast.
Speaker Change: We see our ultimate opportunity over the next three years in AI.
Speaker Change: It's massive.
Speaker Change: Specific hyperscale is have begun their respective journeys.
Speaker Change: To develop their own custom AI accelerators.
Or XP use as well as some network.
Speaker Change: <unk> XP use with open and scalable Ethernet connectivity.
Speaker Change: For each of them.
Speaker Change: This represents a multi year not a quarter to quarter journey.
Speaker Change: As you know we currently currently has three hyperscale customers.
Speaker Change: We have developed our own multi generational AI XP you roadmap.
Speaker Change: <unk> deep to be deployed.
Speaker Change: At varying rates over the next three years.
Speaker Change: In 2027.
Speaker Change: We believe each of them plans to deploy.
1 million XP clusters.
Speaker Change: Across a single fabric.
We expect this to represent.
Revenues serviceable addressable market all sent.
Speaker Change: For XP use and network in the range of $60 billion to $90 billion in fiscal 'twenty 'twenty seven alone.
We are very well positioned to achieve a leading market share in this opportunity.
Speaker Change: And expect this will drive a.
Speaker Change: Our strong Ram.
Speaker Change: Our 2020 for AI revenue base of $12 2 billion.
Speaker Change: Keep in mind, though this will not be a linear ramp.
Speaker Change: We'll show quarterly variability.
Speaker Change: To compound this.
Speaker Change: We have been selected.
Speaker Change: By two additional Hyperscale is.
Speaker Change: And in advanced development.
Speaker Change: For the our own next generation AI XP use.
Have line of sight to develop these prospects into revenue generating customers.
Speaker Change: For 2027.
Speaker Change: And could therefore.
Speaker Change: <unk> Steve.
Speaker Change: <unk> significantly.
So the reality going forward for this company is that.
Speaker Change: The AI semiconductor business.
Speaker Change: Whoa rapidly outgrow the non semiconductor business.
Speaker Change: Recognizing this.
Speaker Change: We will now shift to guiding our semiconductor business.
Speaker Change: Buying AI and non AI revenue segments.
So summarizing Q4.
Speaker Change: Semiconductor revenue of $8 $2 billion grew 12% year on year and 13% sequentially.
Speaker Change: Q4, AI revenue grew a strong 150% year on year to $3 7 billion non AI semiconductor revenue declined by 23% year on year to $4 5 billion.
Speaker Change: But still a 10% recovery.
Speaker Change: From the bottom of six months ago.
Speaker Change: Now moving onto our outlook for Q1.
Speaker Change: We expect semiconductor revenue to grow approximately 10% year on year to $8 1 billion.
Speaker Change: AIA demand and demand remains strong and we expect <unk> revenue to grow 65% year on year to $3 $8 billion we.
Speaker Change: We expect non semiconductor revenue to be down about mid teens.
Speaker Change: <unk> year on year.
Speaker Change: And so in total summing this all up we're guiding consolidated Q1 revenue to be approximately 14 $6 billion up 22% year on year.
And we expect this will drive Q1, adjusted EBITDA to approximately 66% of revenue.
Keith: With that let me turn this call over to Keith.
Keith: Thank you Hock, let me now provide additional detail on our Q4 financial performance.
Keith: Consolidated revenue was $14 1 billion for the quarter up 51% from a year ago.
Excluding the contribution from Vmware Q4 revenue increased 11% year on year.
Keith: Gross margins were 76, 9% of revenue in the quarter up 260 basis points from the year ago quarter. R&D was one 4 billion and consolidated operating expenses were $2 billion up year on year, primarily due to the acquisition and consolidation of <unk>.
Speaker Change: Where Q.
Speaker Change: Q4, operating income was $8 8 billion and was up 53% from a year ago with operating margin at 63% of revenue adjusted EBITDA was $9 1 billion or 65% of revenue.
This figure excludes 156 million of depreciation.
Speaker Change: Now a review of the P&L for our two segments starting with semiconductors.
Speaker Change: Revenue for our semiconductor solutions segment was $8 2 billion and represented 59% of total revenue in the quarter. This was up 12% year on year.
Speaker Change: Gross margins for our semiconductor solutions segment were approximately 67% down 220 basis points year on year, driven primarily by a higher mix of AI XP is.
Speaker Change: Operating expenses increased 11% year on year to 914 million on increased investment in R&D, resulting in semiconductor operating margins at 56%.
Speaker Change: Now moving on to infrastructure software revenue for infrastructure software was $5 8 billion up 196% year on year, primarily due to the contribution of Vmware and represented 41% of revenue.
Speaker Change: Gross margins for infrastructure software, where 91% in the quarter and operating expenses were $1 1 billion in the quarter, resulting in infrastructure software operating margin of 72%.
Speaker Change: Excluding transition costs operating margin was 73%.
Speaker Change: Moving on to cash flow free.
Free cash flow in the quarter was $5 5 billion and represented 39% of revenues excluding.
Speaker Change: Excluding cash used for restructuring and integration of $506 million pre cash flows at 6 billion were up 22% year on year and represented 43% of revenue.
Speaker Change: Free cash flow as a percentage of revenue has declined from the same quarter a year ago.
Speaker Change: Higher cash interest expense from debt related to the Vmware acquisition higher cash taxes due to a higher mix of U S. Taxable income the continued delay in the re enactment of section 174, and recent proposed regulations on corporate A&P.
Speaker Change: We spent 122 million on capital expenditures.
Speaker Change: Days sales outstanding were 29 days in the fourth quarter compared to 31 days a year ago. We ended the fourth quarter with inventory of $1 8 billion down 7% sequentially.
Speaker Change: We continue to remain disciplined on how we manage inventory across the ecosystem.
Speaker Change: We ended the fourth quarter with $9 3 billion of cash and $69 8 billion of gross principal debt during the quarter, we replaced 5 billion.
Speaker Change: Our floating rate debt with new senior notes, we used cash on hand to pay or mix of senior notes, which came due in Q4 and additional floating rate debt, reducing debt by $2 5 billion.
Speaker Change: Following these actions the weighted average coupon rate in years to maturity of our $56 billion at fixed rate debt is three 7% and seven six years respectively.
Speaker Change: The weighted average coupon rate in years to maturity of our $14 billion in floating rate debt is five 9% and 3.2 years, respectively. We expect to repay approximately $495 million of fixed rate senior notes coming due in Q1.
Speaker Change: Now, let me recap our financial performance for fiscal year 2024 are.
Speaker Change: Our revenue hit a record $51 6 billion growing 44% year on year, including Vmware and 9% organically excluding Vmware.
Speaker Change: Semiconductor revenue was $30 1 billion up 7% year over year infrastructure software revenue was $21 5 billion up 181% year on year and up 19% year on year, excluding Vmware <unk>.
Speaker Change: Fiscal 2024, adjusted EBITDA was $31 9 billion and represented 62% of revenue.
Speaker Change: Free cash flow grew 10% year on year to $19 4 billion and up 22% year on year to $21 9 billion, excluding restructuring and integration costs.
Speaker Change: Turning to capital allocation.
For fiscal 2024, we spent $22 2 billion consisting of $9 8 billion in the form of cash dividends and $12 4 billion in share repurchases and elimination.
Speaker Change: Aligned with our ability to generate increased cash flows in the preceding year and off of a larger share count based on the acquisition of Vmware, We are announcing an increase in our quarterly common stock cash dividend in Q1 fiscal 2025 to 59 per share on a split adjusted basis.
Speaker Change: An increase of 11% from the prior quarter.
Speaker Change: We intend to maintain this target quarterly dividend throughout fiscal 'twenty five subject to quarterly board approval.
This implies that our fiscal 2025 annual common stock dividend to be a record $2 36 per share on a split adjusted basis, an increase of 12% year on year.
I would like to highlight that this represents the 14th consecutive increase and annual dividend since we initiated dividends in fiscal 2011.
Speaker Change: Now moving on to guidance.
Speaker Change: From a year on year comparable basis keep in mind that Q1 of fiscal 'twenty four was a 14 week quarter and Q1 of fiscal 'twenty five is a 13 week quarter.
Speaker Change: As we are now past one year following the close of the Vmware acquisition, starting in Q1 of fiscal 2025, we will no longer breakout Vmware revenue and costs on a standalone basis, we will continue to report infrastructure software segment revenue and profitability.
Speaker Change: <unk> includes brocade fibre channel fiber channel, San CA mainframe enterprise security and Vmware.
Speaker Change: Our guidance for Q1 is for consolidated revenue of $14 6 billion with semiconductor revenue was $8 1 billion up approximately 10% year on year and infrastructure software revenue of $6 5 billion up 41% year on year, we expect Q1, adjusted EBITDA to be a rep.
<unk>, 66% and Q1 non-GAAP diluted share count to be approximately $4 9 billion shares for modeling purposes. We expect Q1 consolidated gross margins to be up 100 basis points sequentially on the higher revenue mix of infrastructure software and product mix within semiconductors.
Speaker Change: Note the consolidated gross margins through the year will be impacted by the revenue mix of infrastructure software in semiconductors and product mix within semiconductors.
