Broadcom Inc. — Call Transcript 2026

Welcome to Broadcom Inc.'s second quarter fiscal year 2026 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. Thank you, operator. Good afternoon, everyone. Joining me on today's call are Hock Tan, President and CEO, Charlie Kawwas, President, Semiconductor Solutions Group, and Ram Velaga, President, Infrastructure Software Group. Also joining is Kirsten Spears, Chief Financial Officer. As we announced, Kirsten will be retiring June 12th, and today we have joining us our incoming Chief Financial Officer, Amie Thuener. Thank you, Kirsten, for your leadership over the past 12 years. Broadcom distributed a press release and financial tables after the market closed, describing our financial performance for the second quarter fiscal year 2026. 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 one 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 2026 results, guidance for our third quarter fiscal year 2026, 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 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 a non-GAAP basis. A reconciliation between GAAP and non-GAAP measures, to the extent possible, is included in the tables attached to today's press release. Comments made during today's call will primarily refer to our non-GAAP financial results. I will now turn the call over to Hock. Thank you, Ji. Thank you, everyone, for joining today. In our fiscal Q2 2026, total revenue reached a record $22.2 billion, up 48% year-on-year, above our guidance on strength in AI semiconductors. Q2 operating margin was a record 67%, and adjusted EBITDA was a record 69% of revenue, which was above our guidance. Even as our revenue scales up massively, driven by AI, our operating and EBITDA margins remain strong and stable. Turning to semiconductors, Q2 revenue was a record $15 billion, as I said before, as we grew 79% year-on-year. Driving this growth was AI semiconductor revenue at a record $10.8 billion, up 143% year-on-year and above our outlook. Networking represented almost 40% of our Q2 AI revenue. Demand for XPUs and networking is simply insatiable. During the quarter, bookings for AI semiconductors were over $30 billion against the $10.8 billion we shipped. In the second half of 2026, we expect AI semiconductor revenue to double from the first half we shipped this year. Consistent with this trend, in Q3, we expect AI semiconductor revenue to accelerate to $16 billion, up over 200% year-on-year. For the full year 2026, we expect to achieve AI semiconductor revenue of $56 billion, up approximately 180% from fiscal 2025. We expect this momentum to continue into fiscal year 2027 and reiterate our AI semiconductor revenue guidance to be in excess of $100 billion. We expect AI semiconductor revenue growth to continue in fiscal 2028, based on the following initiatives with our six core customers. As you are aware, with Google, we announced in April that we entered into a long-term agreement to develop and supply multiple generations of TPUs and AI networking. Our relationship continues to be strategic and very substantial as we continue to deliver vastly superior technology and execution compared to other alternatives. This ability to provide differentiated value to Google ensures that our business will sustain and grow for the foreseeable future. For Anthropic, as you know, for 2026, we are providing access to Broadcom TPU-based compute of over one gigawatts. In April, we entered into an agreement to enable Anthropic to access another five gigawatts of next-generation TPU-based compute beginning in 2027. For OpenAI, we have delivered silicon, and we are on track for production late 2026. We have a contractual commitment to deploy 1.3 GW in 2027 as part of the larger 10 GW that by 2029 agreement we announced last year. For Meta, in April, we announced a partnership to deliver multiple generations of MTIA XPUs. Under this agreement, we expect to deploy 3 GW through the end of 2028. The initial order for 1 GW, which includes XPUs and our networking, has been received and will start delivery in the second half of 2027. For our other two customers, we expect shipments to begin late 2026 and accelerate into 2027. To date, we have received purchase orders totaling $6 billion. While we have significant IP and execution leadership in XPUs, networking is key to building scalable XPU and GPU clusters. Here in networking, we have at least one generation of technology and product leadership. For scale up within racks, we enable direct attached copper based on our industry-leading 200G and 400G SerDes, driving co-packaged copper with Ethernet and PCI Express switches. For scale out between racks, we have been shipping the industry's only 100 terabit Ethernet switch, the Tomahawk 6, for over a year. We will now be taping out our next generation 200 terabit switch this quarter. In CPOs, which is co-packaged optics, 1.6 Tb DSPs, CW and EML lasers, we are the de facto standard in the industry. To extend AI clusters across data centers, we remain the industry leader with our Jericho 3 and Jericho 4 fabric solutions, enabling the world's largest deployments at multiple hyperscalers. Our strategic vision is to bring together Broadcom's leading technology and investor partners with the strongest balance sheets to deliver at scale sufficient compute capacity at the lowest cost and power for the leading AI frontier labs, including Anthropic and OpenAI. To deliver this vision, we are creating the AI XPU platform with Apollo and Blackstone and other leading investors to deploy more than 20 GW of compute capacity through 2028. The first tranche of this platform, valued at $35 billion, is in fact currently being launched by Apollo. Turning to non-AI semiconductors. Q2 revenue of $4.2 billion was up 6% year-on-year. Bookings during the same period exceeded $6 billion, which is a clear indication we're on a path towards a full cyclical recovery. Broadband, server storage and enterprise networking together were up, partially offset by a seasonal decline in wireless. Consistent with this trend in Q3, we forecast non-AI semiconductor revenue to be approximately $4.5 billion, up 12% from a year ago. In summary, we expect Q3 semiconductor revenue to be $20.5 billion, up 124% year-over-year. Let me turn to Infrastructure software segment. Q2 software revenue of $7.2 billion was up 9% year-over-year, in line with our guidance. Bookings continue to be strong as we sustain ARR growth of 17% year-over-year. For Q3, we forecast software revenue to be approximately $8.9 billion, up 31% year-over-year. We just released VMware Cloud Foundation 9.1, focused on improving infrastructure efficiency, security, and support for enterprise AI inferencing workloads. With strong server demand globally, the deployment of VCF 9.1 for on-prem cloud computing is extremely strong, driving robust revenue growth. This release adds heterogeneous compute support across GPUs and CPU architectures, including AMD, Intel, and NVIDIA platforms, enabling enterprise cloud customers to run AI, Kubernetes, and traditional virtualized workloads on a common private cloud environment. To sum it up, for Q3 2026, we expect our consolidated revenue to grow to $29.4 billion, up 84% year-on-year. We expect operating margin to be stable at approximately 67% of revenue, and adjusted EBITDA to be at approximately 68% of revenue. With that, let me turn the call over to Kirsten. Thank you, Hock. Let me now provide additional detail on our Q2 financial performance. Consolidated revenue was a record $22.2 billion for the quarter, up 48% from a year ago. Gross margin was 77.1% of revenue in the quarter, down 230 basis points year-on-year, as semiconductor became a larger proportion of our product mix. Consolidated operating expenses were $2.2 billion, of which $1.6 billion was R&D. Q2 operating income was a record $14.9 billion, up 52% from a year ago. Note that even with the decline in gross margin, operating margin increased 200 basis points year-over-year to 67.3% as operating expenses remained relatively flat. Adjusted EBITDA of $15.2 billion or 69% of revenue was above our guidance of 68%. A review of the P&L for our two segments. Starting with semiconductors. Revenue for our Semiconductor Solutions segment was a record $15 billion with growth accelerating to 79% year-on-year driven by AI. Semiconductor revenue represented 68% of total revenue in the quarter, and AI semiconductor revenue represented 49% of total revenue. Gross margin for our Semiconductor Solutions segment was approximately 70%. Operating expenses of $1.2 billion reflected increased investment in R&D for leading-edge AI semiconductors and represented 8% of revenue. Semiconductor operating margin of 62% was up 460 basis points year-on-year, reflecting our strong operating leverage. Now moving on to Infrastructure Software. Revenue for Infrastructure Software of $7.2 billion was up 9% year-on-year and represented 32% of revenue. Gross margin for Infrastructure Software was 93% in the quarter, and operating expenses were $1 billion in the quarter. Q2 software operating margin was up 310 basis points year-on-year to approximately 79%. Moving on to cash flow. Free cash flow in the quarter was a record $10.3 billion and represented 46% of revenue. We spent $231 million on capital expenditures. We ended the second quarter with $19.6 billion of cash compared to $14.2 billion in the prior quarter. We ended the second quarter with inventory of $4.33 billion as we continued to secure supply to support strong AI demand. Our days of inventory on hand were 86 days in Q2 compared to 68 days in Q1 in anticipation of accelerating AI semiconductor growth in the second half of the year. Turning to capital allocation. In Q2, we paid stockholders $3.1 billion of cash dividends based on a quarterly common stock cash dividend of $0.65 per share. Now moving to guidance. Our guidance for Q3 is for consolidated revenue of $29.4 billion, up 84% year-over-year. We forecast semiconductor revenue of approximately $20.5 billion, up 124% year-on-year. Within this, we expect Q3 AI semiconductor revenue of $16 billion, up over 200% year-on-year. We expect Q3 infrastructure software revenue of approximately $8.9 billion, up 31% year-on-year. Moving on to margins. As the proportion of AI revenue significantly grows in Q3, we expect Q3 consolidated gross margin to be down to approximately 74%. This decline in gross margin does not represent a structural change in semiconductor margin. Rather, it reflects product mix between semiconductors and infrastructure software. Regardless of the impact to gross margin, we expect Q3 operating margin to be 67%, which is flat quarter-over-quarter, demonstrating our strong operating leverage. We highly recommend that investors model semiconductor and infrastructure software margins separately to properly reflect the impact of changes in total revenue mix going forward. We expect the non-GAAP tax rate for Q3 in fiscal year 2026 to be approximately 16% due to the impact of the global minimum tax and the geographic mix of income compared to that of fiscal year 2025. In Q3, we expect the non-GAAP diluted share count to be approximately 4.94 billion shares, excluding the impact of potential share repurchases. That concludes my prepared remarks. Operator, please open up the call for questions. Thank you. To ask a question, you will need to press star one one on your telephone. To withdraw your question, press star one one again. Due to time restraints, we ask that you please limit yourself to one question. Please stand by while we compile the Q&A roster. Our first question will come from the line of Harlan Sur with JPMorgan. Your line is open. Good afternoon. Thank you for taking my question. Thanks for all your support, Kirsten and Amie. Welcome to the team. First, just a quick housekeeping item, Hock. On this fiscal year, AI sort of 2x growth, second half over first half. That would put AI revenues over $60 billion with sequential growth in fiscal Q4. You gave us this $56 billion number, which is only 1.5x, half over half growth with Q4 AI actually being down sequentially. If you could just help us square the numbers there. For my real question, back in December of last year, you talked about an AI backlog next 18 months, $73 billion. Market sort of took that number, spread that linearly over six quarters. We know that the backlog is always more front-loaded over the first four quarters, right? Sure enough, you're going to deliver around 80% or more of that backlog in this fiscal year or first four quarters. Just given the strength of all your programs, the broadening of the customer base, accelerating year-over-year trends in your AI shipments, all the multi-gigawatt partnerships that you just articulated today, most of it which is set to start to fire next year. Is it fair to assume that your 18-month AI backlog second half of this year through all of fiscal 2027 sits at $200 billion or better? That's a very complicated set of number questions. To begin with, let's start with 2026. Doing a math, basically 2x to 2x. The first half, we ship in total AI revenue, something in the range of $19 billion, if you want to be precise. If you do what I indicate and 2x that in the second half, you get to pretty much in the range of what we're talking about, which is around $56 billion, Harlan. Okay. That set of numbers does tie up very well. Your bigger question on the second half, which you're going to need a very detailed analysis of is, yeah, we will keep the momentum going as we expect to see in 2027. What we will see in 2027 is continued growth of the level we're talking about. If you drive on that basis of what we're seeing here, almost 2x, in the range of 2x, what 2026 will be, I think you will easily see that 2027 will exceed very easily $100 billion in 2027, which is pretty much what we indicated last quarter. We are continuing to say that it will be over $100 billion in 2027. Okay. In that sense, if anything else, it might be based on what we're doing very much on track, if not stronger. We're not trying to guide you every quarter what 2027 would be like. We basically say it continues to be in excess of $100 billion in 2027. It is on a same trajectory as we are seeing in the back half of 2026. Got it. Okay. Thank you, Hock. One moment for our next question. That will come from the line of Blayne Curtis with Jefferies. Your line is open. Hey, good afternoon. Thanks for taking my question. Hock, I wanted to ask you, interquarter, you had that 8-K with the long-term agreement with Google. Obviously, you're probably not going to tell me what the total value is there. I think there's a lot of concern about share within that customer. I was just curious, now that you have this agreement, maybe you could speak to a little bit more in terms of your confidence. If there's upside to that customer, is it a fixed amount or is there share? Is there any way you can add some color to that agreement that came out? Well, it's a very strong agreement. It basically reflects the strength of the partnership we have, simply because of the products we do, the multi-general products, and the intellectual property we've deployed into this whole program. To answer your question specifically, it's a commitment that is very substantial in dollars. Very substantial amount of dollars. Now, we also accept the fact that while we like to win every design in that program, we also accept the fact that given the growth of consumption and development and consumption of AI compute, even by our partner, Google, that we fully expect that there'll be some diversity of sources for them. Our commitment from them is a very substantial dollar amount. Thank you. One moment for our next question. That will come from the line of Ross Seymore with Deutsche Bank. Your line is open. Hi. Thanks for letting me ask the question, and congrats to both Kirsten and Amie. A question on the gross margin side of things. I know, Kirsten, you talked about it going down due to the mix dynamics within the semis versus the software side, but given the strength on the software side in the quarter, it seems like the gross margin's falling a little bit harder. Behind the scenes, can you just talk a little bit about what the drivers within semis are? Is that the XPU versus the networking side of things? Is that trend likely to continue next year? Are there rack scale versus chip scale? All those sorts of dynamics, any color you could give on that would be helpful. Yes, certainly. As our semiconductor business grows, just to reiterate, on a consolidated basis relative to our software business, you're going to have a decline in margins, right? A bit. You'll have compression. Remember that it's accretive because we have strong operating leverage, right? Our operating margins will stand up a bit over time to that. Within semiconductors, we've always said our ASICs, TPU, some of the wireless business has lower margins. As the TPU continue to accelerate, there'll be pressure overall on margins. The connectivity side, the AI networking side of the business, has very rich margins. It'll offset it somewhat as we go. I mean, Ross, as Kirsten said in her remarks, structurally, the semiconductor margins remains very stable and very solid. It's the mix, particularly the mix between software and non-AI to the very highly, rapidly growing AI semiconductor that is just diluting gross margin. The rack versus chip side of things, is that all clarified now? No rack. It's all chips. We're in the chip business only. We only chips. Only chips. Perfect. Thank you. One moment for our next question. That will come from the line of Ben Reitzes with Melius. Your line is open. Yeah. Hey, guys. Thanks. Appreciate it. I wanted to ask about 2027, Hock. With regard to, previously you've talked about the TAM being 10 to 20 and whatnot. It seems that one of your competitors talked recently about the TAM per gigawatt going up a lot as we go throughout the decade. It seems it wasn't just due to infrastructure, it was due to the compute and networking components and other things. Perhaps you're familiar with that comment that Jensen made where the overall infrastructure's