Broadcom(US:AVGO)2025-12-15 01:55Summary of Broadcom Inc. (AVGO) Conference Call Company Overview - Company: Broadcom Inc. (AVGO) - Industry: Semiconductor and Infrastructure Software Key Financial Results - Total Revenue: $18.0 billion, exceeding Goldman Sachs (GS) estimate of $17.5 billion and Street estimate of $17.5 billion [2] - Gross Margin: 77.9%, slightly above GS at 77.8% and Street at 77.7% [2] - Operating Margin: 66.2%, in line with GS and Street estimates [2] - Operating EPS: $1.95, in line with GS at $1.96 and above Street at $1.88 [2] - AI Semiconductor Revenue: Grew 74% YoY to $6.5 billion, above GS and Street estimates of $6.2 billion [2] - Semiconductor Solutions Revenue: $11.1 billion, above GS at $10.8 billion and Street at $10.7 billion [2] - Infrastructure Software Revenue: $6.9 billion, slightly above GS at $6.8 billion and Street at $6.7 billion [2] Guidance and Future Outlook - 1Q26 Revenue Guidance: $19.1 billion, above GS at $18.9 billion and Street at $18.3 billion [6] - AI Semiconductor Revenue Guidance for 1Q26: $8.2 billion, significantly above GS at $6.8 billion and Street at $6.9 billion [6] - AI Revenue Growth: Expected to accelerate, with a prior growth rate of 65% in FY25 and guidance for ~100% growth in Q1 [1][6] - AI Backlog: Currently stands at $73 billion over the next 18 months [6] - Gross Margin Expectation: Anticipated decline of 100 basis points QoQ due to a greater mix of XPUs [6] Customer and Market Dynamics - Key Customers: Strong traction with Google on TPU program; other customers include Anthropic, Apple, and Cohere [5] - New Customer Acquisition: Announced a fifth XPU customer for early revenue in FY26; Anthropic placed an additional $11 billion order for FY26 [1][5] Investment Considerations - Stock Rating: Reiterated Buy rating, with increased conviction in Broadcom's position in custom silicon for AI applications [1][9] - Price Target: Increased to $450 from $435, based on a P/E multiple of 38x normalized EPS estimate of $12.00 [8] - Risks: Potential slowdown in AI infrastructure spending, share loss in custom compute franchise, persistent inventory digestion in non-AI, and increased competition in VMware [8] Additional Insights - Margin Trends: Management expects some level of gross and operating margin dilution as full-rack solutions ramp up beginning in 2H26 [6] - EPS Estimates: Mostly unchanged, reflecting higher AI revenue but offset by lower gross margin and higher tax rate [7] - Long-term Outlook: Broadcom's dominant position in custom silicon is expected to drive sustained outperformance in its AI business relative to peers, particularly with hyperscalers like Google [1][9]