00:00As we await the earnings of Gil, I am curious as to what to expect here. Is this really just
00:04a story of keep an eye on where all of this hyperscaler money is going and see whether
00:10it ends up trickling down to the income statement and balance sheet of Broadcom?
00:15That's exactly right. I mean, Broadcom is one of the big winners, right? That capital
00:20going from the hyperscalers of the great data center build out is going to NVIDIA,
00:25it's going to Broadcom, it's going to AMD, it's going to Micron. And those companies have reported
00:34very strong results. I'll throw Dell in there. And that's what's going to be challenging for
00:40Broadcom today is that the hurdle has been set high. It's not really a matter of them
00:45exceeding our consensus estimates. It's a matter of them giving us enough fuel to keep the party going
00:51because their peers have just reported fantastic results over the last few weeks.
00:57Give me a sense of kind of what the evolution has been right now when it comes to chips. Because,
01:01I mean, a few last year, I mean, really only a few months ago, it was basically, you know,
01:06it was Blackwell or bust, right? I mean, that was the narrative. And now we're starting to see the
01:10nuances in this that you need more than just those powerful GPUs to do this job. There's a whole
01:16ecosystem of chips out there. What exactly is it that Broadcom's making that people need?
01:21That's right. So first and foremost, Broadcom is the NVIDIA alternative. If you're Google or Amazon,
01:29and to some extent, Microsoft and Meta, and increasingly open AI anthropocally, if you want
01:36to make your own chip, especially for the purposes of inference, of serving the AI models, Broadcom is
01:44the top destination. You could also go to Marvell or MediaTek. But Broadcom has the biggest business
01:51in making those custom chips, those ASIC chips. So as you diversify from NVIDIA, you're diversifying
01:58to the chips that you design. And that's usually done in conjunction with Broadcom. So the more the
02:04data centers spend, the less you want to be dependent just on NVIDIA, the more you go to Broadcom.
02:09You also have the option of going to AMD, they make their own GPU, and they're going to have a
02:14big ramp
02:14this year. But that's all because the demand is so big, that it's beyond NVIDIA, it's beyond Broadcom,
02:22it's beyond AMD. And now we also have this huge ramp in demand for CPUs, huge ramp in demand for
02:28memory,
02:29and for other components like optical components. And all of these have become bottlenecks in growth.
02:36GPUs are actually relatively straightforward to order, but memory is in short supply. CPUs are
02:42in short supply. Some advanced assembly is in short supply, in addition to energy, which is the
02:49conversation you just had. So all these bottlenecks are increasing prices, and the winners are the
02:55companies that are selling this equipment. Hold that thought for one second. Gil Lauria over at
02:59DA Davidson. Broadcom earnings now crossing the wire here on the Bloomberg terminal.
03:05Adjusted EPS in the quarter, this is their fiscal second quarter, $2.44 a share, a modest beat over
03:11the average of street estimates of $2.39. Net revenue, a slight beat, $22.2 billion. For the
03:18third quarter, the company says look for revenue of about $29.4 billion. That's slightly above the
03:24average of street estimates for $28.6 billion. We're going to try to get you some deeper numbers
03:31here on this. But overall, a beaten race quarter, a modest one to be sure. The shares are down about
03:367% in the after hours trade. But let's not forget, this is a stock that had rallied about 57
03:40%
03:41just over the last two months heading into this print. Infrastructure software revenue at $7.18
03:48billion in the most recent quarter. Semiconductor solutions revenue, the number most people really
03:53want to care about, $15 billion, relatively even. EBITDA, $15.24 billion, and the R&DA expense going up.
04:01The company says that its revenue for semiconductors in the second quarter from AI, $10.8 billion,
04:09and that was up 143% year over year. Gil Lauria is still with us, managing director and head of
04:16technology research over at DA Davidson. And I also want to point out with that 143% jump,
04:21it also says that that was above their forecast, and it was driven by increasing demand for AI
04:27accelerators and AI networking. When you think about the job that Haqtan has ahead of him,
04:31and it's an enviable job given the demand environment, how does he manage it, Gil?
04:36And more importantly, how does he manage Wall Street expectations?
04:40Yeah, the second part's the hard part, because this is as we feared. That is a beat and raise,
04:44and the results are spectacular. Again, 143% growth in a pretty decent-sized business in AI.
04:51But the beat isn't as impressive as those other chip companies have reported over the last few
04:56weeks. So managing expectations is tough. But I would give Haqtan a lot of credit. Give him the
05:03hour of conference call, and he'll get us excited about what the company is doing. I'm not too worried
05:07about that. And again, this company has a big role in the growth of AI. It's just expectations
05:13were well beyond what consensus estimates were. And so a small beat just wasn't enough to keep the
05:19stock where it's at. And again, it's trading at a premium to NVIDIA. NVIDIA is trading in the low
05:2520s on next 12 months earnings. Broadcom is trading in the 30s on next 12 months earnings. So in order
05:31to justify the higher valuation, they needed to do more than this small beat. But I would expect
05:37them to have some good demand-oriented conversation in the conference call about what they expect for
05:44the balance of the year and next year to get investors excited beyond that small beat.
05:49I am curious just also about this idea of partnerships. And maybe you could talk a little
05:54bit about that. Because we've seen, particularly with some of the earnings we've seen out of other
05:57companies in this ecosystem, a lot of the investor enthusiasm isn't just always just about,
06:02OK, the revenue growth. And we should just point out, just to be clear, for a company this size
06:06to post, just let me make sure I get this right. Basically, we're talking, what, 60, 70 percent
06:11revenue growth. But they also want to make sure that the partnerships is there, the support is
06:16there, and the certain circular effect that I know some people criticize, but has also been a big
06:20beneficiary, a big benefit to this upswing, also remains there. Is it there for Broadcom?
06:27Yes. All these companies are in a form of what we refer to as coopetition. They're competing
06:33against each other, but they're cooperating with each other. So Broadcom works with Google
06:37as well as their competitor, Meta. They work with OpenAI as well as their competitor, Anthropic.
06:42Anthropic famously works with Google as well as Amazon. And OpenAI works with Microsoft.
06:47All these companies are investing a lot at once. And Broadcom, again, has a very important role.
06:53It's not the primary role. The primary role goes through ASML, TSMC, and NVIDIA. But Broadcom has a
07:00very important role. And it's because of those partnerships, especially their relationship with
07:06Google is critically important. They just renewed a deal with them through 2031 to continue helping
07:12Google with the TPUs. As we know, a big reason Google has been so successful in the last six to
07:18nine
07:19months is that they have their own infrastructure, their own chips. They can deliver inference very
07:24efficiently. And that's Broadcom. Broadcom is helping them do that. So Broadcom has an important
07:30role and it will continue to be important. The bigger question for Broadcom is the ramp with
07:35OpenAI and Anthropic. Again, those two IPOs are going to happen. They'll raise capital. And part of that
07:42capital is going to go on chips that Broadcom is going to help them make.
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