Company to Feature Industry’s Leading Open, Scalable and Power Efficient Solutions for Scale-up and Scale-out AI NetworksPALO ALTO, Calif., Oct. 08, 2025 (GLOBE NEWSWIRE) -- Broadcom Inc. (NASDAQ: AVGO) today announced it will showcase major advancements in its scale-up and scale-out AI networking solutions at the 2025 Open Compute Project (OCP) Global Summit. Featuring innovations such as the Tomahawk® 6, Tomahawk Ultra, Jericho4 Ethernet switches, and its third-generation TH6-Davisson Co-packaged Optics ( ...

Key Points Broadcom posted roughly $16 billion in Q3 fiscal 2025 revenue, up 22% year-over-year, with AI revenue hitting $5.2 billion. Shopify grew revenue 31% to $2.68 billion in Q2 2025 while achieving 16% free cash flow margins. Tesla delivered a record 497,099 vehicles in Q3 2025, up 7% year-over-year, ahead of EV tax credit expiration. 10 stocks we like better than Broadcom › Growth stocks thrive on momentum, and October often delivers it. The start of Q3 earnings season, combined with enter ...

Summary of Broadcom Inc. (AVGO) Conference Call Company Overview - **Company**: Broadcom Inc. (AVGO) - **Industry**: Semiconductor and Infrastructure Software Key Financial Highlights - **Quarterly Revenue**: $16.0 billion, exceeding expectations (Street: $15.9 billion) [2] - **Gross Margin**: 78.4%, in line with expectations [2] - **Operating Margin**: 65.5%, consistent with forecasts [2] - **Operating EPS**: $1.69, slightly below Goldman Sachs (GS) estimate of $1.73 but above Street estimate of $1.67 [2] - **AI Semiconductor Revenue**: $5.2 billion, matching GS estimate and exceeding Street estimate [2] - **Infrastructure Software Revenue**: $6.8 billion, above both GS and Street estimates [2] AI Semiconductor Growth - **Year-over-Year Growth**: AI Semiconductor revenue increased by 63% in Q3 [3] - **Q4 Guidance**: Expected AI Semiconductor revenue of $6.2 billion, up 66% YoY [3] - **New Customer Conversion**: Successfully converted a new custom silicon customer focused on inference, expected to contribute significantly starting in 2HFY26 with initial orders of $10 billion [3] - **Revised Growth Expectations**: Management now anticipates AI Semiconductor revenue growth of 108% in FY26, up from previous expectations of 50%-60% [3] Strategic Developments - **Backlog**: Total backlog exceeds $110 billion, indicating strong business visibility for the next two years [1] - **CEO Announcement**: CEO Hock Tan intends to remain in position through at least 2030 [1] - **AI Networking**: AI Networking represented 35% of AI revenue in Q3, but is expected to decrease as custom XPU revenue grows [10] Future Guidance - **Q4 Revenue Guidance**: Total revenue expected to be $17.4 billion, above GS and Street estimates [6] - **AI Semiconductor Revenue Guidance**: Projected at $6.2 billion, significantly above prior estimates [6] - **Non-AI Semiconductor Revenue**: Expected to grow in the low-double digits quarter-over-quarter [6] Price Target and Investment Rating - **Price Target Increase**: 12-month price target raised to $360 from $340 based on revised EPS estimates [8] - **Investment Rating**: Maintained as "Buy" due to leadership in AI custom compute and networking silicon [9] Risks and Considerations - **Key Risks**: Potential slowdown in AI infrastructure spending, share loss in custom compute, persistent inventory issues in non-AI segments, and increased competition in VMware [8] Summary of Estimates Changes - **EPS Estimates**: Raised by an average of 9% reflecting higher AI revenue expectations [7] - **Long-term Revenue Projections**: Significant increases in revenue estimates for AI Semiconductors for FY26 and FY27 [13] This summary encapsulates the key points from the conference call, highlighting Broadcom's strong performance, growth in AI semiconductor revenue, strategic developments, and future guidance.