going from something around 50 something towards 100, and the compute content going way up. Are you seeing the same thing as you go throughout the long term? Is that potentially being an accelerator to what you've already outlined, in terms of your TAM per gigawatt, and how are you thinking about that? Thanks a lot. Sure. Well, I think the accelerating part, if you talk about power, realize one thing, is the dollars per gigawatt, the content dollars or racks per gigawatt, is not accelerating that much because you are creating chips that each individual chips are driving higher and higher power. You're driving less chips, though the ASP of each chip is going up in price. Dollars per gigawatt, dollar billions per gigawatt is relatively stable. The number of gigawatts will accelerate as I think some of our remarks indicate. That's what we are seeing, that the amount of gigawatts required, compute capacity as measured by number of gigawatts, is growing very fast. We're seeing that. We are seeing that particularly to the point where for even two of our customers, we're talking about, which is Anthropic and OpenAI, for which we're creating this platform to enable them to run sufficient compute power. We're talking about capacity as measured by gigawatt power that are way ahead of what we have expected, say, six months ago. That's just these guys. We've not talked about the consumption beyond the XPU platform we have announced here from our other customers, which is Google-owned internal workloads, Meta's workloads, and the other two customers we have. Fold that in, and you're talking about gigawatts in totality. If you ask about 2027 or 2028, that will continue to grow. We expect, in fact, 2028 to be a substantial growth from what we are forecasting in 2027. Thank you, Hock. One moment for our next question. That will come from the line of Timothy Arcuri with UBS. Your line is open. Thanks a lot, Hock. I wanted to ask you about supply and your ability to get incremental volume of wafers and HBM. As I look at some of your competitors, they're able to drop $20 billion out of thin air and get incremental wafer supply. I'm wondering, do you feel pretty good about if a customer comes to you, are you able to get upside in terms of wafers and HBM, and are you beginning to consider maybe using other foundries to add more optionality to your supply? Thanks a lot. Getting supply is not just about dropping money, Tim, though that does work. We are very comfortable that we have been able to secure supply of the types you mentioned about for our needs 2026, 2027. Working on 2028 and 2029 right now. Right. If a customer comes to you and wants incremental supply, are you able to go to your suppliers and get it the way that it seems like some of your competitors are? Customers have been coming to us incrementally over the last few months. Expect that to continue. By and large, yes. Okay, Hock. Thank you. One moment for our next question. That will come from the line of Stacy Rasgon with Bernstein Research. Your line is open. Hi, guys. Thanks for taking my question. Hock, you gave some gigawatt shipment targets for next year for your various customers. I just want to know, are those any different? Do they contemplate any change from what you said last quarter, where I think you'd said that was close to 10 GW you'd be shipping in 2027? Can you just help us shape the year? It sounded to me like you expected that to be more back-half loaded in 2027, given the shape of the ramps. Most importantly, is there any change that is it more gigawatts or less gigawatts, or the same gigawatts versus what you were suggesting last quarter? Well, good question. Yeah. For 2027, we indicated about 10 GW shipment in 2027. That's still very much intact. We're planning to ship 10 GW in 2027, and nothing has changed. Back-half loaded to that extent, yes, and which really provides an interesting trajectory into 2028 with this back-half trajectory. 2028, we expect a lot more gigawatts. Got it. That's helpful. Thank you. One moment for our next question. That will come from the line of Jim Schneider with Goldman Sachs. Your line is open. Good afternoon. Thanks for taking my question. I was wondering if you could comment a little bit on the profile of your networking business, Hock, as we head through fiscal 2026 and 2027, about 40% of AI revenue this quarter. Will you expect that to sort of fall back down as some of these custom ramps ramp into the end of the year into early next year, or would you sort of expect to stay at the upper end of that range? Maybe talk about when you see some of the optical and CPO revenue becoming meaningful. Thank you. That's a hell of a great question, Jim. It's just very difficult to answer because of how do we predict that. There are quite a few moving parts there. One of which is to start with is as a volume, as more and more of our customers turn to XPUs. Obviously, XPUs uses very much a lot of our networking components across the board. That's great for us, and that drives increase in consumption. It also means that we have been able to sell networking to non-XPU footprints. That part of it would dilute the growth rate. This 40%, I consider as almost a situation where stars align, where we are shipping a lot of networking to non-XPU, while the growth of XPU are obviously allowing us to grow this networking business to our XPUs, and we get to 40%. I see that as probably as high as that percentage of total AI revenue would go. Not the first time I indicated that. The more expected percentage as a share of total AI revenue for networking would be closer to around 30%. One moment for our next question. That will come from the line of Tom O'Malley with Barclays. Your line is open. Hey, Hock. Thanks for taking the question. I noticed with the most recent deal with Anthropic that you guys are using Broadcom chips as a backstop for the deal. Do you expect more deals to come like this in the future? As you start to see the AI environment, is there any way you're thinking about financing in the future? You're going to continue to do it with chips or anything that you can offer on that? Thank you. Can you repeat that question, especially at the front end? I didn't quite get what you're saying here. I don't want to answer the wrong way. Sorry, Hock. Essentially, most recent deal with Anthropic is being backstopped by Broadcom chips. Do you think that in the future you will see more deals done this way? Any comments on the future financing of deals with the large AI models? Thank you. Oh, I have to correct you on that. Our deal with Anthropic and that we basically released, disclosed in our 8-K recently. As the deal we did with Anthropic is we use our TPU chips that we developed to provide the compute capacity to Anthropic. It wasn't backstop in that sense. We were the ones providing the chips to Anthropic. We were the ones providing the compute capacity to Anthropic. Thank you. One moment for our next question. That will come from the line of C.J. Muse with Cantor Fitzgerald. Your line is open. Yeah, good afternoon. Thanks for taking the question. I guess, Hock, in recent years you've talked about really focusing your efforts on very large XPU platforms. I'm just curious, we're seeing many kind of XPU attached derivatives across interconnect, storage, other. I'm wondering if there's any sort of programs there that are more niche that are whetting your appetite. Well, I don't think so. I think our business model is actually very straightforward, which is we are developing XPUs, custom AI accelerators for use by our customers who are pretty much all LLM developers, whether it's for training or inference. We are also creating a portfolio of critical components to enable these XPUs and even GPUs to be clustered and form better performance. That continues to be the model we do, which is we provide chips, technology in the form of chips, whether they be AI compute accelerators we call XPUs or networking chips that cluster them together, be it switches, PCI Express connectors, DSP, lasers, NICs, and routers. We still, as you can see, our financial model and the program we go, we drive towards a chip business model through the technologies we provide. What we are doing to enable some of these LLM players to be able to get access to the volume of compute capacity, the large gigawatt of compute capacity they need to scale up their models is we are, as I announced here today, creating in partnership with guys with the best balance sheets around, a vehicle to basically have these chips funded for these LLM players who otherwise might have difficulty getting access to our technology, which provides them with the lowest power and the lowest cost. One moment for our next question. That will come from the line of Atif Malik with Citi. Your line is open. Hi, thank you for taking my question. I have a question on Infrastructure Software business. Are you guys seeing any impact of AI, agentic AI, on your software growth and renewals? If you can just talk about some sort of long-term growth for that business. Well, we're not seeing it. If anything else, as I reported, the high volume of core count of CPUs selling together with GPUs, it's driving some accelerated growth of our VMware business. As you can see in Q3, we're seeing an accelerated growth, and we expect that to continue, I guess, for the next multiple quarters as this demand picks up. Long term, given the kind of products we do in infrastructure software, very close to literally the hardware, basically the hypervisor, which is where our products are. We do not expect to see any impact on software products. One moment for our next question. That will come from the line of Edward Snyder with Charter Equity Research. Your line is open. Thanks a lot. Hock, this is very interesting because the gigawatts that you laid out for the different customers, it's very clear that the two that are offering kind of CSP, I don't want to say CFC, but consumer versions of AI, Anthropic and OpenAI, have very large gigawatt commitments in the out years. I know part of that's catch up because they've just started late, where your oldest customers have been doing this for quite some time. Even part of Google's is offering cloud services to other folks, too. Are we seeing a shift here? I know that initially a lot of the XPUs and the AI services were through the hyperscalers for their own customer workloads. We've talked about that ad nauseam. Now you're seeing AI finally hit the enterprises, and you're seeing cloud take off with the programming, which is sweeping everybody. Can we expect that there's going to be this big second wave of demand that's driven as AI starts hitting enterprises and as consumers start getting access to it or finding usable tools? The numbers you're saying here are significantly different for the two classes of customers. Well, that's a very interesting thought here. You may be very well right that enterprise consuming AI is still relatively at an early stage of the game. Having said that, what we're also seeing is a lot of what the enterprise is consuming on tokens. They are buying a lot of these tokens from the platforms, the product API they pull from the platforms of this same name of customers we talked about, which is Anthropic, OpenAI, Gemini. These are the large guys they're pulling it from, and that's where I think high, substantially most of these tokens consumption are tied to those LLMs. These LLM guys, as they productize their frontier models, whether it be Opus 4.7, ChatGPT 5.5 or Gemini 3.5, comes back to the same end demand on compute capacity we provide to all these guys. Even a growth of enterprise demand that we're now starting to see as enterprise starts to consume AI tokens for their own workloads, for their own productivity users, as consumers do, they are buying from the same source, these same few guys. That's what's driving this very large, I call it insatiable growth in compute capacity that we are experiencing. We see that continuing to happen now through 2027 and what we're seeing now through 2028 as well. This is getting to be quite a sustainable and steepening trajectory of demand. If I could, doesn't this change the dynamic of what we've talked about before? You talked about seven or so customers for your XPUs, but this is actually happening. We've already seen it, Google offering cloud services for TPU. It opens up XPU access to all those smaller companies that don't meet the criteria for doing their own ASICs that you couldn't partner with to Broadcom's technology through these platforms. Why would that not be the case? Well, I guess the answer to that is it's possible, but the reality of the whole issue is the compute capacity most of AI generated are provided in the form of SaaS models. APIs are pulled from the clouds, whether they're from Bedrock, Vertex, Azure, or the first party. It is still provided in the cloud. Most of all that demand, at the end of the day, in terms of compute capacity, which is what we're doing, comes from those few large frontier model developers and the products they generate to supply to consumer and enterprises globally. Source of demand comes from those frontier model labs who are developing the products which consumer and enterprise, like you and us and our companies, are consuming. What we're doing is providing that capacity to that demand source, as opposed to going to a company or bank and trying to provide them XPUs, and then they having to try to build it, create a software stack to then write application and run it themselves. I'm sure there are few enterprises doing now, but there are not many. It's early stage in that whole game. Right now, most of the demand are coming from the frontier model players who are creating products. Things, as I said, like code assistance, like engineering verticals, which are really coming from the same source of guys who are doing all those. Those few guys doing the frontier models. It's not really coming from 100,000 companies directly trying to buy XPUs or for that matter, GPUs. It's not. One moment for our next question. That will come from the line of Joe Moore with Morgan Stanley. Your line is open. Great. Thank you. You talked about $30 billion of AI bookings in the quarter, which is a lot, I guess, relative to this quarter and next quarter shipments. Can you talk about the dynamic? Why is there so much backlog now, or is there-- You sort of said you can react to upside with supply, just why so many bookings this quarter relative to revenue? Well, there's a huge demand of compute. See, a lot of our large, these few six customers now, they realize that lead time to get compute, you need lead time. You need to be thoughtful. That's not just asking for wafers to get the chips or memory to ensure their HBMs are available or DRAMs available. They're also talking about, "Hey, I got to have the power, the power shell." All this is planning ahead. What we are seeing, the bookings that are coming, is not for immediate delivery. Some are hope to have, the reality they all accept is they need to align quite a few other things in place before they can deliver. They are placing their orders early, and they're placing their orders now, and they are placing their orders in fairly huge demand, which basically gives us a lot more visibility than we normally otherwise would have in semiconductors. Our visibility runs all the way to 2028 right now. Three months ago, I can tell you our visibility run pretty much 2027. Today, it runs to 2028. That's a big part of the reason why we are creating this XPU platform as really the platform to plan to build up this capacity for those frontier model customers of ours who are seeing, as you guys are seeing in some of the financials they are telling you and in the experiences you have, which is driving huge amount of consumption of tokens from those compute capacity we are giving them. We have the benefit now of a lot of lead time, we're planning that. It's not because of shortage of our components, it's also the other elements that need to be put in place, which particularly relates to power and connection into an infrastructure globally or through America, at least, that enables inference to be distributed through to consumers and enterprises throughout the country. We're just getting a lot of lead time. Very helpful. Thank you. Thank you. We do have time for one final question, and that will come from the line of Joshua Buchalter with TD Cowen. Your line is open. Hey, guys. Thank you for taking my question. In the past, you've talked about sort of $15 billion, $20 billion per gigawatt of compute. Given the 10 that you implied is what you'll be doing next year, it implies a much larger number than $100 billion. You've also mentioned that the value per gigawatt does vary per project. I guess, how should we think about the evolution of your revenue per gigawatt over time? As I would expect on one hand, then-to-then pricing to increase on programs you're already shipping, but also there are other projects that are entering the model. Thank you. Our revenue, our content per gigawatt will increase. Put it simply. Our content from the fact that our compute chip XPU will go up in price very dramatically, particularly when you not only put SRAM into it, sparse cores, you start putting embedding CPU cores into the same XPUs and making those chips basically multi-die with lots of HBM. The trajectory of content increase will go up. It just doesn't go up every month, every six months, or every quarter. It will follow one generation to the next, that the content will grow per gigawatt. Thank you. Thank you. I would now like to turn the call over to Ji Yoo, Head of Investor Relations, for closing remarks. Thank you, operator. Broadcom currently plans to report its earnings for the third quarter of fiscal year 2026 after close of market on Wednesday, September 2nd, 2026. A public webcast of Broadcom's earnings conference call will follow at 2:00 P.M. Pacific Time. That will conclude our earnings call today. Thank you all for joining. Cherie, you may end the call. This concludes today's program. Thank you all for participating. You may now disconnect.

