--- title: "Broadcom (Minutes): AI revenue will maintain a 60% growth rate in 2026" description: "BROADCOM (AVGO.O) released its Q2 2025 fiscal year earnings (as of April 2025) after the U.S. market closed on June 6, Beijing time. Below is the earnings call minutes for Broadcom's Q2 2025 fiscal ye" type: "topic" locale: "en" url: "https://longbridge.com/en/topics/30421923.md" published_at: "2025-06-06T05:09:07.000Z" author: "[Dolphin Research](https://longbridge.com/en/news/dolphin.md)" --- # Broadcom (Minutes): AI revenue will maintain a 60% growth rate in 2026 Broadcom (AVGO.O) released its Q2 2025 fiscal year earnings (as of April 2025) after the U.S. market closed on June 6, Beijing time: **Below is the earnings call transcript for Broadcom's Q2 2025 fiscal year. For earnings analysis, please refer to** [**Broadcom: ASIC Growth "Stalls," Trillion-Dollar ASIC Story Faces "Pitfalls" or "Opportunities"?**](https://longportapp.cn/zh-CN/topics/30413673) **1\.** $Broadcom(AVGO.US) **Key Earnings Highlights** 1\. Segment Performance: (1) Semiconductor Revenue ($8.4B, 56% of total): Up 17% YoY (driven by AI semiconductor revenue). a) AI Semiconductor Revenue: $4.4B, up 46% YoY, marking the 9th consecutive quarter of growth. Breakdown: **I. Custom AI Accelerators: Double-digit YoY growth; II. AI Networking: Up >170% YoY, with Ethernet-based AI networking accounting for 40% of AI revenue.** b) Non-AI Semiconductor Revenue: $4.0B, down 5% YoY (bottomed out), with broadband, enterprise networking, and server/storage businesses growing sequentially. (2) Infrastructure Software ($6.6B, 44% of total): (Q2 2024 was the first full quarter post-VMware acquisition). a) Revenue up 25% YoY (exceeding guidance of $6.5B). 2\. Balance Sheet & Capital Allocation: (1) Cash & Debt: Ending cash of $9.5B, total debt of $69.4B. Repaid $1.6B post-quarter (current total debt: $67.8B). Debt Structure: $59.8B fixed-rate debt (avg. rate 3.8%, avg. maturity 7 years); $8.0B floating-rate debt (avg. rate 5.3%, avg. maturity 2.6 years). Inventory: $2.0B (up 6% QoQ; days inventory outstanding: 69 days). (2) Dividends & Buybacks: Paid $2.8B in dividends ($0.59/share); repurchased $4.2B in shares (25M shares). (3) Q3 Shares Outstanding: ~4.97B (non-GAAP diluted, excluding potential buybacks). 3\. FY2025 Q3 Guidance: (1) Revenue: $15.8B (up 21% YoY). Semiconductor Solutions: $9.1B (up 25% YoY; AI revenue: $5.1B, up 60% YoY). Non-AI Semiconductors: Maintained at $4.0B. Infrastructure Software: $6.7B (up 16% YoY). (2) Adjusted EBITDA%: At least 66%. (3) Gross Margin: Down 130 bps QoQ (due to higher XPU mix in AI). (4) Tax Rate: 14% (non-GAAP, unchanged for FY2025). **2\. Broadcom Earnings Call Details** **2.1 Key Management Commentary** 1\. Semiconductor Growth Drivers: AI Accelerators & Networking: (1) AI Networking (Ethernet-based) surged >170% YoY, supporting hyperscale AI clusters (Tomahawk switches, Jericho core routers, NIC drivers). (2) Tomahawk 5 Switch: Launched 2.4Tbps version; simplified cluster architecture from 3-tier to 2-tier for >100K AI accelerators, reducing latency/power. Custom XPU Strategy: (1) Progressing with 3 existing and 4 potential customers; at least 3 plan to deploy 1M AI accelerator clusters by 2027 (mainly for frontier model training). (2) Demand Shift: **Hyperscalers accelerating inference deployment; orders may pull forward to late 2026.** (3) AI semiconductor momentum expected to continue through FY2026. Non-AI Semiconductors: **Revenue stable at $4.0B/quarter. Q3 Outlook: Enterprise networking/broadband up QoQ; server/storage/wireless/industrial flat.