Broadcom Inc Q2 2024 Earnings Call Summary

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

Question: Vivek Arya - Bank of America Securities - Analyst : Thanks for taking my question. Hock, I would appreciate your perspective on the emerging competition between Broadcom and Nvidia across both accelerators and ethernet switching. So on the accelerator side, they are going to launch their Balckwell product that many of the same customers that you have a very large position in the custom compute. So I'm curious how you think customers are going to do that allocation decision, just broadly what the visibility is? And then, I think a part B of that is as they launch their Spectrum-X Ethernet switch, do you think that poses increasing competition for Broadcom in the ethernet switching side in AI for next year? Thank you.

Question: Vivek Arya - Bank of America Securities - Analyst : Thank you.

Question: Ross Seymore - Deutsche Bank - Analyst : Hi, guys. Thanks for letting me ask the question. I wanted to stick on the AI theme, Hock. The strong growth that you had in the quarter, the 280% year over year, could you delineate a little bit between if that's the compute offload side versus the connectivity side? And then, as you think about the growth for the full year, how are those split in that realm as well? Are they kind of going hand-in-hand or is one side growing significantly faster than the other, especially with the I guess you said the next-generation accelerators are now going to be Broadcom as well?

Question: Ross Seymore - Deutsche Bank - Analyst : Thank you.

Question: Stacy Rasgon - Bernstein Research - Analyst : Hi, guys. Thanks for taking my question. I wanted to ask about the $11 billion AI guide. With the $11.6 billion, even if you didn't grow AI from the current level in the second half, and it feels to me like you're not suggesting that -- it feels to me like you think it'd be going, so why wouldn't that AI number be a lot more than $11.6 billion? Feels like it ought to be or am I missing something?

Question: Stacy Rasgon - Bernstein Research - Analyst : Okay. So I guess, again, how do I -- are you just suggesting that that more than $11 billion is sort of like the worst it could be, because that would just be flat with the current levels, but you're also suggesting that things are getting better into the back half?

Question: Stacy Rasgon - Bernstein Research - Analyst : Okay. So I guess we just take that that's a very -- if I'm reading it wrong with, that's just a very conservative number.

Question: Stacy Rasgon - Bernstein Research - Analyst : Okay. All right, Hock. Thank you, I appreciate it.

Question: Harlan Sur - JPMorgan - Analyst : Good afternoon. Thanks for taking my question. Hock, on cloud and AI networking silicon, good to see that the networking mix is steadily increasing. Like clockwork, the dot-com team has been driving a consistent two-year cadence rate of new product introductions, Trident, and Tomahawk, Jericho family of switching and routing products for the past seven generations. You layer on top of that. your GPU customers are accelerating their cadence of new product introductions and deployments of their products. So is this also driving faster adoption curve for your latest Tomahawk and Jericho products? And then, maybe just as importantly, like clockwork, it's been two years since you've introduced Tomahawk 5 product introduction, right, which if I look back historically means you have silicon and are getting ready to introduce your next-generation [three nanometer] Tomahawk 6 products, which would, I think, puts you two to three years ahead of your public competitors. Can you just give us an update there?

Question: Harlan Sur - JPMorgan - Analyst : And is this acceleration of Cadence buyer GPU and CPU partners? Is that's also what's kind of driving the strong growth in the networking products?

Question: Harlan Sur - JPMorgan - Analyst : Okay. Thank you, Hock.

Question: Ben Reitzes - Melius Research LLC - Analyst : Hey, thanks a lot and congrats on the quarter and guide. Hock, I wanted to talk a little bit more about VMware. Just wanted to clarify if it is indeed going better than expectations, how would you characterize know the customer willingness to move to subscription? And also, just a little more color on cloud foundation. You've cut the price there and are you seeing that beat expectations? Thanks a lot. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 12, 2024 / 9:00PM, AVGO.OQ - Q2 2024 Broadcom Inc Earnings Call

Question: Ben Reitzes - Melius Research LLC - Analyst : Great. And then it's on track for bill by the fourth quarter still, which is reiterated.

Question: Ben Reitzes - Melius Research LLC - Analyst : Okay. Thanks a lot, Hock.