Speaker Change: Expect the non-GAAP tax rate in fiscal year 2025 to be approximately 14, 5% as tax deductions related to interest expense.
Speaker Change: <unk> as we pay down and refinance debt under more favorable interest terms.
Speaker Change: GAAP net income and cash flows in Q1 will be impacted by higher taxes.
Structuring and integration related cash costs due to the Vmware acquisition.
Speaker Change: That concludes my prepared remarks, operator, please open up the call for questions. Thank.
Speaker Change: Thank you to ask a question. Please press star 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.
Speaker Change: And our first question will come from the line of Blayne Curtis with Jefferies. Your line is open.
Blayne Curtis: Thanks, So much for taking my question, it's kind of a clarification and a question I thought I heard you say that AI networking revenue was 76% of networking I'm, just going to get that math right, but maybe the broader question is <unk> seen growth off that low point in April NII can you just talk about asics rank versus networking the trends youre seeing and kind of.
Blayne Curtis: Of October and January.
Speaker Change: Well, that's a very interesting question.
Speaker Change: Both for growing not at the same rates, but we've been shipping.
Speaker Change: I believe a lot more of our network AI connectivity networking components.
Speaker Change: In the back half of this year compared.
Speaker Change: Compared to the first half of this fiscal year.
Speaker Change: And we suspect a lot of that will continue in the first half of next fiscal year before more.
Speaker Change: XP use nature as I indicated more on the new generation of <unk>.
Speaker Change: Three nanometer XP use will start ramping very much in the back half of 'twenty five.
Speaker Change: Very clear thanks, Bob.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And that will come from the line of C. J Muse with Cantor Fitzgerald. Your line is open yes.
Speaker Change: Yes, good afternoon, and thank you for taking the question I guess Hock I wanted to hit on the $60 billion to $90 billion revenue range for fiscal 2007 for AI.
Speaker Change: Was hoping you could speak to.
Speaker Change: The mix you see there between <unk> and networking.
Speaker Change: And.
Speaker Change: Within that construct.
Speaker Change: Are you including.
Speaker Change: All the customers that you see out there in hyperscale and vertically integrated consumers or any sort of help in terms of what you're including in that potential mix would be very helpful. Thank you.
Thank you.
Speaker Change: Well. Thanks for the question give me an opportunity here to clarify and be very specific.
Speaker Change: First.
Speaker Change: On the total dollars. These non revenue by the way is the revenue opportunity for us is what I call.
Serviceable addressable market as we all term Sam knocked.
Speaker Change: Not 10 cents and serviceable addressable market for three of our Hyperscale customers.
Speaker Change: <unk>.
Speaker Change: It's a very narrow serviceable.
Speaker Change: Addressable market with talking about and we're talking about.
Speaker Change: XP using AI and connectivity at that scale.
Speaker Change: Can I add connectivity could probe we estimate to run approximately.
Speaker Change: Rose to $2, 15% to 20%.
Speaker Change: Of the dollar content.
Thank you one moment our next question.
Speaker Change: And that will come from the line of Joe Moore with Morgan Stanley. Your line is open.
Joe Moore: Great. Thank you I Wonder if you could talk to the SBU market.
Speaker Change: Our customers sort of reacting to some of the rack scale products from your merchant.
Speaker Change: It's better from a video.
Speaker Change: How do they sort of get the connectivity to multiple X views inside the rack.
Speaker Change: Just how does that present, a competitive dynamic for you. Thanks.
Speaker Change: Well.
Speaker Change: Everybody is trying to figure out why.
Speaker Change: When you start when you.
Speaker Change: When you connect the cluster on a single fabric of 10000.
Speaker Change: XP use our Gpus, a GPU and scale it up to 100000.
Speaker Change: And on to 500000 and $1 million is a whole new game.
Speaker Change: In terms of architecture, and so you guys here the differences when you do this rex.
Speaker Change: You have what it calls.
Speaker Change: Scale up.
And then you have joining rectal ranked because you have no change to kind of get to a million dollars for them at a 100000, otherwise you call it scale out.
Speaker Change: And then that's a continuing evolving architecture, but.
Speaker Change: I think each of these hyperscale customers of ours.
Speaker Change: At this point kind of figured out how to get the.
Speaker Change: Hence our road map that will keep growing from 100002.
Speaker Change: A million.
Speaker Change: <unk> Costa.
Speaker Change: On pretty months similar architecture basis over the next three four years.
Great. Thank you.
Speaker Change: Thank you one moment our next question.
Speaker Change: And that will come from the line of Harlan sur with Jpmorgan. Your line is open.
Speaker Change: Hi, good afternoon. Thanks for taking my question, how can I know the team has been putting out.
Speaker Change: For fiscal 'twenty, five and I appreciate the multiyear.
Speaker Change: Sam opportunity outlook, but for this year.
Speaker Change: Can we look at what your customers.
Speaker Change: On the networking and custom accelerators are thinking about from a data center Capex spending perspective. So for example, our latest well look is that the top for cloud and hyper scale or is it going to grow their capex 35, 40% in fiscal 'twenty five I would expect that your AI business would sort of closely mirrored this.
Speaker Change: Trend maybe even.
Speaker Change: Think about it as a base case, when we think about Ethernet taking share from Infiniband asics growing faster than merchant Gpus, maybe the profile of your AD business can go even faster than the capex trends either way plus or minus is that is that how we should think about the growth in the AI business roughly in line with Capex will trend of your large cloud and <unk>.
Speaker Change: Hyperscale customers.
No I'm not.
Speaker Change: It doesn't I mean, I think the Hyperscale, it's time to give you an overall capex numbers I'm not sure really breakout between once the AI and whats known out there.
Speaker Change: And.
Clearly.
Speaker Change: The spending in <unk>.
Speaker Change: Our streams spanning known AI, even on the Capex.
Speaker Change: So no I wouldnt necessary stop at that.
Speaker Change: Okay no. Thank you.
Speaker Change: Thank you one moment our next question.
Speaker Change: And that will come from the line of Stacy <unk> with Bernstein. Your line is open.
Speaker Change: Hi, guys. Thanks for taking my question I have a more tactical question I see a software push outs into Q1, which is elevating it should we think about that that.
Speaker Change: Those push outside rolling off as we get into Q2.
Speaker Change: In the back half of the year and like what are the implications on the shape of software for the year as well as gross margins because I guess, maybe in the back half youll have like software little weaker versus Q2 as well as the <unk> stronger so should we be thinking about the gross margin trajectory off the current elevated base kind of like easing as we get into back out so just.
Speaker Change: Anything you can tell us around the shape of the software around the push push outs and implications for revenues and gross margins.
Speaker Change: Well number one.
Speaker Change: Is the slips and.
Speaker Change: And I think you're over thinking this this home.
Speaker Change: This whole project.
Speaker Change: Just sleep.
Speaker Change: And you'll see the differences between Q4 growth.
Speaker Change: Q1, <unk> celebration, that's all it is one thing.
Speaker Change: Q2 will be lower because you had pushed out into Q1 is what I'm asking.
Speaker Change: No it doesn't.
Speaker Change: Now I don't want you won't have material impact on the rest of the fiscal 'twenty five.
Speaker Change: <unk> software can kind of hold at these levels or even grow off of these like $6 billion levels. As we go through the year I'm not I'm not giving you guidance I might remind you for the rest of the year I'm, just giving you a guidance for Q1, but I'm just telling you our analysis is kind of the factories.
Speaker Change: [laughter].
Speaker Change: I've been told that before okay. Thank you Ross Thank you.
Speaker Change: Thank you one moment, our next question and that will come from Benjamin Reitzes with Melleous. Your line is open.
Benjamin Reitzes: Hey, Thanks, a lot.
Benjamin Reitzes: Nice quarter there hock.
Speaker Change: Wanted to ask you about the $60 to $90 billion.
Speaker Change: It's a little more clarity previously you've talked about a cumulative tam.
Speaker Change: From your customers so.
Speaker Change: And that is this a run rate Tam or accumulative Tam kind of meaning do we take the 12 point to then add some.
Speaker Change: Growth for the next two years and then.
Speaker Change: Of it that way or do we think of we take a share of like a 75 billion Tam and what your revenue yield is and then I. Just also was hoping you could clarify.
Speaker Change: Youre not including those two new customers.
Speaker Change: Do those two customers have the same.
Speaker Change: <unk> 30 billion Tam each that the current <unk> or do you think there are smaller or bigger.
Speaker Change: Sorry about the multipart question there.
Speaker Change: No I think.
Speaker Change: You'll answer the first part was very similar to an earlier question, but I'd be pleased to clarify.
Speaker Change: No. The 60 to 90 billion is not.
Speaker Change: We're not talking accumulative.
Speaker Change: Sam or Tam anymore.
Speaker Change: We are putting for you.
Speaker Change: A destination so to speak a milestone which happens to be three years 2027.
Possibly slip a bit part of 28 2027, we're seeing.
Speaker Change: A destination 2027 or milestone better one.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: Deployment of those large scale AI clusters, each on singles fabric pretty much to run those large LLM models would come.