** 2\. Infrastructure Software (VMware) Progress: (1) VCF Subscription Transition: **87% of top 10,000 customers shifted to VCF subscriptions (replacing perpetual licenses)**, driving double-digit annual growth in core software. (2) Use Cases: Customers building modern private clouds, repatriating workloads from public clouds while running containerized/AI apps. 3\. Operations & Strategic Focus: (1) R&D: Increased spending for cutting-edge AI semiconductor development. (2) VMware Integration: Strict cost controls drove software op margin up 1,600 bps YoY. (3) Supply Chain: Inventory up 6% QoQ to support future growth. **2.2 Q&A** **Q: Is next year's AI growth confidence driven by XPUs, connectivity, or both?** A: Primarily XPU deployment growth, with accompanying network demand—both contribute. **Q: Any specific inference progress?** A: Rapid inference demand growth observed. **Q: Can 60% AI growth sustain through year-end and FY2026? Is the 60% CAGR framework still valid?** A: **Yes, based on visibility, FY2026 should maintain similar trajectory**. Framework remains valid; no FY2027 update needed. **Q: Why did AI networking outperform? Implications for next year?** A: 1. AI networking syncs with accelerator cluster deployment. 2. Hyperscalers shifting from scale-out to scale-up architectures (5-10x higher switch density). This kept AI networking at 40% of AI revenue (vs. expected decline). **Q: When will Tomahawk switches accelerate growth?** A: Strong demand for 102Tb/s Tomahawk, but only in PoC stage—no mass shipments yet. **Q: Timing for Ethernet-based scale-up networks?** A: Scale-up rapidly adopting Ethernet, especially among hyperscalers. **Q: Will FY2026 AI grow 60% to $30B?** A: Current visibility supports 60% growth trajectory, but this is directional, not a target. **Q: Does inference expand SAM beyond $60-90B?** A: No SAM adjustment; reaffirming 2027 targets. **Q: Does networking strength imply XPU weakness?** A: XPU on track; networking heat doesn’t affect XPU trajectory. **Q: Milestones for new XPU customers?** A: No long-term updates; SAM framework (1T GPU clusters) remains. New customer timelines unclear until 2026. **Q: Best inference workloads for custom chips? Training vs. inference mix?** A: Custom chips excel in end-to-end optimization. No training/inference split disclosed, but customization is key for performance leaps. **Q: Is CPO critical for 5-10x scale-up? Tomahawk-driven?** A: Copper-to-optical shift (not CPO-specific) is key. Tomahawk enables flexible modules. Transition expected in 1-2 years. **Q: Other margin pressures beyond XPU?** A: 130bps QoQ GM drop due to XPU mix (structurally lower margins). No long-term GM guidance. **Q: Is AI surge due to XPU/ASIC outperforming GPUs?** A: Driven by hyperscalers monetizing LLMs (ROI focus), not tech shifts. Demand from existing cloud players. **Q: Will FY2026 60% growth include new customers (e.g., Meta)?** A: Visibility supports 60% trajectory; new customer contributions unquantified. **Q: Will NVLink scale-up shift to Ethernet?** A: No comment on competitors. **Q: Post-VMware capital allocation?** A: 1. 50% FCF to dividends. 2. Debt reduction (target ≤2x Debt/EBITDA). 3. Opportunistic buybacks. M&A: Only large-scale deals (e.g., VMware), no mid-sized distractions. **Q: Does FY2026 include new customer contributions?** A: No discussion of potential customers. **Q: Will AI networking stay at 40%?** A: XPU growth should lower networking to <30% by 2026. **Q: Is AI still immune to export controls?** A: No guarantees amid dynamic policy changes; impact unquantifiable. **Q: Subscription transition progress?** A: ~2/3 complete; full transition in 1-1.5 years (contract cycles). **Disclosures:** [**Dolphin Research Disclaimers**](https://support.longbridge.global/topics/misc/dolphin-disclaimer) ### Related Stocks - [AVGO.US - Broadcom](https://longbridge.com/en/quote/AVGO.US.md) --- > **Disclaimer**: This article is for reference only and does not constitute any investment advice.