Broadcom Inc. Q2 FY2024 Earnings Call

· Earnings call transcript and AI-powered summary

Broadcom Q2 FY2024 Earnings Summary

Quarter Overview

  • Q2 FY24 consolidated revenue was $12.5B, up 43% year over year. Excluding VMware, revenue grew 12% year over year, driven by a 280% increase in AI-related revenue to $3.1B.
  • Gross margin was 76.2%; operating margin was 57% (59% excluding transition costs).
  • Free cash flow was $4.4B (or $5.3B excluding restructuring and integration), representing 36% and 42% of revenue respectively.
  • Announced a 10-for-1 forward stock split effective July 15, 2024.
  • Raised FY24 revenue guidance to $51B and adjusted EBITDA to 61% of revenue.

Software Segment Performance

  • Infrastructure software revenue was $5.3B, up 175% year over year, including $2.7B in VMware contribution (up from $2.1B in Q1).
  • VMware integration progressing well: product SKUs reduced to four core offerings; SG&A restructuring ongoing.
  • Annualized Booking Value (ABV) from VMware products rose to $1.9B from $1.2B in Q1. Total Broadcom software ABV rose to $2.8B from $1.9B.
  • VMware spending run rate reduced to $1.6B from $2.3B pre-acquisition; expected to move to $1.3B by Q4 and stabilize at $1.2B post-integration.
  • VMware revenue expected to reach a $4B quarterly run rate over time, with operating margins converging to Broadcom’s classic software margins by FY25.

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Operator: Welcome to Broadcom Inc. Second Quarter Fiscal Year 2024 Financial Results Conference Call. At this time, for opening remarks and introductions, I would like to turn the call over to Ji Yoo, Head of Investor Relations of Broadcom Inc. Ji Yoo : Thank you, Operator, and good afternoon, everyone. Joining me on today's call are Hock Tan, President and CEO; Kirsten Spears, Chief Financial Officer and Charlie Kawwas, President, Semiconductor Solutions Group. Broadcom distributed a press release and financial tables after the market closed, describing our financial performance for the second quarter of fiscal year 2024. If you did not receive a copy, you may obtain the information from the Investor section of Broadcom's website at Broadcom.com. This conference call is being webcast live and an audio replay of the call can be accessed for 1 year through the Investor section of Broadcom's website. During the prepared comments, Hock and Kirsten will be providing details of our second quarter fiscal year 2024 results, guidance for our fiscal year 2024, as well as commentary regarding the business environment. We'll take questions after the end of our prepared comments. Please refer to our press release today and our recent filings with the SEC for information on the specific risk factors that could cause our actual results to differ materially from the forward-looking statements made on this call. In addition to US GAAP reporting, Broadcom reports certain financial measures on

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