Speaker 13: Welcome to Broadcom Inc.'s second quarter fiscal year 2026 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. Welcome to Broadcom Inc.'s second quarter fiscal year 2026 financial results conference call. welcome to broadcom inc.'s second quarter fiscal year 2026 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. 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

Speaker 8: Thank you, operator. Good afternoon, everyone. Joining me on today's call are Hock Tan, President and CEO, Charlie Kawwas, President, Semiconductor Solutions Group, and Ram Velaga, President, Infrastructure Software Group. Also joining is Kirsten Spears, Chief Financial Officer. As we announced, Kirsten will be retiring June 12th, and today we have joining us our incoming Chief Financial Officer, Amie Thuener. Thank you, Kirsten, for your leadership over the past 12 years. Broadcom distributed a press release and financial tables after the market closed, describing our financial performance for the second quarter fiscal year 2026. 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 one year through the investor section of Broadcom's website. Thank you, operator. thank you operator Good afternoon, everyone. good afternoon everyone Joining me on today's call are Hock Tan, President and CEO, Charlie Kawwas, President, Semiconductor Solutions Group, and Ram Velaga, President, Infrastructure Software Group. joining me on today's call are hock tan president and ceo charlie kawwas president semiconductor solutions group and ram velaga president infrastructure software group Also joining is Kirsten Spears, Chief Financial Officer. also joining is kirsten spears chief financial officer As we announced, Kirsten will be retiring June 12th, and today we have joining us our incoming Chief Financial Officer, Amie Thuener. as we announced kirsten will be retiring june 12th and today we have joining us our incoming chief financial officer amie thuener Thank you, Kirsten, for your leadership over the past 12 years. thank you kirsten for your leadership over the past 12 years Broadcom distributed a press release and financial tables after the market closed, describing our financial performance for the second quarter fiscal year 2026. broadcom distributed a press release and financial tables after the market closed describing our financial performance for the second quarter fiscal year 2026 If you did not receive a copy, you may obtain the information from the investor section of Broadcom's website at broadcom.com. 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 one year through the investor section of Broadcom's website. this conference call is being webcast live and an audio replay of the call can be accessed for one 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 2026 results, guidance for our third quarter fiscal year 2026, 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 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 a non-GAAP basis. A reconciliation between GAAP and non-GAAP measures, to the extent possible, is included in the tables attached to today's press release. Comments made during today's call will primarily refer to our non-GAAP financial results. I will now turn the call over to Hock. During the prepared comments, Hock and Kirsten will be providing details of our second quarter fiscal year 2026 results, guidance for our third quarter fiscal year 2026, as well as commentary regarding the business environment. during the prepared comments hock and kirsten will be providing details of our second quarter fiscal year 2026 results guidance for our third quarter fiscal year 2026 as well as commentary regarding the business environment We'll take questions after the end of our prepared comments. 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 risk factors that could cause our actual results to differ materially from the forward-looking statements made on this call. please refer to our press release today and our recent filings with the sec for information on 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 a non-GAAP basis. in addition to us gaap reporting broadcom reports certain financial measures on a non-gaap basis A reconciliation between GAAP and non-GAAP measures, to the extent possible, is included in the tables attached to today's press release. a reconciliation between gaap and non-gaap measures to the extent possible is included in the tables attached to today's press release Comments made during today's call will primarily refer to our non-GAAP financial results. comments made during today's call will primarily refer to our non-gaap financial results I will now turn the call over to Hock. i will now turn the call over to hock