Summary of Key Points from the Conference Call Company and Industry Overview - The conference call primarily discusses **Broadcom** and its developments in the **AI ASIC** market, highlighting the significant demand for AI-driven products and services [1][2][5]. Core Insights and Arguments - **Backlog and Orders**: Broadcom's backlog has reached **$110 billion**, primarily driven by AI demand, indicating a robust market outlook extending to **2027** [1][3][5]. - **New Client Acquisition**: Broadcom has secured a new AI custom chip client, **OpenAI**, with an order amounting to **$10 billion**, expected to be delivered in the **2026 fiscal year** [1][2][4][10]. - **Revenue Growth Projections**: The company anticipates its overall revenue to grow from **$15-20 billion** in **2024** to **$60-90 billion** by **2027**, with a compound annual growth rate exceeding **60%** [2][10]. - **AI Network Products**: Broadcom continues to innovate in AI network products, including the **Tomahawk 6**, **Tomahawk Ultra**, and **JERICHO 4**, which cater to various data center communication needs [1][11]. - **ASTERLABS Revenue Expectations**: ASTERLABS is projected to achieve at least **$1 billion** in revenue next year, driven by a major client, **Amazon** [1][20]. Additional Important Insights - **Market Dynamics**: The demand for AI infrastructure is expected to accelerate, with significant contributions from both large model enterprises and those providing computational services to businesses [6][8]. - **Ethernet Penetration**: The increasing penetration of Ethernet in AI data centers is anticipated to benefit Ethernet switch manufacturers and related products, including optical modules and PCIe switches [18][19]. - **Competitive Landscape**: Broadcom's competitive edge lies in its advanced technology and product offerings, including a strong focus on AI ASICs and network solutions, while Marvell faces challenges due to fluctuating AI custom chip revenues [11][12]. - **Future Outlook**: The AI ASIC market is still in its early stages, with expectations of significant growth as penetration rates increase. Broadcom's partnerships with major cloud service providers are expected to drive substantial revenue growth [15][25]. Conclusion - Broadcom is positioned strongly within the AI ASIC market, with a substantial backlog, new client acquisitions, and innovative product offerings. The overall industry outlook remains positive, driven by increasing demand for AI infrastructure and services.

Broadcom Company Conference Call Summary Industry and Company Overview - The conference call pertains to Broadcom, a leading semiconductor and software company, particularly focusing on its performance in the AI and software sectors. Key Points and Arguments Financial Performance - Broadcom reported a record total revenue of $16 billion for Q3 2025, representing a year-over-year growth of 22% [3] - Adjusted EBITDA reached $10.7 billion, up 30% year-over-year [2][3] - Semiconductor revenue was $9.2 billion, a 20.6% increase year-over-year, with AI semiconductor revenue at $5.2 billion, growing 63% [2][3] AI Semiconductor Growth - AI semiconductor revenue is projected to reach $6.2 billion in Q4 2025, reflecting a 66% year-over-year increase [2][5] - Broadcom's AI business is expected to grow at a rate of 50% to 60% in 2025, with significant growth anticipated in 2026 [4][10] - The company has introduced new products, including Come Out 5 and Tomahawk 6, to meet rising computational and networking demands [2][5] Software Business Performance - The infrastructure software segment generated $6.8 billion in revenue for Q3 2025, a 17% increase year-over-year [6] - Total contract value for software reached $8.4 billion, indicating strong demand [6] - The release of VMware Cloud Foundation 9.0 supports various applications, including AI workloads [6] Order Trends and Backlog - Broadcom's total backlog stands at $110 billion, with approximately 50% attributed to AI-related business [4][14] - Non-AI business also showed double-digit growth, although at a slower pace compared to AI [4][11] Cash Flow and Debt Situation - Free cash flow for Q3 was $7 billion, accounting for 44% of total revenue [9] - Long-term debt is reported at $66.3 billion, with a weighted average coupon rate of 3.9% [9] Future Outlook - Broadcom anticipates Q4 2025 consolidated revenue of approximately $17.4 billion, a 24% year-over-year increase [8] - The company expects semiconductor revenue to be $10.7 billion, with AI semiconductor revenue projected at $6.2 billion [8] Product Development and Market Strategy - Broadcom is focusing on developing large language models and has identified seven potential clients in this niche [17] - The Jericho 4 switch has been launched to address higher bandwidth needs, with sales to several hyperscale customers [19] Competitive Landscape - Broadcom is cautious in selecting partners for AI development, focusing on clients that require significant initial investments for model training [17] - The company emphasizes the importance of maintaining competitive advantages through continuous innovation and investment [24] Margin and Cost Management - Software gross margin decreased by 70 basis points, influenced by wireless and XTU business performance [21] - Broadcom aims to stabilize semiconductor margins while improving software margins [22] Additional Important Insights - The company is seeing a notable increase in order volume, with a year-over-year growth exceeding 20% [12] - Broadcom's strategy includes a focus on the enterprise market for AI, with a careful approach to customer qualification [17] - The transition of accounts from vSphere to vSphere Cloud Foundation is progressing well, with over 90% of accounts having purchased licenses [20]