Speaker Change: Come to $60 billion to $90 billion in that one year period.
Speaker Change: And collectively collectively all three of them.
Speaker Change: And to answer the other part.
Two.
Speaker Change: Uh huh.
Speaker Change: Possibly yes.
Speaker Change: At least one of them we believe yes.
Speaker Change: But you know what.
Speaker Change: I don't want you, adding one plus one equals two here those are not.
Speaker Change: As validated in our view.
Speaker Change: Model S customers. So please don't do addition to that success.
Speaker Change: $90 million, Sam that I have parts poster later in my remarks.
Speaker Change: Thank you so much.
And one moment, our next question and that will come from the line of Ross Seymore with Deutsche Bank. Your line is open.
Ross Seymore: Hi, Thanks for let me ask a question I wanted to talk about the cash return side of things great job on the dividend increase the other 50%.
Ross Seymore: Fiscal 'twenty, five a year, where you're going to still be paying down debt.
Speaker Change: Sure return share repurchases in the mix or Hock, you mentioned that Vmware. The integration is largely now behind you usually that puts you on the prowl looking for deals is that something we should in general think about or.
Speaker Change: I guess the Tory issues that are still are concerned just trying to figure out what that other 50% is going to go towards this year.
Speaker Change: Oh well.
Speaker Change: Well, let's start with the other 50% of cash.
Speaker Change: That is will be generated that will not use it that is beyond dividends, we only one useful to use us for it we've always say one with pocket on balance sheet.
Speaker Change: Paul.
Paul: The opportunity to buy someone else, but in reality, we're buying big enough companies, you almost say that 50% cash.
Paul: It's sitting there its not adequate so the likely use of that 50% cash is as Chris indicated in her remarks prepared remarks pay down debt.
Paul: We do intend to use part of that 50% free cash flow is going to use for dividends.
Paul: <unk> de lever ourselves.
Paul: Given the size of the debt load we are taking on all we have taken on since required Vmware.
Paul: Yes, Ross its Kirsten we want to focus on reducing interest expense. So we'll go after those are.
Paul: Those term loans, so yes, the focus will be on paying down debt.
Speaker Change: Thank you.
Speaker Change: And one moment for our next question.
Speaker Change: That will come from the line of Vivek Arya with Bank of America. Your line is open.
Vivek Arya: Thanks for taking my question I'll hop back to AI. What do you think is the Tam in 2024. So we can get a baseline view of what your $12 2 billion in sales represent then.
Vivek Arya: Function that you maintain this year right you grew it or what happens to that showed over time and then sort of related question to that is what happens to your semiconductor gross margins its AI grows.
Vivek Arya: To some extent because you gave us a mid single digit for non AI and I'm wondering if I guess it would be such a big part of what happens to gross margin. So what kind of a baseline of what Sam was this year and what happens to margins over time okay.
Vivek Arya: That's a.
Speaker Change: Very insightful question on that first one Richard on the first one anyway.
Speaker Change: We are seeing what's the what is the baseline on the $60 billion to $90 billion in three years' time.
Speaker Change: We are specifying down to just treat customers of ours and I would I would estimate.
Speaker Change: And this 2024 for that to be about less than $20 billion $15 billion to $20 billion at this point.
Speaker Change: In $2024 $15 billion to $20 billion going to $60 billion to $90 billion.
Speaker Change: Yeah.
Speaker Change: And.
Speaker Change: In terms of margins.
Speaker Change: Well I don't get too hung up on gross margin. Please.
Vivek Arya: Vivek because.
You're not wrong gross margin semiconductors will dilute.
And saying that but see the game here is the revenue.
Vivek Arya: Leverage so much on this spending.
Vivek Arya: Spending we have to do to generate that operating margin.
Vivek Arya: <unk> improve from where we are today.
Speaker Change: Thank you thanks. Thank.
Speaker Change: Thank you one moment our next question.
Speaker Change: And that will come from the line of harsh Kumar with Piper Sandler. Your line is open yes first of all guys huge congratulations on successfully integrating Vmware. So much ahead of your timeframe and Hock I had a two part question is there a single simple dollar metric that we can think off to a network attached to <unk>.
Speaker Change: For example, it's $1 of XP of networking to $1 <unk> and then for my question.
Speaker Change: And one of your posts you talked about sovereign data centers and Vmware.
Yes. My question is is there a place for Broadcom outside of the software piece in other words are you noticing that sovereign guys are wanting to use <unk> or are they still sticking to merchant silly.
Speaker Change: Silicon.
Speaker Change: Well, let me answer your question banquets easiest one first.
Speaker Change: Sovereign guys.
Speaker Change: Unlike most online more than most of the other.
Speaker Change: Of the enterprise is pretty much like the enterprise market.
Speaker Change: Which is simply merchant.
Speaker Change: Southern guys.
Speaker Change: Do not have the capability necessarily to create first the hardware, but more importantly, this software stack to enable transistors in hardware to translate itself into a high level language, which then.
Speaker Change: LLM AP AP application luxury which models and application AI application can operate on so they'll stick to what's available which is much of the silicon and available.
Speaker Change: Uh huh.
Speaker Change: Ecosystem of software transfer software layers that allow that translation. So it will be done very much that way.
Speaker Change: On <unk> NAND.
Speaker Change: And then.
Speaker Change: On your first question of what's the ratio between AI connectivity and networking that HSA to XP use the compute.
Speaker Change: Well, it's a changing number.
As the cluster expense no doubt some ratios to be looked at in a simple ratio to look at as they scale up.
Speaker Change: And as scale out.
Speaker Change: And as we expand into a single fabric.
Speaker Change: Cluster of XP use our gpus that grows bigger and bigger guess what is more important scale.
Speaker Change: Becomes more and more important.
Speaker Change: Important.
Speaker Change: The ratio, we're talking about as we move up increases almost exponentially.
Speaker Change: Which is why im saying from propylene networking as a percent of AI content in silicon today of between 5% to 10% Youre going up to 15% to 20% by the time you hit 500000 to a million.
Speaker Change: <unk> GPU clusters.
Thank you.
Speaker Change: One moment for our next question.
Speaker Change: And that will come from the line of Toshi Hari with Goldman Sachs. Your line is open.
Speaker Change: Okay.
Speaker Change: Hi, good afternoon, and thank you so much for taking the question.
Speaker Change: The $60 billion to $90 billion Sam.
Speaker Change: Forecast for fiscal 'twenty, seven Hock I am curious if you guys have a view on the Tam.
Speaker Change: Just want to know how big the Sam is as a percentage of the total opportunity set.
Speaker Change: And then my main question is you talked about.
Speaker Change: <unk> four for leading market share.
Speaker Change: Within your Sandwich makes sense.
Speaker Change: I assume are not not assuming a 100% sure. So the value of that $60 billion to $90 billion that you won't be capturing.
Speaker Change: Is that a function of some of your hyperscale customers wanting to capture value internally or is it.
Speaker Change: Always having a backup.
Our second source.
Speaker Change: Is there a low margin business that you just simply won't pursue.
Speaker Change: How should we think about the part of the $60 billion to $90 billion that you won't be going after it wont be capturing thank you okay.
Speaker Change: First to answer the big overarching question I don't know the Tam I don't make any path to I don't think too far on the hot about them. We don't thing in macro approaches. We're looking at a line of sight here. So I got customers I tried to figure out how much volume that while the roadmap of the customer is not.
Speaker Change: Product technology, but what they are building up what is the consumption pattern like that's how we create a cent.
Speaker Change: In a way bottoms up and tops down so I have no idea what the Tam is beyond customers. We are serving closely collaborating closely.
Speaker Change: Let's make it clear.
Speaker Change: In terms of.
Speaker Change: Market share don't know about it but as you all can see.
Speaker Change: It's a very large substantial market opportunity this room.
Speaker Change: Paul.
Paul: Any players all were trying to do is gain our fair share.
Paul: Just very well positioned today having.
The bass.
Paul: Technology very relevant in this space, we have by far one of the best technology combination technology out there to do X P use.
Paul: And connect those Sps the silicon technology that enables that.
Paul: We have at CA Broadcom bought lots, which is why we are very well positioned with these three customers of ours. So we based on that and based on the depth of our engagement. Today. This isn't just thought this isn't going on now for a wall in terms of deep engagement with.
Engineering teams from the other side each of the other site.
Paul: We are very well positioned well underway to creating.
Paul: Our multiyear road map.
Paul: To enable this few customers of ours to get to where the ambition leads them to be.
Paul: And it's because of the great technology, we have where we are actually enabling in the areas. We're very good at we're talking about.
Paul: Silicon design packaging design and optical technology.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Speaker Change: And that will come from the line of William Stein with choice Securities. Your line is open.
William Stein: Thanks for taking my question I wanted to add my congrats to all the great results this year and for the quarter and outlook.
Speaker Change: But hock.
Speaker Change: Sort of a stunning turn of events in the last year with.
Speaker Change: What we've been accustomed to thinking of as sort of mature slow growth business at its core with all the M&A tacked onto it.
Speaker Change: And I wonder with the sudden acceleration of the organic business given your.
Speaker Change: Exposure to these.
