Broadcom Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ben Reitzes - Melius Research - Analyst : Congrats on the results. Hock, you talked about four more customers coming online. Can you just talk a little bit more about the trend you're seeing? Can any of these customers be as big as the current 3? And what does it say about the custom silicon trend overall and your optimism and upside to the business long term?

Question: Harlan Sur - JPMorgan - Analyst : And great job on the strong quarterly execution Hock and team. Great to see the continued momentum in the AI business here in the first half of your fiscal year and the continued broadening out of your AI customers. I know Hock last earnings, you did call out a strong ramp in the second half of the fiscal year, driven by new 3-nanometer AI accelerated programs kind of ramping. Can you just help us either qualitatively quality profile the second half step-up relative to what the team just delivered here in the first half? Has the profile changed either favorably, less favorably versus what maybe 90 days ago because quite frankly, I mean, a lot has happened since last earnings, right? You've had the dynamics like DeepSeek and focus on AI model efficiency, but on the flip side, you've had strong CapEx outlooks by your cloud and hyperscale customers. So any color on the second-half AI profile would be helpful.

Question: Harlan Sur - JPMorgan - Analyst : And on the second half, that you talked about 90 days ago, the second half 3-nanometer ramp? Is that still very much on track?

Question: William Stein - Truist Securities - Analyst : Congrats on these pretty great results. It seems from the news headlines about tariffs and about Deep Seek that there may be some disruptions, some customers and some other complementary suppliers seem to feel a bit paralyzed perhaps and have difficulty making tough decisions. Those tend to be really useful times for great companies to sort of emerge as something bigger and better than they were in the past. You've grown this company in a tremendous way over the last decade plus -- and you're doing great now, especially in this AI area, but I wonder if you're seeing that sort of disruption from these dynamics that we suspect or are happening based on headlines what we see from other companies? And how -- aside from adding these customers in AI, I'm sure there's other great stuff going on, but should we expect some bigger changes to come from Broadcom as a result of this?

Question: Ross Seymore - Deutsche Bank - Analyst : Thanks for asking the question. Hock, I want to go back to the XPU side of things and going from the four new engagements, not yet named, customers to last quarter and two more today that you announced. I want to talk about going from kind of design into deployment to judge that because there is some debate about tons of design wins, but the deployments actually don't happen either that they never occur or that the volume is never what is originally promised. How do you view that kind of conversion ratio? Is there a wide range around it? Or is there some way you could help us kind of understand how that works?

Question: Stacy Rasgon - Bernstein - Analyst : I wanted to go to the three customers that you do have in volume today. And what I wanted to ask was, is there any concern about some of the new regulations or the AI diffusion rules that are going to get put in place supposedly in May impacting any of those design wins or shipments. It sounds like you think all three of those are still on at this point, but anything you could tell us about where is that new regulations or AI diffusional impacting any of those wins would be helpful.

Question: Stacy Rasgon - Bernstein - Analyst : Got it. So none of those are going into China or to Chinese customers then?

Question: Vivek Arya - BofA Global Research - Analyst : Hock, whenever you have described your AI opportunity, you've always emphasized the training workload. But the perception is that the AI market could be dominated by the inference workload, especially with these new reasoning model. So what happens to your opportunity and share if the mix moves more towards inference. Does it create a bigger TAM for you than the $60 billion to $90 billion? Does it keep it the same, but there is a different mix of products? Or does a more inference-heavy market favor a GPU over the next year?

Question: Harsh Kumar - Piper Sandler Companies - Analyst : Broadcom team and again, great execution. Just Hock, had a quick question. We've been hearing that almost all of the large clusters that are 100,000 plus, they're all going to Ethernet. I was wondering if you could help us understand the importance of when the customer is making a selection, choosing between a guy that has the best switch ASIC such as you versus a guy that might have the compute there, can you talk about what the customer is thinking and what are the final points that they want to hit upon when they make that selection for the NIC cards?

Question: Timothy Arcuri - UBS Equities - Analyst : Hock, in the past, you have mentioned XPU units growing from about 2 million last year to about 7 million you said in the 2027, 2028 timeframe. My question is, do these four new customers, do they add to that 7 million unit number? I know in the past, you sort of talked about an ASP of $20,000 by then. So the first three customers are clearly a subset of that, 7 million units. So do these new four engagements drive that 7 million higher? Or do they just fill in to get to that 7 million? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 06, 2025 / 10:00PM, AVGO.OQ - Q1 2025 Broadcom Inc Earnings Call

Question: Timothy Arcuri - UBS Equities - Analyst : Okay. So they would add to that number.

Question: C.J. Muse - Cantor Fitzgerald - Analyst : I guess, Hock, to follow up on your prepared remarks and comments earlier around optimization with your best hardware and hyperscalers with their great software I'm curious how you're expanding your portfolio now to six mega scale kind of frontier models will enable you to, in one blush, share tremendous information, but at the same time, a world where these six truly want to differentiate. So obviously, the goal for all of these players is it flops per second per dollar of CapEx per watt. And I guess, to what degree are you aiding them in this effort? And where does maybe the Chinese wall kind of start where they want to differentiate and not share with you kind of some of the work that you're doing.

Question: Christopher Rolland - Susquehanna Financial Group LLLP - Analyst : And this one's maybe for Hock and for Kirsten. I'd love to know just because you have kind of the complete connectivity portfolio how you see new greenfield scale-up opportunities playing out here between could be optical or copper or really anything and what additive this could be for your company? And then, Kirsten, I think OpEx is up. Maybe just talk about where those OpEx dollars are going towards within the AI opportunity and whether they relate

Question: Vijay Rakesh - Mizuho Securities USA - Analyst : Just a quick question on the networking side. Just wondering how much does up sequentially on the AI side? And any thoughts on M&A going forward. seeing a lot of headlines around the Intel products projects?