Core Viewpoint - Broadcom's stock is experiencing significant growth due to strong quarterly earnings and new customer acquisitions for its custom AI chips, with expectations for accelerated revenue growth in the coming year [2][4]. Group 1: Growth Drivers - Broadcom's partnerships with major hyperscalers like Google and Meta for custom AI chips are crucial for its growth, with a recent announcement of securing a fourth major customer valued at $10 billion [4]. - The shift in the AI market from training to inference plays to Broadcom's strengths, as demand for high-performance, power-efficient inference chips is increasing [5]. - Continuous product innovation, including the release of Tomahawk 6 and Tomahawk Ultra networking chips, enhances Broadcom's competitive edge in AI infrastructure [6]. Group 2: Financial Performance - The acquisition of VMware has transformed Broadcom into a significant player in infrastructure software, with VMware's revenue increasing by 43% year-over-year to $6.8 billion in Q3 fiscal 2025 [7]. - Revenue is projected to grow from approximately $60 billion to over $105 billion by 2028, primarily driven by AI and VMware segments [8]. - Broadcom's adjusted net income margins are around 50%, indicating that revenue growth will have a magnified effect on earnings, potentially doubling adjusted EPS from $6.29 to $12 by 2028 [9]. Group 3: Valuation and Market Position - For Broadcom's stock to double, it must maintain a premium valuation, currently over 50 times trailing adjusted earnings, which could support a stock price of around $600 if EPS reaches $12 [10]. - The company’s ability to sustain a premium valuation is contingent on demonstrating continued AI revenue growth above 40% and capturing additional market share [10]. Group 4: Market Leadership - Broadcom holds a dominant position in high-growth markets such as AI networking and custom silicon, supported by high switching costs and deep customer commitments [18]. - The company operates with best-in-class profitability and cash flow margins, reinforcing its market leadership [18].

Core Viewpoint - Broadcom has secured a new customer for AI chips with an order exceeding $10 billion, significantly raising its growth expectations for AI business in 2026, which is anticipated to outpace growth in 2025. The CEO will remain in position until 2030, providing stability during this critical growth phase [1][3][7]. Group 1: AI Business Growth - The new $10 billion order is from OpenAI, contributing to a record backlog of $110 billion for the company. This, along with strong demand from three existing large-scale customers, has led Broadcom to announce a significant improvement in its AI revenue outlook for fiscal year 2026 [4][10]. - AI semiconductor revenue for Q3 reached $5.2 billion, a 63% year-over-year increase, and is expected to rise to $6.2 billion in Q4, reflecting a 66% growth [8][27]. - The company has confirmed the addition of a fourth custom AI accelerator (XPU) customer, with deliveries expected to begin in the second half of fiscal year 2026 [6][10]. Group 2: CEO Stability - CEO Hock Tan announced he will remain in his role until at least 2030, which is crucial for maintaining market confidence and executing the company's long-term strategy during a period of significant growth opportunities in AI [7][11]. Group 3: Traditional Semiconductor Business - The recovery of non-AI semiconductor business remains slow, characterized by a "U-shaped" recovery, with Q3 revenue at $4 billion, unchanged from the previous quarter. A meaningful recovery is not expected until mid to late 2026 [9][12][13]. - Despite a forecasted low double-digit sequential growth in non-AI semiconductor revenue for Q4, this is primarily driven by seasonal factors in wireless and server storage sectors [12][27]. Group 4: Networking Solutions - Broadcom is addressing the challenges of scaling AI clusters, having launched new Ethernet products like Tomahawk 6 and Jericho 4 to support large-scale AI deployments across data centers [14][26]. - The company emphasizes the importance of Ethernet standards in overcoming network challenges associated with AI, highlighting its established position in the Ethernet market [14][26]. Group 5: VMware Integration - The integration of VMware continues to show positive results, with Q3 infrastructure software revenue reaching $6.8 billion, a 17% year-over-year increase. The release of VMware Cloud Foundation 9.0 aims to provide a comprehensive private cloud platform for AI workloads [15][17][29]. - The focus remains on ensuring successful deployment of VMware solutions among the top 10,000 enterprise customers, which is expected to drive further growth in software and related services [17][73].