Speaker 7: Thank you, Ji. Thank you, everyone, for joining today. In our fiscal Q2 2026, total revenue reached a record $22.2 billion, up 48% year-on-year, above our guidance on strength in AI semiconductors. Q2 operating margin was a record 67%, and adjusted EBITDA was a record 69% of revenue, which was above our guidance. Even as our revenue scales up massively, driven by AI, our operating and EBITDA margins remain strong and stable. Turning to semiconductors, Q2 revenue was a record $15 billion, as I said before, as we grew 79% year-on-year. Thank you, Ji. thank you ji Thank you, everyone, for joining today. thank you everyone for joining today In our fiscal Q2 2026, total revenue reached a record $22.2 billion, up 48% year-on-year, above our guidance on strength in AI semiconductors. in our fiscal q2 2026 total revenue reached a record $22.2 billion up 48% year-on-year above our guidance on strength in ai semiconductors Q2 operating margin was a record 67%, and adjusted EBITDA was a record 69% of revenue, which was above our guidance. q2 operating margin was a record 67% and adjusted ebitda was a record 69% of revenue which was above our guidance Even as our revenue scales up massively, driven by AI, our operating and EBITDA margins remain strong and stable. even as our revenue scales up massively driven by ai our operating and ebitda margins remain strong and stable Turning to semiconductors, Q2 revenue was a record $15 billion, as I said before, as we grew 79% year-on-year. turning to semiconductors q2 revenue was a record $15 billion as i said before as we grew 79% year-on-year Driving this growth was AI semiconductor revenue at a record $10.8 billion, up 143% year-on-year and above our outlook. Networking represented almost 40% of our Q2 AI revenue. Demand for XPUs and networking is simply insatiable. During the quarter, bookings for AI semiconductors were over $30 billion against the $10.8 billion we shipped. In the second half of 2026, we expect AI semiconductor revenue to double from the first half we shipped this year. Consistent with this trend, in Q3, we expect AI semiconductor revenue to accelerate to $16 billion, up over 200% year-on-year. For the full year 2026, we expect to achieve AI semiconductor revenue of $56 billion, up approximately 180% from fiscal 2025. We expect this momentum to continue into fiscal year 2027 and reiterate our AI semiconductor revenue guidance to be in excess of $100 billion. Driving this growth was AI semiconductor revenue at a record $10.8 billion, up 143% year-on-year and above our outlook. driving this growth was ai semiconductor revenue at a record $10.8 billion up 143% year-on-year and above our outlook Networking represented almost 40% of our Q2 AI revenue. networking represented almost 40% of our q2 ai revenue Demand for XPUs and networking is simply insatiable. demand for xpus and networking is simply insatiable During the quarter, bookings for AI semiconductors were over $30 billion against the $10.8 billion we shipped. during the quarter bookings for ai semiconductors were over $30 billion against the $10.8 billion we shipped In the second half of 2026, we expect AI semiconductor revenue to double from the first half we shipped this year. in the second half of 2026 we expect ai semiconductor revenue to double from the first half we shipped this year Consistent with this trend, in Q3, we expect AI semiconductor revenue to accelerate to $16 billion, up over 200% year-on-year. consistent with this trend in q3 we expect ai semiconductor revenue to accelerate to $16 billion up over 200% year-on-year For the full year 2026, we expect to achieve AI semiconductor revenue of $56 billion, up approximately 180% from fiscal 2025. for the full year 2026 we expect to achieve ai semiconductor revenue of $56 billion up approximately 180% from fiscal 2025 We expect this momentum to continue into fiscal year 2027 and reiterate our AI semiconductor revenue guidance to be in excess of $100 billion. we expect this momentum to continue into fiscal year 2027 and reiterate our ai semiconductor revenue guidance to be in excess of $100 billion We expect AI semiconductor revenue growth to continue in fiscal 2028, based on the following initiatives with our six core customers. As you are aware, with Google, we announced in April that we entered into a long-term agreement to develop and supply multiple generations of TPUs and AI networking. Our relationship continues to be strategic and very substantial as we continue to deliver vastly superior technology and execution compared to other alternatives. This ability to provide differentiated value to Google ensures that our business will sustain and grow for the foreseeable future. For Anthropic, as you know, for 2026, we are providing access to Broadcom TPU-based compute of over one gigawatts. In April, we entered into an agreement to enable Anthropic to access another five gigawatts of next-generation TPU-based compute beginning in 2027. For OpenAI, we have delivered silicon, and we are on track for production late 2026. We expect AI semiconductor revenue growth to continue in fiscal 2028, based on the following initiatives with our six core customers. we expect ai semiconductor revenue growth to continue in fiscal 2028 based on the following initiatives with our six core customers As you are aware, with Google, we announced in April that we entered into a long-term agreement to develop and supply multiple generations of TPUs and AI networking. as you are aware with google we announced in april that we entered into a long-term agreement to develop and supply multiple generations of tpus and ai networking Our relationship continues to be strategic and very substantial as we continue to deliver vastly superior technology and execution compared to other alternatives. our relationship continues to be strategic and very substantial as we continue to deliver vastly superior technology and execution compared to other alternatives This ability to provide differentiated value to Google ensures that our business will sustain and grow for the foreseeable future. this ability to provide differentiated value to google ensures that our business will sustain and grow for the foreseeable future For Anthropic, as you know, for 2026, we are providing access to Broadcom TPU-based compute of over one gigawatts. for anthropic as you know for 2026 we are providing access to broadcom tpu-based compute of over one gigawatts In April, we entered into an agreement to enable Anthropic to access another five gigawatts of next-generation TPU-based compute beginning in 2027. in april we entered into an agreement to enable anthropic to access another five gigawatts of next-generation tpu-based compute beginning in 2027 For OpenAI, we have delivered silicon, and we are on track for production late 2026. for openai we have delivered silicon and we are on track for production late 2026 We have a contractual commitment to deploy 1.3 GW in 2027 as part of the larger 10 GW that by 2029 agreement we announced last year. For Meta, in April, we announced a partnership to deliver multiple generations of MTIA XPUs. Under this agreement, we expect to deploy 3 GW through the end of 2028. The initial order for 1 GW, which includes XPUs and our networking, has been received and will start delivery in the second half of 2027. For our other two customers, we expect shipments to begin late 2026 and accelerate into 2027. To date, we have received purchase orders totaling $6 billion. While we have significant IP and execution leadership in XPUs, networking is key to building scalable XPU and GPU clusters. Here in networking, we have at least one generation of technology and product leadership. We have a contractual commitment to deploy 1.3 GW in 2027 as part of the larger 10 GW that by 2029 agreement we announced last year. we have a contractual commitment to deploy 1.3 gw in 2027 as part of the larger 10 gw that by 2029 agreement we announced last year For Meta, in April, we announced a partnership to deliver multiple generations of MTIA XPUs. for meta in april we announced a partnership to deliver multiple generations of mtia xpus Under this agreement, we expect to deploy 3 GW through the end of 2028. under this agreement we expect to deploy 3 gw through the end of 2028 The initial order for 1 GW, which includes XPUs and our networking, has been received and will start delivery in the second half of 2027. the initial order for 1 gw which includes xpus and our networking has been received and will start delivery in the second half of 2027 For our other two customers, we expect shipments to begin late 2026 and accelerate into 2027. for our other two customers we expect shipments to begin late 2026 and accelerate into 2027 To date, we have received purchase orders totaling $6 billion. to date we have received purchase orders totaling $6 billion While we have significant IP and execution leadership in XPUs, networking is key to building scalable XPU and GPU clusters. while we have significant ip and execution leadership in xpus networking is key to building scalable xpu and gpu clusters Here in networking, we have at least one generation of technology and product leadership. here in networking we have at least one generation of technology and product leadership For scale up within racks, we enable direct attached copper based on our industry-leading 200G and 400G SerDes, driving co-packaged copper with Ethernet and PCI Express switches. For scale out between racks, we have been shipping the industry's only 100 terabit Ethernet switch, the Tomahawk 6, for over a year. We will now be taping out our next generation 200 terabit switch this quarter. In CPOs, which is co-packaged optics, 1.6 Tb DSPs, CW and EML lasers, we are the de facto standard in the industry. To extend AI clusters across data centers, we remain the industry leader with our Jericho 3 and Jericho 4 fabric solutions, enabling the world's largest deployments at multiple hyperscalers. For scale up within racks, we enable direct attached copper based on our industry-leading 200G and 400G SerDes, driving co-packaged copper with Ethernet and PCI Express switches. for scale up within racks we enable direct attached copper based on our industry-leading 200g and 400g serdes driving co-packaged copper with ethernet and pci express switches For scale out between racks, we have been shipping the industry's only 100 terabit Ethernet switch, the Tomahawk 6, for over a year. for scale out between racks we have been shipping the industry's only 100 terabit ethernet switch the tomahawk 6 for over a year We will now be taping out our next generation 200 terabit switch this quarter. we will now be taping out our next generation 200 terabit switch this quarter In CPOs, which is co-packaged optics, 1.6 Tb DSPs, CW and EML lasers, we are the de facto standard in the industry. in cpos which is co-packaged optics 1.6 tb dsps cw and eml lasers we are the de facto standard in the industry To extend AI clusters across data centers, we remain the industry leader with our Jericho 3 and Jericho 4 fabric solutions, enabling the world's largest deployments at multiple hyperscalers. to extend ai clusters across data centers we remain the industry leader with our jericho 3 and jericho 4 fabric solutions enabling the world's largest deployments at multiple hyperscalers Our strategic vision is to bring together Broadcom's leading technology and investor partners with the strongest balance sheets to deliver at scale sufficient compute capacity at the lowest cost and power for the leading AI frontier labs, including Anthropic and OpenAI. To deliver this vision, we are creating the AI XPU platform with Apollo and Blackstone and other leading investors to deploy more than 20 GW of compute capacity through 2028. The first tranche of this platform, valued at $35 billion, is in fact currently being launched by Apollo. Turning to non-AI semiconductors. Q2 revenue of $4.2 billion was up 6% year-on-year. Bookings during the same period exceeded $6 billion, which is a clear indication we're on a path towards a full cyclical recovery. Broadband, server storage and enterprise networking together were up, partially offset by a seasonal decline in wireless. Our strategic vision is to bring together Broadcom's leading technology and investor partners with the strongest balance sheets to deliver at scale sufficient compute capacity at the lowest cost and power for the leading AI frontier labs, including Anthropic and OpenAI. our strategic vision is to bring together broadcom's leading technology and investor partners with the strongest balance sheets to deliver at scale sufficient compute capacity at the lowest cost and power for the leading ai frontier labs including anthropic and openai To deliver this vision, we are creating the AI XPU platform with Apollo and Blackstone and other leading investors to deploy more than 20 GW of compute capacity through 2028. to deliver this vision we are creating the ai xpu platform with apollo and blackstone and other leading investors to deploy more than 20 gw of compute capacity through 2028 The first tranche of this platform, valued at $35 billion, is in fact currently being launched by Apollo. the first tranche of this platform valued at $35 billion is in fact currently being launched by apollo Turning to non-AI semiconductors. turning to non-ai semiconductors Q2 revenue of $4.2 billion was up 6% year-on-year. q2 revenue of $4.2 billion was up 6% year-on-year Bookings during the same period exceeded $6 billion, which is a clear indication we're on a path towards a full cyclical recovery. bookings during the same period exceeded $6 billion which is a clear indication we're on a path towards a full cyclical recovery Broadband, server storage and enterprise networking together were up, partially offset by a seasonal decline in wireless. broadband server storage and enterprise networking together were up partially offset by a seasonal decline in wireless Consistent with this trend in Q3, we forecast non-AI semiconductor revenue to be approximately $4.5 billion, up 12% from a year ago. In summary, we expect Q3 semiconductor revenue to be $20.5 billion, up 124% year-over-year. Let me turn to Infrastructure software segment. Q2 software revenue of $7.2 billion was up 9% year-over-year, in line with our guidance. Bookings continue to be strong as we sustain ARR growth of 17% year-over-year. For Q3, we forecast software revenue to be approximately $8.9 billion, up 31% year-over-year. We just released VMware Cloud Foundation 9.1, focused on improving infrastructure efficiency, security, and support for enterprise AI inferencing workloads. With strong server demand globally, the deployment of VCF 9.1 for on-prem cloud computing is extremely strong, driving robust revenue growth. Consistent with this trend in Q3, we forecast non-AI semiconductor revenue to be approximately $4.5 billion, up 12% from a year ago. In summary, we expect Q3 semiconductor revenue to be $20.5 billion, up 124% year-over-year. consistent with this trend in q3 we forecast non-ai semiconductor revenue to be approximately $4.5 billion up 12% from a year ago. in summary we expect q3 semiconductor revenue to be $20.5 billion up 124% year-over-year Let me turn to Infrastructure software segment. let me turn to infrastructure software segment Q2 software revenue of $7.2 billion was up 9% year-over-year, in line with our guidance. q2 software revenue of $7.2 billion was up 9% year-over-year in line with our guidance Bookings continue to be strong as we sustain ARR growth of 17% year-over-year. bookings continue to be strong as we sustain arr growth of 17% year-over-year For Q3, we forecast software revenue to be approximately $8.9 billion, up 31% year-over-year. for q3 we forecast software revenue to be approximately $8.9 billion up 31% year-over-year We just released VMware Cloud Foundation 9.1, focused on improving infrastructure efficiency, security, and support for enterprise AI inferencing workloads. we just released vmware cloud foundation 9.1 focused on improving infrastructure efficiency security and support for enterprise ai inferencing workloads With strong server demand globally, the deployment of VCF 9.1 for on-prem cloud computing is extremely strong, driving robust revenue growth. with strong server demand globally the deployment of vcf 9.1 for on-prem cloud computing is extremely strong driving robust revenue growth This release adds heterogeneous compute support across GPUs and CPU architectures, including AMD, Intel, and NVIDIA platforms, enabling enterprise cloud customers to run AI, Kubernetes, and traditional virtualized workloads on a common private cloud environment. To sum it up, for Q3 2026, we expect our consolidated revenue to grow to $29.4 billion, up 84% year-on-year. We expect operating margin to be stable at approximately 67% of revenue, and adjusted EBITDA to be at approximately 68% of revenue. With that, let me turn the call over to Kirsten. This release adds heterogeneous compute support across GPUs and CPU architectures, including AMD, Intel, and NVIDIA platforms, enabling enterprise cloud customers to run AI, Kubernetes, and traditional virtualized workloads on a common private cloud environment. this release adds heterogeneous compute support across gpus and cpu architectures including amd intel and nvidia platforms enabling enterprise cloud customers to run ai kubernetes and traditional virtualized workloads on a common private cloud environment To sum it up, for Q3 2026, we expect our consolidated revenue to grow to $29.4 billion, up 84% year-on-year. to sum it up for q3 2026 we expect our consolidated revenue to grow to $29.4 billion up 84% year-on-year We expect operating margin to be stable at approximately 67% of revenue, and adjusted EBITDA to be at approximately 68% of revenue. we expect operating margin to be stable at approximately 67% of revenue and adjusted ebitda to be at approximately 68% of revenue With that, let me turn the call over to Kirsten. with that let me turn the call over to kirsten

Speaker 12: Thank you, Hock. Let me now provide additional detail on our Q2 financial performance. Consolidated revenue was a record $22.2 billion for the quarter, up 48% from a year ago. Gross margin was 77.1% of revenue in the quarter, down 230 basis points year-on-year, as semiconductor became a larger proportion of our product mix. Consolidated operating expenses were $2.2 billion, of which $1.6 billion was R&D. Q2 operating income was a record $14.9 billion, up 52% from a year ago. Note that even with the decline in gross margin, operating margin increased 200 basis points year-over-year to 67.3% as operating expenses remained relatively flat. Adjusted EBITDA of $15.2 billion or 69% of revenue was above our guidance of 68%. A review of the P&L for our two segments. Starting with semiconductors. Thank you, Hock. thank you hock Let me now provide additional detail on our Q2 financial performance. let me now provide additional detail on our q2 financial performance Consolidated revenue was a record $22.2 billion for the quarter, up 48% from a year ago. consolidated revenue was a record $22.2 billion for the quarter up 48% from a year ago Gross margin was 77.1% of revenue in the quarter, down 230 basis points year-on-year, as semiconductor became a larger proportion of our product mix. gross margin was 77.1% of revenue in the quarter down 230 basis points year-on-year as semiconductor became a larger proportion of our product mix Consolidated operating expenses were $2.2 billion, of which $1.6 billion was R&D. consolidated operating expenses were $2.2 billion of which $1.6 billion was r&d Q2 operating income was a record $14.9 billion, up 52% from a year ago. q2 operating income was a record $14.9 billion up 52% from a year ago Note that even with the decline in gross margin, operating margin increased 200 basis points year-over-year to 67.3% as operating expenses remained relatively flat. note that even with the decline in gross margin operating margin increased 200 basis points year-over-year to 67.3% as operating expenses remained relatively flat Adjusted EBITDA of $15.2 billion or 69% of revenue was above our guidance of 68%. adjusted ebitda of $15.2 billion or 69% of revenue was above our guidance of 68% A review of the P&L for our two segments. a review of the p&l for our two segments Starting with semiconductors. starting with semiconductors Revenue for our Semiconductor Solutions segment was a record $15 billion with growth accelerating to 79% year-on-year driven by AI. Semiconductor revenue represented 68% of total revenue in the quarter, and AI semiconductor revenue represented 49% of total revenue. Gross margin for our Semiconductor Solutions segment was approximately 70%. Operating expenses of $1.2 billion reflected increased investment in R&D for leading-edge AI semiconductors and represented 8% of revenue. Semiconductor operating margin of 62% was up 460 basis points year-on-year, reflecting our strong operating leverage. Now moving on to Infrastructure Software. Revenue for Infrastructure Software of $7.2 billion was up 9% year-on-year and represented 32% of revenue. Gross margin for Infrastructure Software was 93% in the quarter, and operating expenses were $1 billion in the quarter. Q2 software operating margin was up 310 basis points year-on-year to approximately 79%. Revenue for our Semiconductor Solutions segment was a record $15 billion with growth accelerating to 79% year-on-year driven by AI. revenue for our semiconductor solutions segment was a record $15 billion with growth accelerating to 79% year-on-year driven by ai Semiconductor revenue represented 68% of total revenue in the quarter, and AI semiconductor revenue represented 49% of total revenue. semiconductor revenue represented 68% of total revenue in the quarter and ai semiconductor revenue represented 49% of total revenue Gross margin for our Semiconductor Solutions segment was approximately 70%. gross margin for our semiconductor solutions segment was approximately 70% Operating expenses of $1.2 billion reflected increased investment in R&D for leading-edge AI semiconductors and represented 8% of revenue. operating expenses of $1.2 billion reflected increased investment in r&d for leading-edge ai semiconductors and represented 8% of revenue Semiconductor operating margin of 62% was up 460 basis points year-on-year, reflecting our strong operating leverage. semiconductor operating margin of 62% was up 460 basis points year-on-year reflecting our strong operating leverage Now moving on to Infrastructure Software. now moving on to infrastructure software Revenue for Infrastructure Software of $7.2 billion was up 9% year-on-year and represented 32% of revenue. revenue for infrastructure software of $7.2 billion was up 9% year-on-year and represented 32% of revenue Gross margin for Infrastructure Software was 93% in the quarter, and operating expenses were $1 billion in the quarter. gross margin for infrastructure software was 93% in the quarter and operating expenses were $1 billion in the quarter Q2 software operating margin was up 310 basis points year-on-year to approximately 79%. q2 software operating margin was up 310 basis points year-on-year to approximately 79% Moving on to cash flow. Free cash flow in the quarter was a record $10.3 billion and represented 46% of revenue. We spent $231 million on capital expenditures. We ended the second quarter with $19.6 billion of cash compared to $14.2 billion in the prior quarter. We ended the second quarter with inventory of $4.33 billion as we continued to secure supply to support strong AI demand. Our days of inventory on hand were 86 days in Q2 compared to 68 days in Q1 in anticipation of accelerating AI semiconductor growth in the second half of the year. Turning to capital allocation. In Q2, we paid stockholders $3.1 billion of cash dividends based on a quarterly common stock cash dividend of $0.65 per share. Now moving to guidance. Our guidance for Q3 is for consolidated revenue of $29.4 billion, up 84% year-over-year. Moving on to cash flow. moving on to cash flow Free cash flow in the quarter was a record $10.3 billion and represented 46% of revenue. free cash flow in the quarter was a record $10.3 billion and represented 46% of revenue We spent $231 million on capital expenditures. we spent $231 million on capital expenditures We ended the second quarter with $19.6 billion of cash compared to $14.2 billion in the prior quarter. we ended the second quarter with $19.6 billion of cash compared to $14.2 billion in the prior quarter We ended the second quarter with inventory of $4.33 billion as we continued to secure supply to support strong AI demand. we ended the second quarter with inventory of $4.33 billion as we continued to secure supply to support strong ai demand Our days of inventory on hand were 86 days in Q2 compared to 68 days in Q1 in anticipation of accelerating AI semiconductor growth in the second half of the year. our days of inventory on hand were 86 days in q2 compared to 68 days in q1 in anticipation of accelerating ai semiconductor growth in the second half of the year Turning to capital allocation. turning to capital allocation In Q2, we paid stockholders $3.1 billion of cash dividends based on a quarterly common stock cash dividend of $0.65 per share. in q2 we paid stockholders $3.1 billion of cash dividends based on a quarterly common stock cash dividend of $0.65 per share Now moving to guidance. now moving to guidance Our guidance for Q3 is for consolidated revenue of $29.4 billion, up 84% year-over-year. our guidance for q3 is for consolidated revenue of $29.4 billion up 84% year-over-year We forecast semiconductor revenue of approximately $20.5 billion, up 124% year-on-year. Within this, we expect Q3 AI semiconductor revenue of $16 billion, up over 200% year-on-year. We expect Q3 infrastructure software revenue of approximately $8.9 billion, up 31% year-on-year. Moving on to margins. We forecast semiconductor revenue of approximately $20.5 billion, up 124% year-on-year. we forecast semiconductor revenue of approximately $20.5 billion up 124% year-on-year Within this, we expect Q3 AI semiconductor revenue of $16 billion, up over 200% year-on-year. within this we expect q3 ai semiconductor revenue of $16 billion up over 200% year-on-year We expect Q3 infrastructure software revenue of approximately $8.9 billion, up 31% year-on-year. we expect q3 infrastructure software revenue of approximately $8.9 billion up 31% year-on-year Moving on to margins. moving on to margins As the proportion of AI revenue significantly grows in Q3, we expect Q3 consolidated gross margin to be down to approximately 74%. This decline in gross margin does not represent a structural change in semiconductor margin. Rather, it reflects product mix between semiconductors and infrastructure software. Regardless of the impact to gross margin, we expect Q3 operating margin to be 67%, which is flat quarter-over-quarter, demonstrating our strong operating leverage. We highly recommend that investors model semiconductor and infrastructure software margins separately to properly reflect the impact of changes in total revenue mix going forward. We expect the non-GAAP tax rate for Q3 in fiscal year 2026 to be approximately 16% due to the impact of the global minimum tax and the geographic mix of income compared to that of fiscal year 2025. As the proportion of AI revenue significantly grows in Q3, we expect Q3 consolidated gross margin to be down to approximately 74%. as the proportion of ai revenue significantly grows in q3 we expect q3 consolidated gross margin to be down to approximately 74% This decline in gross margin does not represent a structural change in semiconductor margin. this decline in gross margin does not represent a structural change in semiconductor margin Rather, it reflects product mix between semiconductors and infrastructure software. rather it reflects product mix between semiconductors and infrastructure software Regardless of the impact to gross margin, we expect Q3 operating margin to be 67%, which is flat quarter-over-quarter, demonstrating our strong operating leverage. regardless of the impact to gross margin we expect q3 operating margin to be 67% which is flat quarter-over-quarter demonstrating our strong operating leverage We highly recommend that investors model semiconductor and infrastructure software margins separately to properly reflect the impact of changes in total revenue mix going forward. we highly recommend that investors model semiconductor and infrastructure software margins separately to properly reflect the impact of changes in total revenue mix going forward We expect the non-GAAP tax rate for Q3 in fiscal year 2026 to be approximately 16% due to the impact of the global minimum tax and the geographic mix of income compared to that of fiscal year 2025. we expect the non-gaap tax rate for q3 in fiscal year 2026 to be approximately 16% due to the impact of the global minimum tax and the geographic mix of income compared to that of fiscal year 2025 In Q3, we expect the non-GAAP diluted share count to be approximately 4.94 billion shares, excluding the impact of potential share repurchases. That concludes my prepared remarks. Operator, please open up the call for questions. In Q3, we expect the non-GAAP diluted share count to be approximately 4.94 billion shares, excluding the impact of potential share repurchases. in q3 we expect the non-gaap diluted share count to be approximately 4.94 billion shares excluding the impact of potential share repurchases That concludes my prepared remarks. that concludes my prepared remarks Operator, please open up the call for questions. operator please open up the call for questions

