Broadcom Inc Q3 2025 Earnings Call Transcript

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

Question: Harlan Sur - JPMorgan Chase & Co - Analyst : Hi. Good afternoon. Congratulations on the well executed quarter and strong free cash flow. I know everybody is going to ask a lot of questions on AI, Hock. I'm going to ask about the non-AI saving business. If I look at your guidance for Q4, it looks like the non-AI sing business is going to be down about 7%, 8% year over year in fiscal '25, if you hit the midpoint of the Q4 guidance. Good news, the negative year-over-year trends have been improving through year. In fact, I think you guys are going to be positive year-over-year in the fourth quarter. You characterized it as relatively close to the cyclical bottom, relatively slow to recover. However, we have seen some green shoots of positivity, right, broadband, server storage and enterprise networking, you're still driving the DOCSIS upgrade in broadband cable. You've got next-gen PON upgrades in China and the US in front of you, enterprise spending on network upgrades is accelerating. So near term, from the cyclical bottom, how should we think about the magnitude of the cyclical upturn? And given your 30- to 40-week lead times, are you seeing continued order improvements in the non-AI segment, which would point you to continued cyclical recovery into next fiscal year?

Question: Harlan Sur - JPMorgan Chase & Co - Analyst : Are you starting to see that in your order trend in your order book just because your lead times are like 40 weeks, right?

Question: Vivek Arya - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Thanks for taking my question. And best wishes for the next part of your tenure. My question is on -- if you could help us quantify what is the new fiscal '26 AI guidance. Because I think the last call, you mentioned fiscal '26 could grow at the 60% growth rate. So what is the updated number? Is it 60%-plus the $10 billion that you mentioned? And sort of related to that, do you expect the custom versus networking mix to stay broadly what it has been this past year or evolve more towards custom. So any quantification and this networking versus customer mix would be very helpful for fiscal '26.

Question: Vivek Arya - Bofa Merrill Lynch Asset Holdings Inc - Analyst : And the networking versus custom?

Question: Stacy Rasgon - Sanford C Bernstein & Co LLC - Analyst : I was wondering if you could parse out this $110 billion backlog. Did I hear that number right? Could you give some color on the makeup of it -- like how far does that go -- and like how much of that $110 billion is AI versus non-AI versus software?

Question: Stacy Rasgon - Sanford C Bernstein & Co LLC - Analyst : Okay. And it's fair to say that semiconductor piece, it's going to be much more AI than non AI.

Question: James Schneider, Ph.D. - Goldman Sachs Group Inc - Analyst : Hock, I was wondering if you could give us a little more color, not necessarily on the prospects, which you do have in the pipeline, but how you view the universe of additional prospects beyond the seven customers and prospects you've already identified. Do you still see there being additional prospects that would be worthy of a custom chip. And I know you've been relatively circumspect in terms of the number of customers that are out there and the volume that they can provide and selective in terms of the opportunities you're interested in. So maybe frame for us the additional prospects as you see them beyond the seven.

Question: James Schneider, Ph.D. - Goldman Sachs Group Inc - Analyst : Thank you.

Question: Thomas O'Malley - Barclays Services Corp - Analyst : I wanted to ask the on the Jericho4 commentary. NVIDIA talked about the XGS switch and us talking about scale across. You're talking about Jericho4 sounds like this market is really starting to develop. Maybe you could talk about why you see a material uplift in revenue there? And why it's important to start thinking about those type of -- as we move more towards inferencing.

Question: CJ Muse - Cantor Fitzgerald LP - Analyst : I was hoping to focus on gross margins. I understand the guide down 70 bps, particularly with software lower sequentially and greater contributions from wireless and XPUs. But to hit that [ 17 ] spot 7, I either have to model semiconductor margins flat, which I think would be lower or software gross margins to 95% up 200 bps. So can you kind of help me better understand kind of the moving parts there to lap only a 70 bp drop? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2025 / 9:00PM, AVGO.OQ - Q3 2025 Broadcom Inc Earnings Call

Question: Joseph Moore - Morgan Stanley & Co Ltd - Analyst : Great. Thank you. In terms of the fourth customer, I think you've talked in the past about -- customers four and five were more hyperscale, and six and seven work more like the LLM makers themselves. Can you give us a sense for -- if you could help us categorize that? I thought that's fine. And then the $10 billion of orders, can you give us a timeframe on that? Thank you.

Question: Joseph Moore - Morgan Stanley & Co Ltd - Analyst : Okay. Q3, it starts or Q3, what time frame does it take to deploy $10 billion?

Question: Joseph Moore - Morgan Stanley & Co Ltd - Analyst : All right. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2025 / 9:00PM, AVGO.OQ - Q3 2025 Broadcom Inc Earnings Call

Question: Joshua Buchalter - TD Cowen - Analyst : Hey, guys. Thank you for taking my questions. Congrats on the results. I was hoping you could provide some comments on momentum for your first scale up Ethernet and how it compares with UA Link and PCIe solutions out there. how big of a -- how meaningful is it to have at the Tomahawk Ultra product out there with a lower latency? And how meaningful do you think to scale up the Ethernet opportunity could be over the next year as we think about your AI networking business?

Question: Christopher Rolland - Susquehanna Financial Group LLLP - Analyst : Congrats on the contract extension, Hack. So yes, my questions are about competition, both on the networking side and the ASIC side. You kind of answered some of that, I think, in the last question. But do you view any competition on the ASIC side, particularly from US or Asian vendors? Or do you think this is decreasing? And on the networking side, do you think UALink or PCIe even has a chance of displacing SUE in 2027, when it's expected to ramp? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2025 / 9:00PM, AVGO.OQ - Q3 2025 Broadcom Inc Earnings Call

Question: Harsh Kumar - Piper Sandler - Analyst : Congratulations on all the exciting AI metrics, and thanks for everything you do for Broadcom and sticking around. My question is you've got three to four existing customers that are ramping as the data centers for AI clusters get bigger and bigger, it makes sense to have differentiation, efficiency, et cetera, therefore, the case for XPUs. Why should I not think that your XPU share at these three or four customers that are existing will be bigger than the GPU share in the longer term?

Question: Harsh Kumar - Piper Sandler - Analyst : Thank you, Hock.