Question: Toshiya Hari - Goldman Sachs - Analyst : Hi. Thank you so much for taking the question. I guess kind of a follow-up to the previous question on your software business. Hock, you seem to have pretty good visibility into hitting that $4 billion run rate over the medium term. Perhaps you also talked about your operating margins in that business converging to classic Broadcom levels. I know the integration is not done and you're still kind of in debt paydown mode. But how should we think about your growth strategy beyond VMware? Where do you think you have enough drivers both on the semiconductor side and the software side to continue to drive growth? Or is M&A still an option beyond VMware? Thank you.

Question: Toshiya Hari - Goldman Sachs - Analyst : Great, thank you.

Question: Blayne Curtis - Jefferies - Analyst : Hey, thanks for taking my question. And I wanted to ask you, Hock, on the networking business kind of ex AI. Obviously, I think there's an inventory correction, the whole industry is seeing. But just kind of curious, I don't think you mentioned that it was at a bottom. So just perspective, I think, it's down about 60% year over year. Is that business finding a bottom? I know you said overall whole semi business should -- non AI should see recovery. Are you expecting there and any perspective on just customer inventory levels in that segment?

Question: Blayne Curtis - Jefferies - Analyst : Okay, thank you.

Question: Timothy Arcuri - UBS - Analyst : Hi, thanks. Hock, is there a way to sort of map GPU demand back to your AI networking opportunity? I think I heard you say in the past that and $10 billion GPU compute, you need to spend another $10 billion on other infrastructure, most of which is networking. So I so I'm just kind of wondering if when you see these big GPU numbers, is there sort of a rule of thumb that you use to map it back to what the opportunity will be for you? Thanks.

Question: Timothy Arcuri - UBS - Analyst : Perfect. Thank you so much.

Question: Thomas O'Malley - Barclays Investment Bank - Analyst : Hey, guys. Thanks for taking my question and nice results. But my question regards to the customeristic AI. I've talked you've had a long run here of a very successful business, particularly with one customer. If you look in the market today, you have a new entrant who's playing with different customers. And I know that you said historically, that's not really a direct customer to you. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 12, 2024 / 9:00PM, AVGO.OQ - Q2 2024 Broadcom Inc Earnings Call But could you talk about what differentiates you from a new entrant in the market as of late? And then, there has been profitability questions around the sustainability of gross margins longer term. Can you talk about if you see any increased competition and if there's really areas that you would deem more or less defensible in your profile today, and if you would see that additional entrant, maybe attack any of those in the future?

Question: Thomas O'Malley - Barclays Investment Bank - Analyst : Thanks, Hock.

Question: Karl Ackerman - BNP Paribas - Analyst : Yes, thank you. Good afternoon. Hock, your networking switch portfolio with Tomahawk and Jericho chipsets allow hyperscalers to build clusters using either a switch scheduled or endpoint scheduled network. And that, of course, is unique among competitors. But as hyperscalers seek to deploy their own unique AI clusters, are you seeing a growing mix of white-box networking switch deployments? I asked because one of your custom silicon business continues to broaden, it would be helpful to better understand the growing mix of your $11 billion AI networking portfolio combined this year. Thank you. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 12, 2024 / 9:00PM, AVGO.OQ - Q2 2024 Broadcom Inc Earnings Call

Question: Karl Ackerman - BNP Paribas - Analyst : Thank you.

Question: CJ Muse - Cantor Fitzgerald, L.P. - Analyst : Yes, good afternoon. Thank you for taking the question. I was hoping to ask two parts software question. So excluding real were your Brocade CA semantic business is now running $500 million higher for the last two quarters. So curious, is that the new sustainable run rate or were there one-time events in both January and April that we should be considering? And then, the second question is, as you think about VMware cloud foundation adoption, are you seeing any sort of crowding out of spending like other software guys are saying is they repurpose their budgets to IT? Or is that business so less discretionary that it's just not an impact for you? Thanks so much.

Question: CJ Muse - Cantor Fitzgerald, L.P. - Analyst : Thank you.

Question: William Stein - Truist Securities - Analyst : Great. Thanks for squeezing me in. Hock, congrats on yet another great quarter and strong outlook in AI. I also want to ask about something you mentioned with VMware. In your prepared remarks, you highlighted that you've eliminated a tremendous amount of channel conflict. I'm hoping you can linger on this a little bit and clarify maybe what you did, and specifically, also, what you did in the heritage Broadcom software business, where I think historically you've shied away from the channel and there was an idea that perhaps you'd reintroduce those products to the channel through a more unified approach using VMware's channel partners or resources? So any sort of clarification here, I think be helpful. Thank you.

Question: William Stein - Truist Securities - Analyst : Great. Thank you.