Speaker Change: <unk> capabilities in Asics to bring AI technologies to customers does that change your interest level in M&A and does it change your.
Speaker Change: Focus area of potential M&A going forward. Thank you.
Speaker Change: No it doesn't.
Speaker Change: We are open.
Speaker Change: We'll open always open because that's been a core part of our strategy and business model of this company for the last 10 years, which is.
Speaker Change: We're always interested.
Speaker Change: And adding to our portfolio.
Very good franchise assets be they in semiconductors of BD in infrastructure software is strong.
Speaker Change: And as I always say they meet the criteria that fairly demanding criteria, we look for.
Speaker Change: Would always be open to acquiring this asset and adding into our portfolio. So no it hasn't changed our thinking at all.
Speaker Change: Okay. Thank you.
Speaker Change: One moment for our next question.
Speaker Change: And that will come from the line of Vijay Rakesh with Mizuho. Your line is open.
Vijay Rakesh: Hi, Hock.
Vijay Rakesh: Great.
Vijay Rakesh: Just a question back on that.
Vijay Rakesh: I guess I'm, just going to say I guess.
Vijay Rakesh: It looks like after 17 5 billion Tam here Sam here do you have about 70% share so assuming that show any person looking out to 'twenty seven custom.
Vijay Rakesh: Essentially the coronary revenues should be like 51 billion in fiscal 'twenty.
Vijay Rakesh: Do we have a good line of sight into fiscal 'twenty, six showing a pretty nice ramp to hit those numbers might be with our clients.
Vijay Rakesh: To do the $1 billion experience.
Speaker Change: How do you see that.
Vijay Rakesh: Thanks.
Speaker Change: I don't know, we don't have really a good enough line of sight to want assured review nor for that matter do we have a policy of giving you a guidance beyond what we're doing one quarter, yes, but we don't want to give you a sense of where this journey is Heather we wanted to give you a sense of.
Speaker Change: This could lead us this company in terms of its AI semiconductor revenue.
Speaker Change: Trajectory given that we now made it very open official almost that we have going forward only guidance guiding AI revenue versus <unk> revenue, we forget at least give you a sense of what the.
Speaker Change: The AI trajectory is on a non AI, we have known as you have known it with us for a long time is mature.
Speaker Change: Stable evolving growing mid single digits.
Speaker Change: GDP plus AI, we have never given your debt. So that's why we take this step now unprecedented in some ways of laying that roadmap in terms of.
Speaker Change: To ensure market for now.
Speaker Change: Now only market we have is the customers we have.
Speaker Change: End markets, we serve so we create this same.
Speaker Change: And the clarity we see is to some extent in 2027.
Speaker Change: How that journey progresses with each of them.
Speaker Change: Customers.
Yes.
Speaker Change: Somewhat.
Speaker Change: Our variable is the rate of adoption.
And Oh.
Speaker Change: One <unk>.
Speaker Change: And we'll be fairly much very much a part of that journey, but because of that we expect to see.
Speaker Change: Situation, where there could be quarter to quarter variability given there are only three customers.
Speaker Change: That deployment comes in big chunks.
Speaker Change: So.
Speaker Change: My Best answer to you is I can't give you any clarity beyond what I've given so far.
Speaker Change: Got it.
Speaker Change: CSP when do you see them rapidly.
Speaker Change: Well first of all I can do it.
Speaker Change: Again into production they got again production so whether we crossed a breakthrough that we are working very hard with them to get it production stage.
Speaker Change: Deeply engaged with table chips.
Speaker Change: But they've got to get the software ready to get it tested and they got to get.
Speaker Change: Going on it so now I am not sure but.
Speaker Change: Definitely over the next three years.
Speaker Change: Yeah.
Speaker Change: And thank you that is all the time, we have for a question and answer session I would now like to turn the call back over to <unk> head of Investor Relations for closing remarks. Thank.
Suri: Thank you Suri.
Speaker Change: Com currently plans to report its earnings for the first quarter of fiscal year 2025, after close of market on Thursday March six 2024.
Speaker Change: Public webcast of Broadcom earnings Conference call will follow at two P. M Pacific time.
Speaker Change: That will conclude our earnings call today. Thank you all for joining operator, you may end the call.
Speaker Change: This concludes today's program. Thank you all for participating you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: [music].
Speaker Change: Welcome to the Broadcom, Inc, fourth quarter and fiscal year 2024 financial results Conference call. At this time for opening remarks, and introductions I would like to turn the call over to <unk> head of Investor Relations of Broadcom, Inc.
Speaker Change #100: Thank you Sherry and good afternoon, everyone. Joining me on today's call are Hock Tan President and CEO, Kirsten Smith, Chief Financial Officer, and Charlie cause President semiconductor solutions group.
Speaker Change #100: Broadcom distributed a press release and financial tables after the market close describing our financial performance for the fourth quarter and fiscal year 2024.
Speaker Change #100: If you did not receive a copy you may obtain the information from the investors section of Broadcom website at Broadcom Dot com.
Speaker Change #100: This conference call is being webcast live and then audio replay of the conference call can be accessed for one year through the investors section of Broadcom website.
Speaker Change #100: During the prepared comments Hawkins Kirsten will be providing details of our fourth quarter and fiscal year 2024 results guide.
Speaker Change #100: Guidance for our first quarter of fiscal year 2025, as well as commentary regarding the business environment will.
Speaker Change #100: We will take questions. After the end of our prepared comments.
Speaker Change #100: Please refer to our press release today and our recent filings with the SEC for information on the specific risk factors that could cause our actual results to differ materially from the forward looking statements made on this call.
In addition to U S GAAP reporting.
Speaker Change #100: Com reports certain financial measures on a non-GAAP basis.
Speaker Change #100: A reconciliation between GAAP and non-GAAP measures is included in the tables attached to todays press release comp.
Speaker Change #100: Comments made during today's call will primarily refer to are non-GAAP financial results.
Speaker Change #101: I will now turn the call over to Hawk.
Speaker Change #101: Yes.
Hawk: Thank you Jesus.
Hawk: And thank you everyone for joining us today.
Hawk: Well this has been a transformative year for Broadcom.
Hawk: Our fiscal year 'twenty 'twenty four consolidated revenue grew 44% year over year to a record $51 $6 billion.
Hawk: Excluding Vmware.
Hawk: Our revenue grew over 9% organically.
Hawk: Fiscal 'twenty four operating operating profit excluding transition costs grew 42% year over year, and we return a record $22 billion in cash to our shareholders.
Hawk: 45% year on year through dividends buyback and eliminations.
Hawk: There were two significant drivers of this transformation this year.
Hawk: First.
Hawk: We closed the acquisition of <unk> in the early weeks of fiscal 'twenty four.
Hawk: And then focus Vmware on its technology leadership in data Center virtualization.
Hawk: The integration of Vmware is largely complete revs.
Hawk: Revenue is on a growth trajectory and operating margin reached 70% exiting 2024.
Hawk: We are well on the path to delivering incremental adjusted EBITDA at a level that.
Hawk: That significantly exceeds the eight 5 billion, we communicated when we announced the deal.
Hawk: We're planning to achieve this much earlier than our initial target of three years.
Hawk: The second driver in 2024 was AI.
Hawk: Our AI revenue, which came from strength in custom AI accelerators, or XP use and networking grew 220% from $3 $8 billion in fiscal 'twenty three to $12 2 billion.
Hawk: Fiscal 'twenty, four and represented 41% of our semiconductor revenue.
Hawk: Drove semiconductor revenue up to a record $31 billion during the year.
Hawk: Yes.
Hawk: Yes.
Speaker Change #102: Okay now, let's move on to the fourth quarter and give you more color.
Speaker Change #102: Consolidated net revenue.
Speaker Change #102: Our $14 $1 billion was up 51% year on year excluding.
Speaker Change #102: Excluding Vmware.
Speaker Change #102: Organic growth was 11% in.
Speaker Change #102: <unk> operating profit of $8 $8 billion was up 53% year on year.
Speaker Change #102: Yes.
Speaker Change #102: For the details on infrastructure software in Q4.
Speaker Change #102: This infrastructure software segment revenue was $5 8 billion.
Speaker Change #102: 196% year on year flat sequentially.
Even as multiple deals slip over into Q1.
In Vmware.
We booked $21 million total CPU cores in the quarter versus $19 million a quarter ago.
Speaker Change #102: These above 70% represent a Vmware cloud foundation of VCA.
Full software stack Virtualized, we can gain value data center.
Speaker Change #102: And this translated into annualized booking value all HBV as we call. It of $2 7 billion for Vmware in Q4 up from two five in Q3.
Speaker Change #102: Since closing the acquisition just over a year ago with signed up over 4500 of our largest 10000 customers for Vcs DCF enabled customers to deploy private cloud environments on Prem.
Speaker Change #102: As an alternative to running applications in the public cloud.
Speaker Change #102: And in doing all this.
Speaker Change #102: Continued to drive down spending in Vmware, we broad spending down to $1 2 billion in Q4 down from one three in Q3.
Speaker Change #102: By reference PMA spending was averaging over $2 4 billion per quarter Bryan to their acquisition with operating margin less than 30%.
