Broadcom CEO: Silicon photonics is a necessary path, but it will take time

Broadcom's CEO Hock Tan stated that silicon photonics technology will not have an impact on data centers "in the short term." During the company's Q4 2025 earnings call held on Thursday, a financial analyst asked Chen Fu Yang of Broadcom whether the company believes customers are ready to adopt this technology. This technology enhances network speed and performance by integrating optical communication more deeply into computing infrastructure. Artificial intelligence infrastructure operators require high-speed networks to transmit the massive amounts of data they process, which means they are very interested in technologies that can enhance speed. "I foresee that at some point in the future, this will be the only way," Chen Fu Yang responded, adding, "But we are not there yet." In fact, the CEO believes that two waves of innovation need to occur before silicon photonics technology becomes a necessity. The first wave is the expansion of copper-based interconnect technology for rack-level systems. The second wave is pluggable optical devices—a technology that combines electronic devices and photonic devices. "The last straw that breaks the camel's back is when you can't achieve your goals well with pluggable optical devices," Chen Fu Yang said. "At that point, you can only turn to silicon photonics." The CEO stated that the transition to silicon photonics technology is inevitable, but it will take time. "This will eventually happen, and we are prepared, but it won't happen quickly," he said, adding that Broadcom is already conducting the necessary R&D work to meet market demand. Currently, Broadcom is busy producing artificial intelligence hardware to fulfill its backlog of orders worth $73 billion. More than $50 billion of this is for custom AI accelerators ordered by hyperscale customers (which Broadcom refers to as "XPU"). Chen Fu Yang noted that these buyers value custom chips because they can encapsulate software functions into silicon chips, thereby simplifying their technology stack. "Investing in custom accelerators is a multi-year plan, not a transaction or short-term decision," he told investors, asserting that Broadcom's success in the XPU project represents loyal customers and expresses confidence that demand for AI hardware will continue. "The cooling off of customer demand for AI hardware is an exaggerated assumption; I don't believe that will happen," he said, pointing out that an unnamed new customer placed a $1 billion order for XPUs, and Anthropic placed an additional $11 billion order to support his claim. "The order volume over the past three months is unprecedented for us," Chen Fu Yang told investors, predicting that the company's backlog may continue to grow. The CEO dismissed concerns about supply chain constraints, stating that Broadcom can obtain the necessary capacity from TSMC while avoiding issues related to memory costs, and noted that the new factory in Singapore will provide packaging and assembly capabilities to meet demand. In Q4, semiconductor business revenue reached $11 billion, a year-on-year increase of 35%. Of this, $6.7 billion came from AI products, with Broadcom's AI hardware revenue growing tenfold in less than three years The company's infrastructure software business revenue reached $6.9 billion, a year-on-year increase of 19%. Chen Fuyang stated that this growth mainly comes from VMware software sales, and he expects VMware software to drive the company to maintain low double-digit growth before 2026. This is a slowdown compared to the 26% year-on-year growth in fiscal year 2025. However, the software profit margin increased by 6 percentage points to 78%, reflecting that the integration work of VMware into Broadcom has been completed. Chen Fuyang predicts that Broadcom's semiconductor business will continue to drive rapid growth for the company, providing a revenue forecast of $19.1 billion for the first quarter of fiscal year 2026, an increase of 28%. Broadcom's stock price rose about 3% immediately after the earnings announcement but then quickly fell back by 5%. Risk Warning and Disclaimer The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at your own risk