Core Insights - Broadcom is solidifying its position in the customized AI chip market with a new client order exceeding $10 billion, leading to a significant upward revision of its long-term growth forecasts, indicating further acceleration in its already robust AI business [1][4][11] - The new client is reported to be OpenAI, contributing to a record backlog of $110 billion, and strong demand from existing large-scale customers is expected to significantly improve AI revenue growth rates for fiscal year 2026 [2][4][11] - Broadcom's CEO Hock Tan announced his continued leadership until at least 2030, providing stability during a critical growth phase for the company [5][11] AI Business Growth - The core driver for the upward revision in performance outlook is the confirmation of a new client, which has placed a production order worth over $10 billion, marking Broadcom's fourth major XPU customer [4][11] - AI semiconductor revenue for Q3 reached $5.2 billion, a 63% year-over-year increase, and is expected to reach $6.2 billion in Q4, reflecting a 66% growth [11][22] - The new order is anticipated to begin deliveries in the second half of fiscal year 2026, with an increasing share from existing XPU customers as they shift towards customized solutions [4][11] Traditional Semiconductor Business - In contrast to the booming AI sector, Broadcom's non-AI semiconductor business is recovering slowly, with Q3 revenue at $4 billion, remaining flat compared to the previous quarter [6][11] - The recovery is described as "U-shaped," with meaningful improvements not expected until mid to late 2026 [7][11] Networking Solutions - Broadcom is addressing network bottlenecks as AI clusters scale beyond 100,000 nodes, leveraging its decades of experience in Ethernet technology [8][11] - New products like Tomahawk 6 and Jericho 4 are designed to reduce network layers and latency, supporting large-scale AI clusters [8][11] VMware Integration - The integration of VMware continues to show positive results, with the infrastructure software segment generating $6.8 billion in Q3, a 17% year-over-year increase [9][11] - The release of VMware Cloud Foundation 9.0 aims to provide a comprehensive private cloud platform for enterprises, facilitating the deployment of AI workloads [9][11] Financial Performance - Broadcom reported record Q3 revenue of $16 billion, a 22% year-over-year increase, driven by strong AI semiconductor and VMware software performance [16][22] - The company expects Q4 revenue to reach approximately $17.4 billion, reflecting a 24% year-over-year growth [21][22]

Financial Data and Key Metrics Changes - Total revenue for Q3 2025 reached a record $16 billion, up 22% year-on-year, driven by strong demand in AI semiconductors and VMware growth [5][12] - Consolidated adjusted EBITDA was a record $10.7 billion, reflecting a 30% year-on-year increase [5][12] - Gross margin was 78.4% of revenue, better than guidance due to higher software revenues and product mix [12] - Operating income was a record $10.5 billion, up 32% year-on-year [12] Business Line Data and Key Metrics Changes - Semiconductor revenue was $9.2 billion, with year-on-year growth accelerating to 26%, driven by AI semiconductor revenue of $5.2 billion, which increased by 63% year-on-year [5][14] - Infrastructure software revenue was $6.8 billion, up 17% year-on-year, exceeding the outlook of $6.7 billion [10][14] Market Data and Key Metrics Changes - AI semiconductor revenue is forecasted to be approximately $6.2 billion in Q4 2025, up 66% year-on-year [10][16] - Non-AI semiconductor revenue for Q3 was $4 billion, flat sequentially, with expectations for low double-digit growth in Q4 [10][16] Company Strategy and Development Direction - The company is focusing on expanding its AI revenue, with a consolidated backlog reaching a record $110 billion, largely driven by AI growth [5][10] - The launch of new products like Tomahawk 6 and Jericho 4 is aimed at addressing the challenges of scaling AI workloads across data centers [9][60] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the AI market, indicating strong demand and a significant improvement in the outlook for fiscal 2026 AI revenue [7][10] - The non-AI semiconductor segment is expected to recover slowly, with a U-shaped recovery anticipated by mid to late 2026 [27][28] Other Important Information - The company plans to continue its capital allocation strategy, having paid $2.8 billion in cash dividends in Q3 [15][16] - Management confirmed that the CEO will continue in the role through at least 2030, indicating confidence in the company's future [18] Q&A Session Summary Question: AI business and XPU growth - Management indicated that growth expectations for AI revenue have improved due to the addition of a fourth customer and increased volumes from existing customers [22] Question: Non-AI semiconductor business recovery - Management noted that while the non-AI segment is slow to recover, there are signs of improvement, particularly in broadband [27][28] Question: Fiscal 2026 AI guidance - Management stated that growth rates for fiscal 2026 are expected to accelerate beyond the previously indicated 50-60% [32] Question: Backlog details - Management confirmed that approximately 50% of the $110 billion backlog is related to semiconductors, with a significant portion driven by AI [39][40] Question: Competition in the ASIC and networking space - Management emphasized the strength of Ethernet as a proven technology and the company's commitment to out-investing and out-innovating competitors in the XPU space [88][90]