Speaker 13: Thank you. To ask a question, you will need to press star one one on your telephone. To withdraw your question, press star one one again. Due to time restraints, we ask that you please limit yourself to one question. Please stand by while we compile the Q&A roster. Our first question will come from the line of Harlan Sur with JPMorgan. Your line is open. Thank you. thank you To ask a question, you will need to press star one one on your telephone. to ask a question you will need to press star one one on your telephone To withdraw your question, press star one one again. to withdraw your question press star one one again Due to time restraints, we ask that you please limit yourself to one question. due to time restraints we ask that you please limit yourself to one question Please stand by while we compile the Q&A roster. please stand by while we compile the q&a roster Our first question will come from the line of Harlan Sur with JP Morgan. our first question will come from the line of harlan sur with jp morgan Your line is open. your line is open

Speaker 6: Good afternoon. Thank you for taking my question. Thanks for all your support, Kirsten and Amie. Welcome to the team. First, just a quick housekeeping item, Hock. On this fiscal year, AI sort of 2x growth, second half over first half. That would put AI revenues over $60 billion with sequential growth in fiscal Q4. You gave us this $56 billion number, which is only 1.5x, half over half growth with Q4 AI actually being down sequentially. If you could just help us square the numbers there. For my real question, back in December of last year, you talked about an AI backlog next 18 months, $73 billion. Market sort of took that number, spread that linearly over six quarters. We know that the backlog is always more front-loaded over the first four quarters, right? Good afternoon. good afternoon Thank you for taking my question. thank you for taking my question Thanks for all your support, Kirsten and Amie. thanks for all your support kirsten and amie Welcome to the team. welcome to the team First, just a quick housekeeping item, Hock. first just a quick housekeeping item hock On this fiscal year, AI sort of 2x growth, second half over first half. on this fiscal year ai sort of 2x growth second half over first half That would put AI revenues over $60 billion with sequential growth in fiscal Q4. that would put ai revenues over $60 billion with sequential growth in fiscal q4 You gave us this $56 billion number, which is only 1.5x, half over half growth with Q4 AI actually being down sequentially. you gave us this $56 billion number which is only 1.5x half over half growth with q4 ai actually being down sequentially If you could just help us square the numbers there. if you could just help us square the numbers there For my real question, back in December of last year, you talked about an AI backlog next 18 months, $73 billion. for my real question back in december of last year you talked about an ai backlog next 18 months $73 billion Market sort of took that number, spread that linearly over six quarters. market sort of took that number spread that linearly over six quarters We know that the backlog is always more front-loaded over the first four quarters, right? we know that the backlog is always more front-loaded over the first four quarters right Sure enough, you're going to deliver around 80% or more of that backlog in this fiscal year or first four quarters. Just given the strength of all your programs, the broadening of the customer base, accelerating year-over-year trends in your AI shipments, all the multi-gigawatt partnerships that you just articulated today, most of it which is set to start to fire next year. Is it fair to assume that your 18-month AI backlog second half of this year through all of fiscal 2027 sits at $200 billion or better? Sure enough, you're going to deliver around 80% or more of that backlog in this fiscal year or first four quarters. sure enough you're going to deliver around 80% or more of that backlog in this fiscal year or first four quarters Just given the strength of all your programs, the broadening of the customer base, accelerating year-over-year trends in your AI shipments, all the multi-gigawatt partnerships that you just articulated today, most of it which is set to start to fire next year. just given the strength of all your programs the broadening of the customer base accelerating year-over-year trends in your ai shipments all the multi-gigawatt partnerships that you just articulated today most of it which is set to start to fire next year Is it fair to assume that your 18-month AI backlog second half of this year through all of fiscal 2027 sits at $200 billion or better? is it fair to assume that your 18-month ai backlog second half of this year through all of fiscal 2027 sits at $200 billion or better

Speaker 7: That's a very complicated set of number questions. To begin with, let's start with 2026. Doing a math, basically 2x to 2x. The first half, we ship in total AI revenue, something in the range of $19 billion, if you want to be precise. If you do what I indicate and 2x that in the second half, you get to pretty much in the range of what we're talking about, which is around $56 billion, Harlan. That's a very complicated set of number questions. that's a very complicated set of number questions To begin with, let's start with 2026. to begin with let's start with 2026 Doing a math, basically 2x to 2x. doing a math basically 2x to 2x The first half, we ship in total AI revenue, something in the range of $19 billion, if you want to be precise. the first half we ship in total ai revenue something in the range of $19 billion if you want to be precise If you do what I indicate and 2x that in the second half, you get to pretty much in the range of what we're talking about, which is around $56 billion, Harlan. if you do what i indicate and 2x that in the second half you get to pretty much in the range of what we're talking about which is around $56 billion harlan

Speaker 6: Okay. Okay. okay

Speaker 7: That set of numbers does tie up very well. Your bigger question on the second half, which you're going to need a very detailed analysis of is, yeah, we will keep the momentum going as we expect to see in 2027. What we will see in 2027 is continued growth of the level we're talking about. If you drive on that basis of what we're seeing here, almost 2x, in the range of 2x, what 2026 will be, I think you will easily see that 2027 will exceed very easily $100 billion in 2027, which is pretty much what we indicated last quarter. We are continuing to say that it will be over $100 billion in 2027. That set of numbers does tie up very well. that set of numbers does tie up very well Your bigger question on the second half, which you're going to need a very detailed analysis of is, yeah, we will keep the momentum going as we expect to see in 2027. your bigger question on the second half which you're going to need a very detailed analysis of is yeah we will keep the momentum going as we expect to see in 2027 What we will see in 2027 is continued growth of the level we're talking about. what we will see in 2027 is continued growth of the level we're talking about If you drive on that basis of what we're seeing here, almost 2x, in the range of 2x, what 2026 will be, I think you will easily see that 2027 will exceed very easily $100 billion in 2027, which is pretty much what we indicated last quarter. if you drive on that basis of what we're seeing here almost 2x in the range of 2x what 2026 will be i think you will easily see that 2027 will exceed very easily $100 billion in 2027 which is pretty much what we indicated last quarter We are continuing to say that it will be over $100 billion in 2027. we are continuing to say that it will be over $100 billion in 2027

Speaker 6: Okay. Okay. okay

Speaker 7: In that sense, if anything else, it might be based on what we're doing very much on track, if not stronger. We're not trying to guide you every quarter what 2027 would be like. We basically say it continues to be in excess of $100 billion in 2027. It is on a same trajectory as we are seeing in the back half of 2026. In that sense, if anything else, it might be based on what we're doing very much on track, if not stronger. in that sense if anything else it might be based on what we're doing very much on track if not stronger We're not trying to guide you every quarter what 2027 would be like. we're not trying to guide you every quarter what 2027 would be like We basically say it continues to be in excess of $100 billion in 2027. we basically say it continues to be in excess of $100 billion in 2027 It is on a same trajectory as we are seeing in the back half of 2026. it is on a same trajectory as we are seeing in the back half of 2026

Speaker 6: Got it. Okay. Thank you, Hock. Got it. got it Okay. okay Thank you, Hock. thank you hock

Speaker 13: One moment for our next question. That will come from the line of Blayne Curtis with Jefferies. Your line is open. One moment for our next question. one moment for our next question That will come from the line of Blayne Curtis with Jefferies. that will come from the line of blayne curtis with jefferies Your line is open. your line is open

Speaker 3: Hey, good afternoon. Thanks for taking my question. Hock, I wanted to ask you, interquarter, you had that 8-K with the long-term agreement with Google. Obviously, you're probably not going to tell me what the total value is there. I think there's a lot of concern about share within that customer. I was just curious, now that you have this agreement, maybe you could speak to a little bit more in terms of your confidence. If there's upside to that customer, is it a fixed amount or is there share? Is there any way you can add some color to that agreement that came out? Hey, good afternoon. hey good afternoon Thanks for taking my question. thanks for taking my question Hock, I wanted to ask you, interquarter, you had that 8-K with the long-term agreement with Google. hock i wanted to ask you interquarter you had that 8-k with the long-term agreement with google Obviously, you're probably not going to tell me what the total value is there. obviously you're probably not going to tell me what the total value is there I think there's a lot of concern about share within that customer. i think there's a lot of concern about share within that customer I was just curious, now that you have this agreement, maybe you could speak to a little bit more in terms of your confidence. i was just curious now that you have this agreement maybe you could speak to a little bit more in terms of your confidence If there's upside to that customer, is it a fixed amount or is there share? if there's upside to that customer is it a fixed amount or is there share Is there any way you can add some color to that agreement that came out? is there any way you can add some color to that agreement that came out

