Broadcom Q2 Earnings

The Six Five team discusses Broadcom Q2 Earnings.

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Transcript:

Pat Moorhead: Broadcom, what you come to expect from Broadcom, beat, beat, raise. The beat was small. The raise was a 5% raise. I mean that is just absolutely bonkers in this environment. That 8% revenue growth overall was driven by next generation from hyperscalers. What could this be? Well, what’s incredible about this, Daniel, is that most people in the hyperscaler market are down. We saw Intel, we saw AMD from a processor standpoint. So what could this mean? How about AI networking? So overall semis were up 9%, which is incredible. Software is up 3%, which is really in line with those single digit gross that the company wants to bring out.

But here was the thing, I mean you have to talk about AI now on your call. And net-net what they said is, “Hey, in 2022, 10% of our revenue was related to AI.” And they said that by 2024, 25% will be related to AI. I think the market got a little confused or Broadcom wasn’t clear enough on whether that was incremental business. So it kind of just yawned it off. Not yawned off, actually the company’s up 3% today. It was weird. Up four, down, going into pre it was negative, in negative territory. But it looks like people have figured this out. So VMware still expecting a close to fiscal, right? Closed already in Australia, Brazil, Canada, South Africa, Taiwan, and foreign control clearance in all jurisdictions. This baby is going through, VMware is going through.

Daniel Newman: That’s all I wanted to really talk about. I mean you and I, in case anybody missed it, we were in San Jose last week, Santa Clara. We had a chance to sit down with Hock Tan. And you know what, I’ll just leave it to your imagination that there’ll be a conversation next week where you’ll get the skinny and you’ll get the updates on what’s going on there. But Pat, it’s kind of like that rap song, All I Do is Win. That seems to be kind of his MO. I’m not even saying this cynically. Look, you can argue with his methods, you can argue with the way they buy things and how they then manage customers. We can talk and we can have that debate. But talk about well run.

So when you look at earnings, you talk about well run. Well run means you have a good pulse on the business, you manage to the street, you continuously beat, you raise, you return value to shareholder. And that is what he does every single quarter. But Pat, what a moment. I mean look, there’s going to be some types of concessions. I can’t say exactly what they are. The way Broadcom software and hardware maybe split or they’re going to run as two different businesses or division. Something’s going to happen. I don’t know exactly what it’ll look like, but what I can tell you is this is, you just said it probably the best and most eloquent way possible.

Pat Moorhead: Aw, bestie.

Daniel Newman: The deal’s going through. It’s going through. Write your complaints, tweet about it. And here’s the thing, Pat, I’m going to make a prediction that some people probably won’t agree with. The business will grow faster now. The business VMware will grow substantially faster and return more value to shareholders than it’s been able to return running the way it’s been running over the last several years. That will not take very long. He will go in, he will figure out how to optimize it. And I think the market will be surprised that just like CA has been a very, very strong run business and generated a lot more value than it was independently, we’re going to see the same from VMware.