Speaker Change #102: Moving onto Q1 outlook for infrastructure software.
Speaker Change #102: We expect Q1 revenue to grow to $6 5 billion up 11% sequentially and 40% to 41% up year on year.
Speaker Change #102: <unk>.
Speaker Change #102: BV is expected to exceed $3 billion.
Speaker Change #102: Compared to $2 $7 billion in the preceding quarter.
Speaker Change #103: Turning to semiconductors.
Speaker Change #103: Let me give you more details by end markets networking Q4 revenue of $4 5 billion grew 45% year on year.
Speaker Change #103: Networking revenue, which represented 76% of networking.
Speaker Change #103: Grew 158% year on year. This was driven by a doubling of our AI XP shipments to us three hyperscale customers and for earnings growth in AIG connectivity revenue driven by.
Speaker Change #103: Our tomahawk and Jericho shipments globally.
Speaker Change #103: In Q1.
Speaker Change #103: We expect the momentum in the AI connectivity to be as strong as small hyperscale is deployed Jericho three AI, India fabrics.
Speaker Change #103: Our next generation.
Speaker Change #103: XP use.
Speaker Change #103: In three nanometers, and we will be the first of its coming to market in that process.
We are on track for volume shipments and our Hyperscale customers in the second half of fiscal 'twenty five.
Speaker Change #103: Turning on to server storage.
Speaker Change #103: <unk> bought them six months ago, Q4 server storage connectivity revenue has recovered some 20% to $992 million and in Q4, we expect server storage revenue to continue to grow.
Speaker Change #103: Turning to wireless.
Speaker Change #103: As we expected seasonal launched by our North American customer drove Q4 wireless revenue to $2 $2 billion.
Speaker Change #103: Up 30% sequentially.
Speaker Change #103: This was up 7% year on year because of compliance content.
Speaker Change #103: We continue to be very engaged with this customer in multiyear roadmaps across various technologies, we had leadership in.
Speaker Change #103: Including Rs.
Speaker Change #103: Wi Fi Bluetooth sensing and touch.
Speaker Change #103: In Q1, reflecting seasonality.
Speaker Change #103: We expect wireless to be down sequentially.
Speaker Change #103: But still be flat year on year.
Speaker Change #103: Sure.
Speaker Change #103: <unk>.
In Q4 broadband reached bottom and $465 million.
Speaker Change #103: Down 51% year on year.
Speaker Change #103: We have seen significant orders across multiple service providers during this quarter and reflecting this trend. We now expect broadband to show recovery beginning in Q1.
Finally onto industrial which only represents 1% of the total revenues mentioned on Resales Q4, industrial sales of $173 million declined 27% year on year.
Speaker Change #103: We only expect a recovery.
Speaker Change #103: In the second half 2025.
Speaker Change #103: Yes.
Speaker Change #103: Before I sum up and provide you with Q1 fiscal 'twenty <unk> guidance, let me.
Speaker Change #103: Outline a longer term perspective.
Speaker Change #103: On how we see our semiconductor business evolving over the next three years.
Speaker Change #103: On the broad portfolio of non AI semiconductors.
Speaker Change #103: It's multiple end markets.
Speaker Change #103: We saw a silica cyclical bottom in fiscal 'twenty fall at seven.
Speaker Change #103: $17 8 billion.
Speaker Change #103: We expect a recovery from this level.
Speaker Change #103: Ed.
Speaker Change #104: The industry's cost historical growth rate of mid single digits.
Speaker Change #104: Yes.
Speaker Change #104: In sharp contrast.
Speaker Change #104: We see our opening opportunity over the next three years in AI.
Speaker Change #104: It's massive.
Speaker Change #104: Specific hyperscale is have begun their respective journeys.
To develop their own custom AI accelerators.
Speaker Change #104: Or XP use as well as network does.
Speaker Change #104: <unk> XP use with open and scalable Ethernet connectivity.
Speaker Change #104: For each of them.
Speaker Change #104: This represents a multi year not a quarter to quarter journey.
Speaker Change #105: As you know we currently currently has three hyperscale customers.
Speaker Change #105: We have developed our own multi generational AI <unk> roadmap.
Too deep to be deployed.
Speaker Change #105: At varying rates over the next three years.
Speaker Change #105: In 2027.
Speaker Change #105: We believe each of them plans to deploy.
Speaker Change #105: One mainland XP clusters.
Speaker Change #105: Across a single fabric.
Speaker Change #105: We expect this to represent.
Speaker Change #105: Revenues serviceable addressable market <unk>.
Speaker Change #105: For XP use and network in the range of $60 billion to $90 billion in fiscal 'twenty 'twenty seven alone.
Speaker Change #105: We are very well positioned to achieve a leading market share in this opportunity.
And expect this will drive a.
Speaker Change #105: Our strong Ram.
Speaker Change #105: Our 2020 for AI revenue base of $12 2 billion.
Speaker Change #105: Keep in mind, though this will not be a linear ramp.
Speaker Change #105: We will show quarterly variability.
Speaker Change #105: To compound this.
Speaker Change #105: We have been selected.
Speaker Change #105: By two additional Hyperscale is.
Speaker Change #105: And in advanced development.
Speaker Change #105: For the our own next generation AI XP use.
Speaker Change #105: Have line of sight to develop these prospects into revenue generating customers.
For 2027.
Speaker Change #105: And could therefore.
Speaker Change #105: <unk> Steve.
Speaker Change #105: <unk> significantly.
Speaker Change #105: So the reality going forward for this company is that.
Speaker Change #105: The AI semiconductor business.
Speaker Change #105: Whoa rapidly outgrow the non semiconductor business.
Speaker Change #105: Recognizing this.
Speaker Change #105: We will now shift to guiding our semiconductor business.
Speaker Change #105: Buying AI and non AI revenue segments.
Speaker Change #105: So summarizing Q4.
Speaker Change #105: Semiconductor revenue of $8 $2 billion grew 12% year on year and 13% sequentially.
Speaker Change #105: Q4, AI revenue grew a strong 150% year on year to $3 7 billion non AI semiconductor revenue declined by 23% year on year to $4 5 billion.
Speaker Change #105: But still a 10% recovery.
Speaker Change #105: From the bottom of six months ago.
Speaker Change #105: Now moving onto our outlook for Q1.
Speaker Change #105: We expect semiconductor revenue to grow approximately 10% year on year to $8 1 billion.
Speaker Change #105: AIA demand and demand remains strong and we expect <unk> revenue to grow 65% year on year to $3 $8 billion we.
Speaker Change #105: We expect non semiconductor revenue to be down about mid teens percent year on year.
Speaker Change #105: And so in total summing this all arm, we're guiding consolidated Q1 revenue to be approximately 14 $6 billion up 22% year on year.
Speaker Change #105: And we expect this will drive Q1, adjusted EBITDA to approximately 66% of revenue.
Keith: With that let me turn this call over to Keith.
Keith: Thank you Hock, let me now provide additional detail on our Q4 financial performance.
Keith: Consolidated revenue was $14 1 billion for the quarter up 51% from a year ago.
Keith: Excluding the contribution from Vmware Q4 revenue increased 11% year on year.
Keith: Gross margins were 76, 9% of revenue in the quarter up 260 basis points from the year ago quarter. R&D was one 4 billion and consolidated operating expenses were $2 billion up year on year, primarily due to the acquisition and consolidation of <unk>.
Keith: Blair.
Keith: Q4, operating income was $8 8 billion and was up 53% from a year ago with operating margin at 63% of revenue.
Keith: Adjusted EBITDA was $9 1 billion or 65% of revenue.
Keith: This figure excludes 156 million of depreciation.
Keith: Now a review of the P&L for our two segments starting with semiconductors.
Keith: Revenue for our semiconductor solutions segment was $8 2 billion and represented 59% of total revenue in the quarter. This was up 12% year on year.
Keith: Gross margins for our semiconductor solutions segment were approximately 67%.
Keith: <unk> 220 basis points year on year, driven primarily by a higher mix of AI XP is.
Keith: Operating expenses increased 11% year on year to 914 million on increased investment in R&D, resulting in semiconductor operating margins at 56%.
Keith: Now moving on to infrastructure software revenue for infrastructure software was $5 8 billion up 196% year on year, primarily due to the contribution of Vmware and represented 41% of revenue.
Keith: Gross margins for infrastructure software, where 91% in the quarter and operating expenses were $1 1 billion in the quarter, resulting in infrastructure software operating margin of 72% excluding transition costs operating margin was 73%.
Moving onto cash flow.
Keith: Free cash flow in the quarter was $5 5 billion and represented 39% of revenues excluding.
Keith: Excluding cash used for restructuring and integration of $506 million pre cash flows at $6 billion were up 22% year on year and represented 43% of revenue.
Keith: 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 higher cash taxes due to a higher mix of U S. Taxable income the continued delay in the re enactment of section 174 and recent proposed.
Keith: Patients on corporate A&P.
Keith: We spent 122 million on capital expenditures.
Keith: Days sales outstanding were 29 days in the fourth quarter compared to 31 days a year ago. We ended the fourth quarter with inventory of $1 8 billion down 7% sequentially.