Speaker 7: Well, it's a very strong agreement. It basically reflects the strength of the partnership we have, simply because of the products we do, the multi-general products, and the intellectual property we've deployed into this whole program. To answer your question specifically, it's a commitment that is very substantial in dollars. Very substantial amount of dollars. Now, we also accept the fact that while we like to win every design in that program, we also accept the fact that given the growth of consumption and development and consumption of AI compute, even by our partner, Google, that we fully expect that there'll be some diversity of sources for them. Our commitment from them is a very substantial dollar amount. Well, it's a very strong agreement. well it's a very strong agreement It basically reflects the strength of the partnership we have, simply because of the products we do, the multi-general products, and the intellectual property we've deployed into this whole program. it basically reflects the strength of the partnership we have simply because of the products we do the multi-general products and the intellectual property we've deployed into this whole program To answer your question specifically, it's a commitment that is very substantial in dollars. to answer your question specifically it's a commitment that is very substantial in dollars Very substantial amount of dollars. very substantial amount of dollars Now, we also accept the fact that while we like to win every design in that program, we also accept the fact that given the growth of consumption and development and consumption of AI compute, even by our partner, Google, that we fully expect that there'll be some diversity of sources for them. now we also accept the fact that while we like to win every design in that program we also accept the fact that given the growth of consumption and development and consumption of ai compute even by our partner google that we fully expect that there'll be some diversity of sources for them Our commitment from them is a very substantial dollar amount. our commitment from them is a very substantial dollar amount

Speaker 3: Thank you. Thank you. thank you

Speaker 13: One moment for our next question. That will come from the line of Ross Seymore with Deutsche Bank. Your line is open. One moment for our next question. one moment for our next question That will come from the line of Ross Seymore with Deutsche Bank. that will come from the line of ross seymore with deutsche bank Your line is open. your line is open

Speaker 14: Hi. Thanks for letting me ask the question, and congrats to both Kirsten and Amie. A question on the gross margin side of things. I know, Kirsten, you talked about it going down due to the mix dynamics within the semis versus the software side, but given the strength on the software side in the quarter, it seems like the gross margin's falling a little bit harder. Behind the scenes, can you just talk a little bit about what the drivers within semis are? Is that the XPU versus the networking side of things? Is that trend likely to continue next year? Are there rack scale versus chip scale? All those sorts of dynamics, any color you could give on that would be helpful. Hi. hi Thanks for letting me ask the question, and congrats to both Kirsten and Amie. thanks for letting me ask the question and congrats to both kirsten and amie A question on the gross margin side of things. a question on the gross margin side of things I know, Kirsten, you talked about it going down due to the mix dynamics within the semis versus the software side, but given the strength on the software side in the quarter, it seems like the gross margin's falling a little bit harder. i know kirsten you talked about it going down due to the mix dynamics within the semis versus the software side but given the strength on the software side in the quarter it seems like the gross margin's falling a little bit harder Behind the scenes, can you just talk a little bit about what the drivers within semis are? behind the scenes can you just talk a little bit about what the drivers within semis are Is that the XPU versus the networking side of things? is that the xpu versus the networking side of things Is that trend likely to continue next year? is that trend likely to continue next year Are there rack scale versus chip scale? are there rack scale versus chip scale All those sorts of dynamics, any color you could give on that would be helpful. all those sorts of dynamics any color you could give on that would be helpful

Speaker 12: Yes, certainly. As our semiconductor business grows, just to reiterate, on a consolidated basis relative to our software business, you're going to have a decline in margins, right? A bit. You'll have compression. Remember that it's accretive because we have strong operating leverage, right? Our operating margins will stand up a bit over time to that. Within semiconductors, we've always said our ASICs, TPU, some of the wireless business has lower margins. As the TPU continue to accelerate, there'll be pressure overall on margins. The connectivity side, the AI networking side of the business, has very rich margins. It'll offset it somewhat as we go. Yes, certainly. yes certainly As our semiconductor business grows, just to reiterate, on a consolidated basis relative to our software business, you're going to have a decline in margins, right? as our semiconductor business grows just to reiterate on a consolidated basis relative to our software business you're going to have a decline in margins right A bit. a bit You'll have compression. you'll have compression Remember that it's accretive because we have strong operating leverage, right? remember that it's accretive because we have strong operating leverage right Our operating margins will stand up a bit over time to that. our operating margins will stand up a bit over time to that Within semiconductors, we've always said our ASICs, TPU, some of the wireless business has lower margins. within semiconductors we've always said our asics tpu some of the wireless business has lower margins As the TPU continue to accelerate, there'll be pressure overall on margins. as the tpu continue to accelerate there'll be pressure overall on margins The connectivity side, the AI networking side of the business, has very rich margins. the connectivity side the ai networking side of the business has very rich margins It'll offset it somewhat as we go. it'll offset it somewhat as we go

Speaker 7: I mean, Ross, as Kirsten said in her remarks, structurally, the semiconductor margins remains very stable and very solid. It's the mix, particularly the mix between software and non-AI to the very highly, rapidly growing AI semiconductor that is just diluting gross margin. I mean, Ross, as Kirsten said in her remarks, structurally, the semiconductor margins remains very stable and very solid. i mean ross as kirsten said in her remarks structurally the semiconductor margins remains very stable and very solid It's the mix, particularly the mix between software and non-AI to the very highly, rapidly growing AI semiconductor that is just diluting gross margin. it's the mix particularly the mix between software and non-ai to the very highly rapidly growing ai semiconductor that is just diluting gross margin

Speaker 14: The rack versus chip side of things, is that all clarified now? The rack versus chip side of things, is that all clarified now? the rack versus chip side of things is that all clarified now

Speaker 7: No rack. It's all chips. No rack. no rack It's all chips. it's all chips

Speaker 12: We're in the chip business only. We're in the chip business only. we're in the chip business only

Speaker 7: We only chips. We only chips. we only chips

Speaker 12: Only chips. Only chips. only chips

Speaker 14: Perfect. Thank you. Perfect. perfect Thank you. thank you

Speaker 13: One moment for our next question. That will come from the line of Ben Reitzes with Melius. Your line is open. One moment for our next question. one moment for our next question That will come from the line of Ben Reitzes with Melius. that will come from the line of ben reitzes with melius Your line is open. your line is open

Speaker 2: Yeah. Hey, guys. Thanks. Appreciate it. I wanted to ask about 2027, Hock. With regard to, previously you've talked about the TAM being 10 to 20 and whatnot. It seems that one of your competitors talked recently about the TAM per gigawatt going up a lot as we go throughout the decade. It seems it wasn't just due to infrastructure, it was due to the compute and networking components and other things. Perhaps you're familiar with that comment that Jensen made where the overall infrastructure's going from something around 50 something towards 100, and the compute content going way up. Are you seeing the same thing as you go throughout the long term? Yeah. yeah Hey, guys. hey guys Thanks. thanks Appreciate it. appreciate it I wanted to ask about 2027, Hock. i wanted to ask about 2027 hock With regard to, previously you've talked about the TAM being 10 to 20 and whatnot. with regard to previously you've talked about the tam being 10 to 20 and whatnot It seems that one of your competitors talked recently about the TAM per gigawatt going up a lot as we go throughout the decade. it seems that one of your competitors talked recently about the tam per gigawatt going up a lot as we go throughout the decade It seems it wasn't just due to infrastructure, it was due to the compute and networking components and other things. it seems it wasn't just due to infrastructure it was due to the compute and networking components and other things Perhaps you're familiar with that comment that Jensen made where the overall infrastructure's going from something around 50 something towards 100, and the compute content going way up. perhaps you're familiar with that comment that jensen made where the overall infrastructure's going from something around 50 something towards 100 and the compute content going way up Are you seeing the same thing as you go throughout the long term? are you seeing the same thing as you go throughout the long term Is that potentially being an accelerator to what you've already outlined, in terms of your TAM per gigawatt, and how are you thinking about that? Thanks a lot. Is that potentially being an accelerator to what you've already outlined, in terms of your TAM per gigawatt, and how are you thinking about that? is that potentially being an accelerator to what you've already outlined in terms of your tam per gigawatt and how are you thinking about that Thanks a lot. thanks a lot

Speaker 7: Sure. Well, I think the accelerating part, if you talk about power, realize one thing, is the dollars per gigawatt, the content dollars or racks per gigawatt, is not accelerating that much because you are creating chips that each individual chips are driving higher and higher power. You're driving less chips, though the ASP of each chip is going up in price. Dollars per gigawatt, dollar billions per gigawatt is relatively stable. The number of gigawatts will accelerate as I think some of our remarks indicate. That's what we are seeing, that the amount of gigawatts required, compute capacity as measured by number of gigawatts, is growing very fast. We're seeing that. Sure. sure Well, I think the accelerating part, if you talk about power, realize one thing, is the dollars per gigawatt, the content dollars or racks per gigawatt, is not accelerating that much because you are creating chips that each individual chips are driving higher and higher power. well i think the accelerating part if you talk about power realize one thing is the dollars per gigawatt the content dollars or racks per gigawatt is not accelerating that much because you are creating chips that each individual chips are driving higher and higher power You're driving less chips, though the ASP of each chip is going up in price. you're driving less chips though the asp of each chip is going up in price Dollars per gigawatt, dollar billions per gigawatt is relatively stable. dollars per gigawatt, dollar billions per gigawatt is relatively stable The number of gigawatts will accelerate as I think some of our remarks indicate. the number of gigawatts will accelerate as i think some of our remarks indicate That's what we are seeing, that the amount of gigawatts required, compute capacity as measured by number of gigawatts, is growing very fast. that's what we are seeing that the amount of gigawatts required compute capacity as measured by number of gigawatts is growing very fast We're seeing that. we're seeing that We are seeing that particularly to the point where for even two of our customers, we're talking about, which is Anthropic and OpenAI, for which we're creating this platform to enable them to run sufficient compute power. We're talking about capacity as measured by gigawatt power that are way ahead of what we have expected, say, six months ago. That's just these guys. We've not talked about the consumption beyond the XPU platform we have announced here from our other customers, which is Google-owned internal workloads, Meta's workloads, and the other two customers we have. Fold that in, and you're talking about gigawatts in totality. If you ask about 2027 or 2028, that will continue to grow. We expect, in fact, 2028 to be a substantial growth from what we are forecasting in 2027. We are seeing that particularly to the point where for even two of our customers, we're talking about, which is Anthropic and OpenAI, for which we're creating this platform to enable them to run sufficient compute power. we are seeing that particularly to the point where for even two of our customers we're talking about which is anthropic and openai for which we're creating this platform to enable them to run sufficient compute power We're talking about capacity as measured by gigawatt power that are way ahead of what we have expected, say, six months ago. we're talking about capacity as measured by gigawatt power that are way ahead of what we have expected say six months ago That's just these guys. that's just these guys We've not talked about the consumption beyond the XPU platform we have announced here from our other customers, which is Google-owned internal workloads, Meta's workloads, and the other two customers we have. we've not talked about the consumption beyond the xpu platform we have announced here from our other customers which is google-owned internal workloads meta's workloads and the other two customers we have Fold that in, and you're talking about gigawatts in totality. fold that in and you're talking about gigawatts in totality If you ask about 2027 or 2028, that will continue to grow. if you ask about 2027 or 2028 that will continue to grow We expect, in fact, 2028 to be a substantial growth from what we are forecasting in 2027. we expect in fact 2028 to be a substantial growth from what we are forecasting in 2027

Speaker 2: Thank you, Hock. Thank you, Hock. thank you hock

Speaker 13: One moment for our next question. That will come from the line of Timothy Arcuri with UBS. Your line is open. One moment for our next question. one moment for our next question That will come from the line of Timothy Arcuri with UBS. that will come from the line of timothy arcuri with ubs Your line is open. your line is open

Speaker 16: Thanks a lot, Hock. I wanted to ask you about supply and your ability to get incremental volume of wafers and HBM. As I look at some of your competitors, they're able to drop $20 billion out of thin air and get incremental wafer supply. I'm wondering, do you feel pretty good about if a customer comes to you, are you able to get upside in terms of wafers and HBM, and are you beginning to consider maybe using other foundries to add more optionality to your supply? Thanks a lot. Thanks a lot, Hock. thanks a lot hock I wanted to ask you about supply and your ability to get incremental volume of wafers and HBM. i wanted to ask you about supply and your ability to get incremental volume of wafers and hbm As I look at some of your competitors, they're able to drop $20 billion out of thin air and get incremental wafer supply. as i look at some of your competitors they're able to drop $20 billion out of thin air and get incremental wafer supply I'm wondering, do you feel pretty good about if a customer comes to you, are you able to get upside in terms of wafers and HBM, and are you beginning to consider maybe using other foundries to add more optionality to your supply? i'm wondering do you feel pretty good about if a customer comes to you are you able to get upside in terms of wafers and hbm and are you beginning to consider maybe using other foundries to add more optionality to your supply Thanks a lot. thanks a lot

Speaker 7: Getting supply is not just about dropping money, Tim, though that does work. We are very comfortable that we have been able to secure supply of the types you mentioned about for our needs 2026, 2027. Working on 2028 and 2029 right now. Getting supply is not just about dropping money, Tim, though that does work. getting supply is not just about dropping money tim though that does work We are very comfortable that we have been able to secure supply of the types you mentioned about for our needs 2026, 2027. we are very comfortable that we have been able to secure supply of the types you mentioned about for our needs 2026 2027 Working on 2028 and 2029 right now. working on 2028 and 2029 right now