Financial Data and Key Metrics Changes - Total revenue for Q3 2025 reached a record $16 billion, up 22% year-on-year, driven by strong demand in AI semiconductors and VMware growth [4][10] - Consolidated adjusted EBITDA was a record $10.7 billion, reflecting a 30% year-on-year increase [4] - Gross margin was 78.4% of revenue, exceeding initial guidance due to higher software revenues and favorable product mix [10] - Operating income was a record $10.5 billion, up 32% year-on-year, with operating margin increasing to 65.5% [10][12] Business Line Data and Key Metrics Changes - Semiconductor revenue was $9.2 billion, growing 26% year-on-year, with AI semiconductor revenue at $5.2 billion, up 63% year-on-year [4][11] - Infrastructure software revenue was $6.8 billion, up 17% year-on-year, driven by strong bookings [8][11] - Non-AI semiconductor revenue was flat sequentially at $4 billion, with expectations for low double-digit growth in Q4 [8][12] Market Data and Key Metrics Changes - AI semiconductor revenue is forecasted to reach approximately $6.2 billion in Q4 2025, up 66% year-on-year [8][14] - Non-AI semiconductor revenue is expected to grow low double digits sequentially in Q4, driven by seasonality [8][14] - The current consolidated backlog for the company hit a record of $110 billion, with a significant portion attributed to AI [4][35] Company Strategy and Development Direction - The company is focusing on expanding its AI semiconductor business, with a strong emphasis on custom AI accelerators and networking solutions [5][6] - The launch of new products like Tomahawk 6 and Jericho 4 is aimed at addressing the growing demands of AI networking and compute clusters [6][7] - The company plans to continue investing in R&D to maintain its competitive edge in the semiconductor and software markets [11][86] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the AI market, indicating that demand is expected to remain strong and that the outlook for fiscal 2026 AI revenue has improved significantly [5][8] - The non-AI semiconductor segment is characterized as slow to recover, with expectations for a U-shaped recovery by mid to late 2026 [21][25] - Management highlighted the importance of networking solutions in scaling AI infrastructure, noting that challenges in deploying larger clusters will drive demand for their products [7][55] Other Important Information - Free cash flow for Q3 was $7 billion, representing 44% of revenue, with a focus on disciplined inventory management [12] - The company plans to continue paying dividends, with $2.8 billion distributed in Q3 [13] - Management confirmed that the CEO will continue in the role through at least 2030, indicating stability in leadership during a critical growth phase [15] Q&A Session Summary Question: AI business and XPU growth - Management indicated that growth expectations for AI revenue have improved due to the addition of a fourth customer and strong demand from existing customers [17][18] Question: Non-AI semiconductor business recovery - Management noted that while the non-AI segment is slowly recovering, broadband is showing strong growth, and they expect low single-digit growth year-on-year in Q4 [21][24] Question: Fiscal 2026 AI guidance - Management stated that growth rates for fiscal 2026 are expected to accelerate beyond the previously indicated 50-60% range, driven by increased demand from existing and new customers [27][29] Question: Backlog composition - Management confirmed that the $110 billion backlog is largely driven by AI growth, with at least 50% attributed to semiconductors [35][36] Question: Competition in ASIC and networking - Management emphasized the strength of Ethernet as a proven technology and expressed confidence in their ability to compete effectively in both ASIC and networking markets [82][86]