Keith: We continue to remain disciplined on how we manage inventory across the ecosystem.
Keith: We ended the fourth quarter with $9 3 billion of cash and $69 8 billion of gross principal debt during the quarter, we replaced 5 billion.
Our floating rate debt with new senior notes, we used cash on hand to pay or mix of senior notes, which came due in Q4 and additional floating rate debt, reducing debt by $2 5 billion.
Keith: Following these actions the weighted average coupon rate in years to maturity of our $56 billion at fixed rate debt is three 7% and seven six years respectively.
Keith: The weighted average coupon rate in years to maturity of our $14 billion in floating rate debt is five 9% and three two years, respectively. We expect to repay approximately $495 million of fixed rate senior notes coming due in Q1.
Keith: Now, let me recap our financial performance for fiscal year 2024, or.
Keith: Our revenue hit a record $51 6 billion growing 44% year on year, including Vmware and 9% organically excluding Vmware.
Keith: Semiconductor revenue was $30 1 billion up 7% year over year infrastructure software revenue was $21 5 billion up 181% year on year and up 19% year on year, excluding Vmware.
Keith: Fiscal 2024, adjusted EBITDA was $31 9 billion and represented 62% of revenue.
Keith: Free cash flow grew 10% year on year to $19 4 billion and up 22% year on year to $21 9 billion, excluding restructuring and integration costs.
Keith: Turning to capital allocation.
Keith: For fiscal 2024, we spent $22 2 billion consisting of $9 8 billion in the form of cash dividends and $12 4 billion in share repurchases and elimination.
Keith: Aligned with our ability to generate increased cash flows in the preceding year and off of a larger share count based on the acquisition of Vmware, We are announcing an increase in our quarterly common stock cash dividend in Q1 fiscal 2025 to 59 per share on a split adjusted basis in <unk>.
Keith: <unk> of 11% from the prior quarter.
Keith: We intend to maintain this target quarterly dividend throughout fiscal 'twenty five subject to quarterly board approval. This.
Keith: This implies that our fiscal 2025 annual common stock dividend to be a record $2 36 per share on a split adjusted basis, an increase of 12% year on year.
Keith: I'd like to highlight that this represents the 14th consecutive increase and annual dividend since we initiated dividends in fiscal 2011.
Keith: Now moving on to guidance.
Keith: From a year on year comparable basis keep in mind that Q1 of fiscal 'twenty four was a 14 week quarter and Q1 of fiscal 'twenty five is a 13 week quarter.
Keith: As we are now past one year following the close of the Vmware acquisition, starting in Q1 of fiscal 2025, we will no longer breakout Vmware revenue and costs on a standalone basis, we will continue to report infrastructure software segment revenue and profitability.
Keith: <unk> includes brocade fibre channel fiber channel, San CA mainframe enterprise security and Vmware.
Keith: Our guidance for Q1 is for consolidated revenue of $14 6 billion with semiconductor revenue was $8 1 billion up approximately 10% year on year and infrastructure software revenue of $6 5 billion up 41% year on year, we expect Q1, adjusted EBITDA to be a wreck.
Keith: 66% and Q1 non-GAAP diluted share count to be approximately $4 9 billion shares for modeling purposes. We expect Q1 consolidated gross margins to be up 100 basis points sequentially on the higher revenue mix of infrastructure software and product mix within semiconductors.
Keith: Note the consolidated gross margins through the year will be impacted by the revenue mix of infrastructure software in semiconductors and product mix within semiconductors.
Keith: We expect the non-GAAP tax rate in fiscal year 2025 to be approximately 14, 5% as tax deductions related to interest expense.
Keith: <unk> as we pay down and refinance debt under more favorable interest terms.
Keith: GAAP net income and cash flows in Q1 will be impacted by higher taxes.
Structuring and integration related cash costs due to the Vmware acquisition.
Speaker Change #106: That concludes my prepared remarks, operator, please open up the call for questions. Thank.
Speaker Change #107: Thank you to ask a question. Please press star 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.
Speaker Change #108: And our first question will come from the line of Blayne Curtis with Jefferies. Your line is open.
Blayne Curtis: Thanks, So much for taking my question, it's kind of a clarification and a question I thought I heard you say that AI networking revenue was 76% of networking I'm, just going to get that math right, but maybe the broader question is <unk> seen growth off that low point in April NII can you just talk about a fixed rank versus networking the trends youre seeing and kind of.
Speaker Change #108: October.
Speaker Change #108: Over in January.
Speaker Change #108: Well, that's a very interesting question.
Speaker Change #108: Both for growing not at the same rates, but we've been shipping.
Speaker Change #108: I believe a lot more of our network AI connectivity networking components.
Speaker Change #108: In the back half of this year compared.
Speaker Change #108: Compared to the first half of this fiscal year.
Speaker Change #108: And we suspect a lot of that will continue in the first half of next fiscal year Befall mall.
Speaker Change #108: XP use nature as I indicated more on the new generation of.
Three nanometer XP use will start ramping very much in the back half of 'twenty five.
Speaker Change #109: Very clear thanks, Bob.
Speaker Change #110: Thank you one moment for our next question.
Speaker Change #111: And that will come from the line of C. J Muse with Cantor Fitzgerald. Your line is open yes.
Speaker Change #112: Yes. Good afternoon. Thank you for taking the question I guess Hock I wanted to hit on the $60 billion to $90 billion revenue range for fiscal 2007 for AI.
Speaker Change #112: Was hoping you could speak to.
Speaker Change #112: The mix you see there between X P U and networking.
Speaker Change #112: And.
Speaker Change #112: Within that construct.
Speaker Change #112: Are you including.
Speaker Change #113: All the customers that you see out there in hyperscale and vertically integrated consumers or any sort of help in terms of what you're including in that potential mix would be very helpful. Thank you.
Speaker Change #113: Thank you.
Speaker Change #115: Well. Thanks for the question give me an opportunity here to clarify and be very specific.
Speaker Change #115: First.
Speaker Change #115: On the total dollars. These non revenue by the way is the revenue opportunity for us is what I call.
Speaker Change #115: Serviceable addressable market as we all term Sam knocked.
Speaker Change #115: <unk> 10 cents and is serviceable addressable market for three of our Hyperscale customers.
Speaker Change #115: <unk>.
Speaker Change #115: It's a very narrow serviceable.
Addressable market, we're talking about and we're talking about.
Speaker Change #115: XP using AI and connectivity at that scale.
Speaker Change #116: Can I add connectivity could probe we estimate to run approximately.
Speaker Change #116: Rose to $2, 15% to 20%.
Speaker Change #116: Of the dollar content.
Speaker Change #117: Thank you one moment our next question.
Speaker Change #118: And that will come from the line of Joe Moore with Morgan Stanley. Your line is open.
Joe Moore: Great. Thank you I Wonder if you could talk to the SBU market.
Joe Moore: Our customers sort of reacting to some of the rack scale products from your merchant.
Joe Moore: It's better from a video.
Joe Moore: How do they sort of get the connectivity to multiple X views inside the rack.
Joe Moore: Just how does that present, a competitive dynamic for you. Thanks.
Joe Moore: Well.
Speaker Change #119: Everybody is trying to figure out why.
Speaker Change #119: When you start when you when.
Speaker Change #119: When you connect the cluster on a single fabric of 10000.
XP use our Gpus, a GPU and scale it up to 100000.
Speaker Change #119: On to 500000 and $1 million is a whole new game.
Speaker Change #119: In terms of architecture.
Speaker Change #119: And so you guys here the differences when you do this rex.
Speaker Change #119: You have what it calls.
Speaker Change #119: Scale up.
Speaker Change #119: And then you have joining rectal ranked because you have no choice you can get to a million dollars for them at a 100000, otherwise you call it scale out.
Speaker Change #119: And then that's a continuing evolving architecture, but David I think each of these hyperscale customers of ours.
Speaker Change #119: At this point kind of figured out how to get the hen.
Speaker Change #119: Hence our road map that will keep growing from 100002.
Speaker Change #119: A million.
Speaker Change #119: <unk> Costa.
Speaker Change #119: On putting months similar architecture basis over the next three four years.
Great. Thank you.
Speaker Change #120: Thank you one moment our next question.
Speaker Change #121: And that will come from the line of Harlan sur with Jpmorgan. Your line is open.
Harlan Sur: Hi, good afternoon. Thanks for taking my question, how can I know the team has been putting out.
My guide for fiscal 'twenty, five and I appreciate the multiyear.
Harlan Sur: Sam opportunity outlook, but for this year.
Harlan Sur: Can we look at what your customers on the networking and custom accelerators are thinking about from a data center Capex spending perspective. So for example, our.
Speaker Change #123: Our latest well look is that the top four cloud and Hyperscale is it going to grow their capex 35, 40% in fiscal 'twenty five I would expect that your AI business would sort of closely mirrored this trend maybe even.
Speaker Change #123: Think about it as a base case, when we think about Ethernet taking share from Infiniband asics growing faster than merchant Gpus, maybe the profile of your AD business can go even faster than the capex trends either way plus or minus is that is that how we should think about the growth in the air.