Speaker 16: Right. If a customer comes to you and wants incremental supply, are you able to go to your suppliers and get it the way that it seems like some of your competitors are? Right. right If a customer comes to you and wants incremental supply, are you able to go to your suppliers and get it the way that it seems like some of your competitors are? if a customer comes to you and wants incremental supply are you able to go to your suppliers and get it the way that it seems like some of your competitors are

Speaker 7: Customers have been coming to us incrementally over the last few months. Expect that to continue. By and large, yes. Customers have been coming to us incrementally over the last few months. customers have been coming to us incrementally over the last few months Expect that to continue. expect that to continue By and large, yes. by and large yes

Speaker 16: Okay, Hock. Thank you. Okay, Hock. okay hock Thank you. thank you

Speaker 13: One moment for our next question. That will come from the line of Stacy Rasgon with Bernstein Research. Your line is open. One moment for our next question. one moment for our next question That will come from the line of Stacy Rasgon with Bernstein Research. that will come from the line of stacy rasgon with bernstein research Your line is open. your line is open

Speaker 15: Hi, guys. Thanks for taking my question. Hock, you gave some gigawatt shipment targets for next year for your various customers. I just want to know, are those any different? Do they contemplate any change from what you said last quarter, where I think you'd said that was close to 10 GW you'd be shipping in 2027? Can you just help us shape the year? It sounded to me like you expected that to be more back-half loaded in 2027, given the shape of the ramps. Most importantly, is there any change that is it more gigawatts or less gigawatts, or the same gigawatts versus what you were suggesting last quarter? Hi, guys. hi guys Thanks for taking my question. thanks for taking my question Hock, you gave some gigawatt shipment targets for next year for your various customers. hock you gave some gigawatt shipment targets for next year for your various customers I just want to know, are those any different? i just want to know are those any different Do they contemplate any change from what you said last quarter, where I think you'd said that was close to 10 GW you'd be shipping in 2027? do they contemplate any change from what you said last quarter where i think you'd said that was close to 10 gw you'd be shipping in 2027 Can you just help us shape the year? can you just help us shape the year It sounded to me like you expected that to be more back-half loaded in 2027, given the shape of the ramps. it sounded to me like you expected that to be more back-half loaded in 2027 given the shape of the ramps Most importantly, is there any change that is it more gigawatts or less gigawatts, or the same gigawatts versus what you were suggesting last quarter? most importantly is there any change that is it more gigawatts or less gigawatts or the same gigawatts versus what you were suggesting last quarter

Speaker 7: Well, good question. Yeah. For 2027, we indicated about 10 GW shipment in 2027. That's still very much intact. We're planning to ship 10 GW in 2027, and nothing has changed. Back-half loaded to that extent, yes, and which really provides an interesting trajectory into 2028 with this back-half trajectory. 2028, we expect a lot more gigawatts. Well, good question. well good question Yeah. yeah For 2027, we indicated about 10 GW shipment in 2027. for 2027 we indicated about 10 gw shipment in 2027 That's still very much intact. that's still very much intact We're planning to ship 10 GW in 2027, and nothing has changed. we're planning to ship 10 gw in 2027 and nothing has changed Back-half loaded to that extent, yes, and which really provides an interesting trajectory into 2028 with this back-half trajectory. 2028, we expect a lot more gigawatts. back-half loaded to that extent yes and which really provides an interesting trajectory into 2028 with this back-half trajectory 2028 we expect a lot more gigawatts

Speaker 15: Got it. That's helpful. Thank you. Got it. got it That's helpful. that's helpful Thank you. thank you

Speaker 13: One moment for our next question. That will come from the line of Jim Schneider with Goldman Sachs. Your line is open. One moment for our next question. one moment for our next question That will come from the line of Jim Schneider with Goldman Sachs. that will come from the line of jim schneider with goldman sachs Your line is open. your line is open

Speaker 9: Good afternoon. Thanks for taking my question. I was wondering if you could comment a little bit on the profile of your networking business, Hock, as we head through fiscal 2026 and 2027, about 40% of AI revenue this quarter. Will you expect that to sort of fall back down as some of these custom ramps ramp into the end of the year into early next year, or would you sort of expect to stay at the upper end of that range? Maybe talk about when you see some of the optical and CPO revenue becoming meaningful. Thank you. Good afternoon. good afternoon Thanks for taking my question. thanks for taking my question I was wondering if you could comment a little bit on the profile of your networking business, Hock, as we head through fiscal 2026 and 2027, about 40% of AI revenue this quarter. i was wondering if you could comment a little bit on the profile of your networking business hock as we head through fiscal 2026 and 2027 about 40% of ai revenue this quarter Will you expect that to sort of fall back down as some of these custom ramps ramp into the end of the year into early next year, or would you sort of expect to stay at the upper end of that range? will you expect that to sort of fall back down as some of these custom ramps ramp into the end of the year into early next year or would you sort of expect to stay at the upper end of that range Maybe talk about when you see some of the optical and CPO revenue becoming meaningful. maybe talk about when you see some of the optical and cpo revenue becoming meaningful Thank you. thank you

Speaker 7: That's a hell of a great question, Jim. It's just very difficult to answer because of how do we predict that. There are quite a few moving parts there. One of which is to start with is as a volume, as more and more of our customers turn to XPUs. Obviously, XPUs uses very much a lot of our networking components across the board. That's great for us, and that drives increase in consumption. It also means that we have been able to sell networking to non-XPU footprints. That part of it would dilute the growth rate. This 40%, I consider as almost a situation where stars align, where we are shipping a lot of networking to non-XPU, while the growth of XPU are obviously allowing us to grow this networking business to our XPUs, and we get to 40%. That's a hell of a great question, Jim. that's a hell of a great question jim It's just very difficult to answer because of how do we predict that. it's just very difficult to answer because of how do we predict that There are quite a few moving parts there. there are quite a few moving parts there One of which is to start with is as a volume, as more and more of our customers turn to XPUs. one of which is to start with is as a volume as more and more of our customers turn to xpus Obviously, XPUs uses very much a lot of our networking components across the board. obviously xpus uses very much a lot of our networking components across the board That's great for us, and that drives increase in consumption. that's great for us and that drives increase in consumption It also means that we have been able to sell networking to non-XPU footprints. it also means that we have been able to sell networking to non-xpu footprints That part of it would dilute the growth rate. that part of it would dilute the growth rate This 40%, I consider as almost a situation where stars align, where we are shipping a lot of networking to non-XPU, while the growth of XPU are obviously allowing us to grow this networking business to our XPUs, and we get to 40%. this 40% i consider as almost a situation where stars align where we are shipping a lot of networking to non-xpu while the growth of xpu are obviously allowing us to grow this networking business to our xpus and we get to 40% I see that as probably as high as that percentage of total AI revenue would go. Not the first time I indicated that. The more expected percentage as a share of total AI revenue for networking would be closer to around 30%. I see that as probably as high as that percentage of total AI revenue would go. i see that as probably as high as that percentage of total ai revenue would go Not the first time I indicated that. not the first time i indicated that The more expected percentage as a share of total AI revenue for networking would be closer to around 30%. the more expected percentage as a share of total ai revenue for networking would be closer to around 30%

Speaker 13: One moment for our next question. That will come from the line of Tom O'Malley with Barclays. Your line is open. One moment for our next question. one moment for our next question That will come from the line of Tom O'Malley with Barclays. that will come from the line of tom o'malley with barclays Your line is open. your line is open

Speaker 17: Hey, Hock. Thanks for taking the question. I noticed with the most recent deal with Anthropic that you guys are using Broadcom chips as a backstop for the deal. Do you expect more deals to come like this in the future? As you start to see the AI environment, is there any way you're thinking about financing in the future? You're going to continue to do it with chips or anything that you can offer on that? Thank you. Hey, Hock. hey hock Thanks for taking the question. thanks for taking the question I noticed with the most recent deal with Anthropic that you guys are using Broadcom chips as a backstop for the deal. i noticed with the most recent deal with anthropic that you guys are using broadcom chips as a backstop for the deal Do you expect more deals to come like this in the future? do you expect more deals to come like this in the future As you start to see the AI environment, is there any way you're thinking about financing in the future? as you start to see the ai environment is there any way you're thinking about financing in the future You're going to continue to do it with chips or anything that you can offer on that? you're going to continue to do it with chips or anything that you can offer on that Thank you. thank you

Speaker 7: Can you repeat that question, especially at the front end? I didn't quite get what you're saying here. I don't want to answer the wrong way. Can you repeat that question, especially at the front end? can you repeat that question especially at the front end I didn't quite get what you're saying here. i didn't quite get what you're saying here I don't want to answer the wrong way. i don't want to answer the wrong way

Speaker 17: Sorry, Hock. Essentially, most recent deal with Anthropic is being backstopped by Broadcom chips. Do you think that in the future you will see more deals done this way? Any comments on the future financing of deals with the large AI models? Thank you. Sorry, Hock. sorry hock Essentially, most recent deal with Anthropic is being backstopped by Broadcom chips. essentially most recent deal with anthropic is being backstopped by broadcom chips Do you think that in the future you will see more deals done this way? do you think that in the future you will see more deals done this way Any comments on the future financing of deals with the large AI models? any comments on the future financing of deals with the large ai models Thank you. thank you

Speaker 7: Oh, I have to correct you on that. Our deal with Anthropic and that we basically released, disclosed in our 8-K recently. As the deal we did with Anthropic is we use our TPU chips that we developed to provide the compute capacity to Anthropic. It wasn't backstop in that sense. We were the ones providing the chips to Anthropic. We were the ones providing the compute capacity to Anthropic. Oh, I have to correct you on that. oh i have to correct you on that Our deal with Anthropic and that we basically released, disclosed in our 8-K recently. our deal with anthropic and that we basically released disclosed in our 8-k recently As the deal we did with Anthropic is we use our TPU chips that we developed to provide the compute capacity to Anthropic. as the deal we did with anthropic is we use our tpu chips that we developed to provide the compute capacity to anthropic It wasn't backstop in that sense. it wasn't backstop in that sense We were the ones providing the chips to Anthropic. we were the ones providing the chips to anthropic We were the ones providing the compute capacity to Anthropic. we were the ones providing the compute capacity to anthropic

Speaker 13: Thank you. One moment for our next question. That will come from the line of C.J. Muse with Cantor Fitzgerald. Your line is open. Thank you. thank you One moment for our next question. one moment for our next question That will come from the line of C.J. that will come from the line of c.j Muse with Cantor Fitzgerald. muse with cantor fitzgerald Your line is open. your line is open

Speaker 4: Yeah, good afternoon. Thanks for taking the question. I guess, Hock, in recent years you've talked about really focusing your efforts on very large XPU platforms. I'm just curious, we're seeing many kind of XPU attached derivatives across interconnect, storage, other. I'm wondering if there's any sort of programs there that are more niche that are whetting your appetite. Yeah, good afternoon. yeah good afternoon Thanks for taking the question. thanks for taking the question I guess, Hock, in recent years you've talked about really focusing your efforts on very large XPU platforms. i guess hock in recent years you've talked about really focusing your efforts on very large xpu platforms I'm just curious, we're seeing many kind of XPU attached derivatives across interconnect, storage, other. i'm just curious we're seeing many kind of xpu attached derivatives across interconnect storage other I'm wondering if there's any sort of programs there that are more niche that are whetting your appetite. i'm wondering if there's any sort of programs there that are more niche that are whetting your appetite

Speaker 7: Well, I don't think so. I think our business model is actually very straightforward, which is we are developing XPUs, custom AI accelerators for use by our customers who are pretty much all LLM developers, whether it's for training or inference. We are also creating a portfolio of critical components to enable these XPUs and even GPUs to be clustered and form better performance. That continues to be the model we do, which is we provide chips, technology in the form of chips, whether they be AI compute accelerators we call XPUs or networking chips that cluster them together, be it switches, PCI Express connectors, DSP, lasers, NICs, and routers. We still, as you can see, our financial model and the program we go, we drive towards a chip business model through the technologies we provide. Well, I don't think so. well i don't think so I think our business model is actually very straightforward, which is we are developing XPUs, custom AI accelerators for use by our customers who are pretty much all LLM developers, whether it's for training or inference. i think our business model is actually very straightforward which is we are developing xpus custom ai accelerators for use by our customers who are pretty much all llm developers whether it's for training or inference We are also creating a portfolio of critical components to enable these XPUs and even GPUs to be clustered and form better performance. we are also creating a portfolio of critical components to enable these xpus and even gpus to be clustered and form better performance That continues to be the model we do, which is we provide chips, technology in the form of chips, whether they be AI compute accelerators we call XPUs or networking chips that cluster them together, be it switches, PCI Express connectors, DSP, lasers, NICs, and routers. that continues to be the model we do which is we provide chips technology in the form of chips whether they be ai compute accelerators we call xpus or networking chips that cluster them together be it switches pci express connectors dsp lasers nics and routers We still, as you can see, our financial model and the program we go, we drive towards a chip business model through the technologies we provide. we still as you can see our financial model and the program we go we drive towards a chip business model through the technologies we provide What we are doing to enable some of these LLM players to be able to get access to the volume of compute capacity, the large gigawatt of compute capacity they need to scale up their models is we are, as I announced here today, creating in partnership with guys with the best balance sheets around, a vehicle to basically have these chips funded for these LLM players who otherwise might have difficulty getting access to our technology, which provides them with the lowest power and the lowest cost. What we are doing to enable some of these LLM players to be able to get access to the volume of compute capacity, the large gigawatt of compute capacity they need to scale up their models is we are, as I announced here today, creating in partnership with guys with the best balance sheets around, a vehicle to basically have these chips funded for these LLM players who otherwise might have difficulty getting access to our technology, which provides them with the lowest power and the lowest cost. what we are doing to enable some of these llm players to be able to get access to the volume of compute capacity the large gigawatt of compute capacity they need to scale up their models is we are as i announced here today creating in partnership with guys with the best balance sheets around a vehicle to basically have these chips funded for these llm players who otherwise might have difficulty getting access to our technology which provides them with the lowest power and the lowest cost