Speaker Change #123: This roughly in line with Capex will trend of your large cloud and Hyperscale customers.
Speaker Change #123: Alan.
Speaker Change #123: No.
Speaker Change #123: No it doesn't.
Speaker Change #123: I think the Hyperscale, it's time to give you an overall capex numbers I'm not sure really breakdown between once the AI and what's not.
Speaker Change #123: Yeah.
Speaker Change #123: And.
Speaker Change #123: Clearly.
Speaker Change #123: The spending in <unk>.
Our streams spanning non AI, even on the Capex.
Speaker Change #123: And so no I wouldnt necessary stop at that.
Speaker Change #124: Okay, well thank you all.
Speaker Change #125: Thank you one moment our next question.
Speaker Change #126: And that will come from the line of Stacy <unk> with Bernstein. Your line is open.
Speaker Change #127: Hi, guys. Thanks for taking my question I have a more tactical question.
We have software push outs into Q1, which is elevating it should we think about that.
Speaker Change #128: It does push outside rolling off as we get into Q2.
Speaker Change #128: In the back half of the year and like what are the implications on the shape of software for the year as well as gross margins because I guess, maybe in the back half youll have like software little weaker versus Q2 as well as the <unk> stronger so should we be thinking about the gross margin trajectory off the current elevated base kind of like easing as we get into back out so just anything.
Speaker Change #128: Anything you can tell us around the shape of the software around the push push outs and implications for revenues and gross margins.
Well number one.
Speaker Change #128: Is the slips and.
I think youre over thinking this this home.
Speaker Change #128: This whole project is just sleep.
Speaker Change #128: And you'll see the differences between Q4 growth.
Speaker Change #128: Q1, <unk> celebration, that's all it is one thing.
Speaker Change #129: Q2 will be lower because you had pushed out into Q1 is what I'm asking.
Speaker Change #130: No it does not.
No I don't.
Speaker Change #130: You won't have material impact on the rest of the fiscal 'twenty five.
Speaker Change #130: Moving software can kind of hold at these levels or even grow off of these like $6 billion levels. As we go through the year I'm not I'm not giving you guidance I might remind you for the rest of the year I'm, just giving you a guidance for Q1, but I'm just telling you our analysis is kind of the factories.
Speaker Change #131: Uh huh.
Speaker Change #131: All of that before.
Speaker Change #131: Thank you Ross Thank you.
Speaker Change #132: Thank you one moment for our next question and that will come from Benjamin Reitzes with Melleous. Your line is open.
Benjamin Reitzes: Hey, Thanks, a lot and.
Benjamin Reitzes: Nice quarter there hock.
Speaker Change #133: Wanted to ask you about the $60 to $90 billion.
Speaker Change #133: It's a little more clarity previously you've talked about a cumulative tam.
Speaker Change #133: From your customers so.
Speaker Change #134: And that is this a run rate Tam or accumulative Tam kind of meaning do we take the 12 point to then add some.
Speaker Change #134: Growth for the next two years and then.
Speaker Change #134: Of it that way or do we think of we take a share of like a 75 billion Tam and what your revenue yield is and then I. Just also I was hoping you could clarify.
Speaker Change #135: Youre not including those two new customers.
Speaker Change #135: Do those two customers have the same.
<unk> 30 billion Tam each that the current <unk> or do you think there are smaller or bigger.
Speaker Change #136: Sorry about the multipart question there.
Speaker Change #137: No I think.
Speaker Change #138: You'll answer the first part was very similar to an earlier question, but I'd be pleased to clarify.
Speaker Change #139: No the 60% to 90 billion is not we're not talking accumulative.
Speaker Change #139: Sam or Tam anymore.
Speaker Change #139: We are putting for you.
Speaker Change #139: A destination so to speak a milestone which happens to be three years 2027.
Speaker Change #139: Possibly slip a bit part of 28, but 2020, we're seeing.
Speaker Change #139: <unk> 2027 or milestone better one way.
Speaker Change #139: Yeah.
Speaker Change #139: Deployment of those large scale AI clusters, each on singles fabric pretty much to run those large LLM models.
Speaker Change #139: In award come to $60 billion to $90 billion in that one year period.
Speaker Change #139: And collectively collectively all three of them.
Speaker Change #139: And to answer the other two.
Speaker Change #139: Two.
Speaker Change #139: You know.
Speaker Change #139: Possibly yes.
Speaker Change #139: At least one of them we believe yes.
Speaker Change #139: But you don't want.
Speaker Change #140: I don't want you, adding one plus one equals two here those are not.
Speaker Change #140: As validated in our view and our model as customers.
Speaker Change #140: Please don't do your addition to the success of 990 million same that I have box poster later in my remarks.
Speaker Change #141: Thank you so much.
Speaker Change #142: And one moment, our next question and that will come from the line of Ross Seymore with Deutsche Bank. Your line is open.
Ross Seymore: Hi, Thanks for let me ask a question I wanted to talk about the cash return side of things great job on the dividend increase the other 50% is fiscal 'twenty, five a year, where you're going to still be paying down debt.
Speaker Change #143: Sure return.
Hock Tan: Share repurchases in the mix or Hock, you mentioned that Vmware. The integration is largely now behind you usually that puts you on the prowl looking for deals is that something we should in general think about or is there like inventory issues that are still are concerned just trying to figure out what that other 50% is going to go towards this year.
Hock Tan: Oh well.
Hock Tan: Well, let's start with the other 50% of cash.
Hock Tan: That is will be generate then they will not use it that is beyond dividends, we only one useful to use us for it we've always say one with pocket on balance sheet.
Hock Tan: Four.
Hock Tan: For the opportunity to buy someone else, but in reality, we're buying big enough companies.
Mostly that 50% cash.
Hock Tan: He is sitting there is not adequate so the likely use of that 50% cash.
Speaker Change #145: This is Kirsten indicated in her remarks prepared remarks, paydowns that we do intend to use part of that 50%.
Speaker Change #145: Free cash flow is going to use for dividends to delever all sales.
Speaker Change #146: Given the size of the debt load we are taking on all we have taken on since you acquired Vmware.
Speaker Change #146: Yes, Ross its Kirsten we want to focus on reducing interest expense. So we will go after those those term loans. So yes, the focus will be on paying down debt.
Speaker Change #147: Thank you.
Speaker Change #148: And one moment for our next question.
Speaker Change #149: That will come from the line of Vivek Arya with Bank of America. Your line is open.
Vivek Arya: Thanks for taking my question I'll hop back to AI. What do you think is this Pam in 2024. So we can get a baseline view of what your $12 2 billion in sales represent then.
Vivek Arya: The assumption that you maintain this year right you grew it or what happens to that showed over time and then sort of related question to that is what happens to your semiconductor gross margins its AI grows.
Vivek Arya: Does that makes sense, because you gave us a mid single digit <unk> and I'm wondering if I guess it would be such a big part of semi is what happens to gross margin. So what kind of a baseline of what.
Sam was this year and what happens to margins over time.
Vivek Arya: That's a very.
Vivek Arya: Very insightful question on that first one which is.
On the first one anyway.
Vivek Arya: We are seeing what's the what is the baseline on the $60 billion to $90 billion in three years' time.
We are specifying down to just treat customers of ours.
Vivek Arya: And I would I would estimate.
Vivek Arya: And this 2024 for that to be about.
Vivek Arya: Less than $20 billion.
Vivek Arya: 15% to $20 billion at this point.
Vivek Arya: In 2020 for $15 billion to $20 billion going to $60 billion to $90 billion.
Vivek Arya: Yeah.
Vivek Arya: And.
Vivek Arya: In terms of margins.
Speaker Change #150: Well I don't get too hung up on gross margin. Please.
Speaker Change #150: The bank because.
Speaker Change #150: You're not wrong gross margin semiconductors will dilute you want in saying that but see the game here is the revenue.
Speaker Change #150: Leverage so much on this spending.
Speaker Change #150: Spending we have to do to generate that operating margin.
Speaker Change #150: <unk> improve from where we are today.
Speaker Change #151: Thank you. Thank you thank.
Speaker Change #152: Thank you one moment our next question.
Speaker Change #153: And that will come from the line of harsh Kumar with Piper Sandler. Your line is open yes first of all guys huge congratulations on successfully integrating Vmware. So much ahead of your timeframe and Hock I had a two part question there isn't a single simple dollar metric that we can think off to a network attached to <unk>.
For example, it's $1 of XP of networking to $1 <unk> and then for my question.
Speaker Change #153: And one of your posts you talked about sovereign data centers and Vmware.
Speaker Change #154: Yes. My question is is there a place for Broadcom outside of the software piece in other words are you noticing that sovereign guys are wanting to use <unk> or are they still sticking to merchant silicon.
Speaker Change #153: Silicon.
Speaker Change #155: Well, let me answer your question banquets easiest one first.
Speaker Change #155: Sovereign guys.
Speaker Change #155: Unlike most online more than most of the other most of the enterprise is pretty much larger enterprise market.
Speaker Change #155: Which is simply merchant.
Speaker Change #156: Southern guys.
Speaker Change #156: Do not have the capability necessarily to create first the hardware, but more importantly, this software stack to enable transistors in hardware to translate itself into a high level language, which then.
Speaker Change #156: LLM, API and API application luxury which models and application AI application can operate on so they'll stick to what's available which is much of the silicon and available.
Speaker Change #157: Uh huh.
Speaker Change #157: Ecosystem of software translate software layers that allow that translation. So it will be done very much that way.
Speaker Change #157: On <unk> NAND.
Speaker Change #157: And then.
Speaker Change #157: On your first question of what's the ratio between AI connectivity and networking that is shifting to XP use the compute.
Speaker Change #157: Well, it's a changing number.
Speaker Change #157: As the cluster expense no doubt some ratios to be looked at in a simple ratio to look at as they scale up.
Speaker Change #157: And as scale out.
Speaker Change #157: And as we expand into a single fabric.
Cluster of XP use our gpus that grows bigger and bigger guess what is more important scale.
Becomes more and more important.
Speaker Change #157: Important.
Speaker Change #157: The ratio, we're talking about as we move up increases almost exponentially.
Speaker Change #157: Which is why im saying from propylene networking as a percent of AI content in silicon today of between 5% to 10% Youre going up to 15% to 20% by the time you hit 500000 to a million.
Speaker Change #157: <unk> GPU clusters.
Speaker Change #158: Thank you.
Speaker Change #158: One moment for our next question.
Speaker Change #159: And that will come from the line of Toshi Hari with Goldman Sachs. Your line is open.
Speaker Change #158: Okay.
Speaker Change #160: Hi, good afternoon, and thank you so much for taking the question.
Speaker Change #160: The $60 billion to $90 billion Sam.
Hock Tan: Forecast for fiscal 'twenty, seven Hock I am curious if you guys have a view on the Tam.
Speaker Change #161: Just want to know how big the Sam is as a percentage of the total opportunity set.
Speaker Change #161: And then my main question is you talked about.
Speaker Change #161: <unk> four leading market share.
Speaker Change #161: Within your Sandwich makes sense.
Speaker Change #161: I assume are not not assuming a 100% sure. So the value of that $60 billion to $90 billion that you won't be capturing.
Speaker Change #162: Is that a function of some of your hyperscale customers wanting to capture value internally or is it.
Speaker Change #162: Always having a backup.
Speaker Change #163: A second source.
Speaker Change #164: Is there a low margin business that you just simply won't pursue.
Speaker Change #165: How should we think about the part of the $60 billion to $90 billion that you won't be going after it wont be capturing thank you okay.
Speaker Change #166: First to answer the big overarching question I don't know the Tam I don't make any part two I don't thing to fall on hard about them. We don't thing in macro approaches. We're looking at a line of sight here. So I got customers I tried to figure out how much volume to cut and where the roadmap of the customer is not.
Speaker Change #166: Product technology, but what they are building up what is the consumption pattern like that's how we create a cent.
Speaker Change #166: <unk> been a wave bottoms up and tops down so I have no idea what the Tam is beyond customers. We are serving closely collaborating closely.
Speaker Change #167: Let's make it clear.
Speaker Change #167: In terms of.
Speaker Change #167: Market share don't know about it but as you all can see.
Speaker Change #167: It's a very large substantial market opportunity this room.
Speaker Change #167: Paul.
Paul: Any players all were trying to do is gain our fair share.
Paul: Just very well positioned today having.
Paul: The bass.
Paul: Technology very relevant in this space, we have by far one of the best technology combination technology out there to do X P use.
Paul: And connect those Sps the silicon technology that enables that.
Paul: We have at CA Broadcom bought lots, which is why we are very well positioned with these three customers of ours. So we based on that and based on the depth of our engagement. Today. This isn't just thought this isn't going on now for a wall in terms of deep engagement with.
Paul: Engineering teams from the other side each of the other site.
Paul: We are very well positioned well underway to creating.
Paul: Our multiyear road map.
Paul: To enable this few customers of ours to get to where the ambition leads them to be.
Paul: And it's because of the great technology, we have where we are actually enabling in the areas. We're very good at we're talking about.
Silicon design packaging design and optical technology.
Speaker Change #168: Thank you.
Speaker Change #168: One moment for our next question.
Speaker Change #169: And that will come from the line of William Stein with choice Securities. Your line is open.
William Stein: Thanks for taking my question I wanted to add my congrats to all the great results this year and for the quarter and outlook.
Hock Tan: But hock.
Speaker Change #170: Sort of a stunning turn of events in the last year with.
Speaker Change #170: What we've been accustomed to thinking of as sort.
Speaker Change #170: Sort of mature slow growth business at its core with all the M&A tacked onto it.
Speaker Change #171: And I wonder with the sudden acceleration of the organic business given your.
Speaker Change #171: Exposure to these.
Speaker Change #171: <unk> capabilities in Asics to bring AI technologies to customers does that change your interest level in M&A and does it change your.
Speaker Change #171: Focus area of potential M&A going forward. Thank you.
Speaker Change #172: No it doesn't.
Speaker Change #172: We are open.
Speaker Change #172: Open always open because that's been a core part of our strategy business model of this company for the last 10 years, which is.
Speaker Change #172: We're always interested.
Speaker Change #172: Adding to our portfolio.
Speaker Change #172: Very good franchise assets be they in semiconductors, our BD in infrastructure software as long as I always say they meet the criteria the fairly demanding criteria. We look for we would always be open to acquiring this asset.
Speaker Change #172: And digging into our portfolio so no it hasn't changed our thinking at all.
Speaker Change #173: Thank you.
Speaker Change #174: One moment for our next question.
Speaker Change #175: And that will come from the line of Vijay Rakesh with Mizuho. Your line is open.
Vijay Rakesh: Hi, Greg.
Speaker Change #176: Just a question back on that.
Speaker Change #176: Yes.
Speaker Change #176: It looks like 17 5 billion Tam here Sam here do you have about 70% share so assuming that show any person looking at liquidity seven youre essentially looking at our revenues should be like 50 billion in fiscal 'twenty.
Speaker Change #176: Do we have a good line of sight into fiscal 'twenty, six showing a pretty nice ramp to hit those numbers might be without <unk>.
Speaker Change #177: To do the million excuse or how do you see that.
Speaker Change #176: Thanks.
Speaker Change #176: I don't know, we don't have really a good enough line of sight to want assured review nor.
Speaker Change #176: Do we have a policy of giving you guidance beyond what we're doing one quarter, yes, but we don't want to give you a sense of.
Speaker Change #176: This journey is Heather we wanted to give you a sense of where this could lead us. This company in terms of its AI semiconductor revenue.
Speaker Change #176: Trajectory given that we now made it very open official almost that.
Speaker Change #176: We are going forward only guidance guiding AI revenue versus <unk> revenue, we forget at least give you a sense for what.
Speaker Change #176: The AI trajectory is on a non AI, we have known as you have known it with us for a long time is mature stable evolving growing mid single digit.
Speaker Change #176: GDP plus AI, we have never given your debt. So that's why we take this step now unprecedented in some ways of laying that roadmap in terms of.
Speaker Change #176: The potential market for now only market. We have is the customers we have.
Speaker Change #176: End markets, we serve so we create this Sam.
Speaker Change #176: And the clarity we see is to some extent in 2027.
Speaker Change #176: All of that journey progresses with each of them.
Speaker Change #176: Customers.
Speaker Change #176: <unk>.
Speaker Change #176: Somewhat.
Speaker Change #176: <unk> a variable is the rate of adoption.
Speaker Change #176: And how soon.
Speaker Change #178: Excuse me.
Speaker Change #178: And it will be fairly much very much a part of that journey, but because of that we expect to see.
Speaker Change #178: Situation, where there could be quarter to quarter variability given there are only three customers and the fact that deployment comes in big chunks typically.
Speaker Change #178: No.
Speaker Change #179: My Best answer to you is I can't give you any clarity beyond what I've given so far.
Speaker Change #180: Got it.
Speaker Change #180: CSP.
Speaker Change #180: Demographically.
Speaker Change #180: Okay.
Speaker Change #180: Well first of all I got.
Speaker Change #180: <unk> into production. They got again production. So why don't we cross that bridge that we are working very hard with them to get it production stage, we're pretty deeply engage with table chips.
Speaker Change #180: But they've got to get the software ready.
Speaker Change #180: Get it tested and they got it.
Speaker Change #181: Going on it so now im not sure but definitely over the next three years.
Speaker Change #181: Yeah.
Speaker Change #182: Thank you that is all the time, we have for a question and answer session I would now like to turn the call back over to <unk> head of Investor Relations for closing remarks.
Speaker Change #183: Thank you sorry, Broadcom currently plans to report its earnings for the first quarter of fiscal year 2025. After close of market on Thursday March six 2020 for a public webcast of Broadcom earnings Conference call will follow at two P. M Pacific time.
Speaker Change #183: That will conclude our earnings call today. Thank you all for joining operator, you may end the call.
Speaker Change #184: This concludes today's program. Thank you all for participating you may now disconnect.