Speaker 13: One moment for our next question. That will come from the line of Atif Malik with Citi. Your line is open. One moment for our next question. one moment for our next question That will come from the line of Atif Malik with Citi. that will come from the line of atif malik with citi Your line is open. your line is open

Speaker 1: Hi, thank you for taking my question. I have a question on Infrastructure Software business. Are you guys seeing any impact of AI, agentic AI, on your software growth and renewals? If you can just talk about some sort of long-term growth for that business. Hi, thank you for taking my question. hi thank you for taking my question I have a question on Infrastructure Software business. i have a question on infrastructure software business Are you guys seeing any impact of AI, agentic AI, on your software growth and renewals? are you guys seeing any impact of ai agentic ai on your software growth and renewals If you can just talk about some sort of long-term growth for that business. if you can just talk about some sort of long-term growth for that business

Speaker 7: Well, we're not seeing it. If anything else, as I reported, the high volume of core count of CPUs selling together with GPUs, it's driving some accelerated growth of our VMware business. As you can see in Q3, we're seeing an accelerated growth, and we expect that to continue, I guess, for the next multiple quarters as this demand picks up. Long term, given the kind of products we do in infrastructure software, very close to literally the hardware, basically the hypervisor, which is where our products are. We do not expect to see any impact on software products. Well, we're not seeing it. well we're not seeing it If anything else, as I reported, the high volume of core count of CPUs selling together with GPUs, it's driving some accelerated growth of our VMware business. if anything else as i reported the high volume of core count of cpus selling together with gpus it's driving some accelerated growth of our vmware business As you can see in Q3, we're seeing an accelerated growth, and we expect that to continue, I guess, for the next multiple quarters as this demand picks up. as you can see in q3 we're seeing an accelerated growth and we expect that to continue i guess for the next multiple quarters as this demand picks up Long term, given the kind of products we do in infrastructure software, very close to literally the hardware, basically the hypervisor, which is where our products are. long term given the kind of products we do in infrastructure software very close to literally the hardware basically the hypervisor which is where our products are We do not expect to see any impact on software products. we do not expect to see any impact on software products

Speaker 13: One moment for our next question. That will come from the line of Edward Snyder with Charter Equity Research. Your line is open. One moment for our next question. one moment for our next question That will come from the line of Edward Snyder with Charter Equity Research. that will come from the line of edward snyder with charter equity research Your line is open. your line is open

Speaker 5: Thanks a lot. Hock, this is very interesting because the gigawatts that you laid out for the different customers, it's very clear that the two that are offering kind of CSP, I don't want to say CFC, but consumer versions of AI, Anthropic and OpenAI, have very large gigawatt commitments in the out years. I know part of that's catch up because they've just started late, where your oldest customers have been doing this for quite some time. Even part of Google's is offering cloud services to other folks, too. Are we seeing a shift here? I know that initially a lot of the XPUs and the AI services were through the hyperscalers for their own customer workloads. We've talked about that ad nauseam. Now you're seeing AI finally hit the enterprises, and you're seeing cloud take off with the programming, which is sweeping everybody. Thanks a lot. thanks a lot Hock, this is very interesting because the gigawatts that you laid out for the different customers, it's very clear that the two that are offering kind of CSP, I don't want to say CFC, but consumer versions of AI, Anthropic and OpenAI, have very large gigawatt commitments in the out years. hock this is very interesting because the gigawatts that you laid out for the different customers it's very clear that the two that are offering kind of csp i don't want to say cfc but consumer versions of ai anthropic and openai have very large gigawatt commitments in the out years I know part of that's catch up because they've just started late, where your oldest customers have been doing this for quite some time. i know part of that's catch up because they've just started late where your oldest customers have been doing this for quite some time Even part of Google's is offering cloud services to other folks, too. even part of google's is offering cloud services to other folks too Are we seeing a shift here? are we seeing a shift here I know that initially a lot of the XPUs and the AI services were through the hyperscalers for their own customer workloads. i know that initially a lot of the xpus and the ai services were through the hyperscalers for their own customer workloads We've talked about that ad nauseam. we've talked about that ad nauseam Now you're seeing AI finally hit the enterprises, and you're seeing cloud take off with the programming, which is sweeping everybody. now you're seeing ai finally hit the enterprises and you're seeing cloud take off with the programming which is sweeping everybody Can we expect that there's going to be this big second wave of demand that's driven as AI starts hitting enterprises and as consumers start getting access to it or finding usable tools? The numbers you're saying here are significantly different for the two classes of customers. Can we expect that there's going to be this big second wave of demand that's driven as AI starts hitting enterprises and as consumers start getting access to it or finding usable tools? can we expect that there's going to be this big second wave of demand that's driven as ai starts hitting enterprises and as consumers start getting access to it or finding usable tools The numbers you're saying here are significantly different for the two classes of customers. the numbers you're saying here are significantly different for the two classes of customers

Speaker 7: Well, that's a very interesting thought here. You may be very well right that enterprise consuming AI is still relatively at an early stage of the game. Having said that, what we're also seeing is a lot of what the enterprise is consuming on tokens. They are buying a lot of these tokens from the platforms, the product API they pull from the platforms of this same name of customers we talked about, which is Anthropic, OpenAI, Gemini. These are the large guys they're pulling it from, and that's where I think high, substantially most of these tokens consumption are tied to those LLMs. These LLM guys, as they productize their frontier models, whether it be Opus 4.7, ChatGPT 5.5 or Gemini 3.5, comes back to the same end demand on compute capacity we provide to all these guys. Well, that's a very interesting thought here. well that's a very interesting thought here You may be very well right that enterprise consuming AI is still relatively at an early stage of the game. you may be very well right that enterprise consuming ai is still relatively at an early stage of the game Having said that, what we're also seeing is a lot of what the enterprise is consuming on tokens. having said that what we're also seeing is a lot of what the enterprise is consuming on tokens They are buying a lot of these tokens from the platforms, the product API they pull from the platforms of this same name of customers we talked about, which is Anthropic, OpenAI, Gemini. they are buying a lot of these tokens from the platforms the product api they pull from the platforms of this same name of customers we talked about which is anthropic openai gemini These are the large guys they're pulling it from, and that's where I think high, substantially most of these tokens consumption are tied to those LLMs. these are the large guys they're pulling it from and that's where i think high substantially most of these tokens consumption are tied to those llms These LLM guys, as they productize their frontier models, whether it be Opus 4.7, ChatGPT 5.5 or Gemini 3.5, comes back to the same end demand on compute capacity we provide to all these guys. these llm guys as they productize their frontier models whether it be opus 4.7 chatgpt 5.5 or gemini 3.5 comes back to the same end demand on compute capacity we provide to all these guys Even a growth of enterprise demand that we're now starting to see as enterprise starts to consume AI tokens for their own workloads, for their own productivity users, as consumers do, they are buying from the same source, these same few guys. That's what's driving this very large, I call it insatiable growth in compute capacity that we are experiencing. We see that continuing to happen now through 2027 and what we're seeing now through 2028 as well. This is getting to be quite a sustainable and steepening trajectory of demand. Even a growth of enterprise demand that we're now starting to see as enterprise starts to consume AI tokens for their own workloads, for their own productivity users, as consumers do, they are buying from the same source, these same few guys. even a growth of enterprise demand that we're now starting to see as enterprise starts to consume ai tokens for their own workloads for their own productivity users as consumers do they are buying from the same source these same few guys That's what's driving this very large, I call it insatiable growth in compute capacity that we are experiencing. that's what's driving this very large i call it insatiable growth in compute capacity that we are experiencing We see that continuing to happen now through 2027 and what we're seeing now through 2028 as well. we see that continuing to happen now through 2027 and what we're seeing now through 2028 as well This is getting to be quite a sustainable and steepening trajectory of demand. this is getting to be quite a sustainable and steepening trajectory of demand

Speaker 5: If I could, doesn't this change the dynamic of what we've talked about before? You talked about seven or so customers for your XPUs, but this is actually happening. We've already seen it, Google offering cloud services for TPU. It opens up XPU access to all those smaller companies that don't meet the criteria for doing their own ASICs that you couldn't partner with to Broadcom's technology through these platforms. Why would that not be the case? If I could, doesn't this change the dynamic of what we've talked about before? if i could doesn't this change the dynamic of what we've talked about before You talked about seven or so customers for your XPUs, but this is actually happening. you talked about seven or so customers for your xpus but this is actually happening We've already seen it, Google offering cloud services for TPU. we've already seen it google offering cloud services for tpu It opens up XPU access to all those smaller companies that don't meet the criteria for doing their own ASICs that you couldn't partner with to Broadcom's technology through these platforms. it opens up xpu access to all those smaller companies that don't meet the criteria for doing their own asics that you couldn't partner with to broadcom's technology through these platforms Why would that not be the case? why would that not be the case

Speaker 7: Well, I guess the answer to that is it's possible, but the reality of the whole issue is the compute capacity most of AI generated are provided in the form of SaaS models. APIs are pulled from the clouds, whether they're from Bedrock, Vertex, Azure, or the first party. It is still provided in the cloud. Most of all that demand, at the end of the day, in terms of compute capacity, which is what we're doing, comes from those few large frontier model developers and the products they generate to supply to consumer and enterprises globally. Source of demand comes from those frontier model labs who are developing the products which consumer and enterprise, like you and us and our companies, are consuming. Well, I guess the answer to that is it's possible, but the reality of the whole issue is the compute capacity most of AI generated are provided in the form of SaaS models. well i guess the answer to that is it's possible but the reality of the whole issue is the compute capacity most of ai generated are provided in the form of saas models APIs are pulled from the clouds, whether they're from Bedrock, Vertex, Azure, or the first party. apis are pulled from the clouds whether they're from bedrock vertex azure or the first party It is still provided in the cloud. it is still provided in the cloud Most of all that demand, at the end of the day, in terms of compute capacity, which is what we're doing, comes from those few large frontier model developers and the products they generate to supply to consumer and enterprises globally. most of all that demand at the end of the day in terms of compute capacity which is what we're doing comes from those few large frontier model developers and the products they generate to supply to consumer and enterprises globally Source of demand comes from those frontier model labs who are developing the products which consumer and enterprise, like you and us and our companies, are consuming. source of demand comes from those frontier model labs who are developing the products which consumer and enterprise like you and us and our companies are consuming What we're doing is providing that capacity to that demand source, as opposed to going to a company or bank and trying to provide them XPUs, and then they having to try to build it, create a software stack to then write application and run it themselves. I'm sure there are few enterprises doing now, but there are not many. It's early stage in that whole game. Right now, most of the demand are coming from the frontier model players who are creating products. Things, as I said, like code assistance, like engineering verticals, which are really coming from the same source of guys who are doing all those. Those few guys doing the frontier models. It's not really coming from 100,000 companies directly trying to buy XPUs or for that matter, GPUs. It's not. What we're doing is providing that capacity to that demand source, as opposed to going to a company or bank and trying to provide them XPUs, and then they having to try to build it, create a software stack to then write application and run it themselves. what we're doing is providing that capacity to that demand source as opposed to going to a company or bank and trying to provide them xpus and then they having to try to build it create a software stack to then write application and run it themselves I'm sure there are few enterprises doing now, but there are not many. i'm sure there are few enterprises doing now but there are not many It's early stage in that whole game. it's early stage in that whole game Right now, most of the demand are coming from the frontier model players who are creating products. right now most of the demand are coming from the frontier model players who are creating products Things, as I said, like code assistance, like engineering verticals, which are really coming from the same source of guys who are doing all those. things as i said like code assistance like engineering verticals which are really coming from the same source of guys who are doing all those Those few guys doing the frontier models. those few guys doing the frontier models It's not really coming from 100,000 companies directly trying to buy XPUs or for that matter, GPUs. it's not really coming from 100,000 companies directly trying to buy xpus or for that matter gpus It's not. it's not

Speaker 13: One moment for our next question. That will come from the line of Joe Moore with Morgan Stanley. Your line is open. One moment for our next question. one moment for our next question That will come from the line of Joe Moore with Morgan Stanley. that will come from the line of joe moore with morgan stanley Your line is open. your line is open

Speaker 10: Great. Thank you. You talked about $30 billion of AI bookings in the quarter, which is a lot, I guess, relative to this quarter and next quarter shipments. Can you talk about the dynamic? Why is there so much backlog now, or is there-- You sort of said you can react to upside with supply, just why so many bookings this quarter relative to revenue? Great. great Thank you. thank you You talked about $30 billion of AI bookings in the quarter, which is a lot, I guess, relative to this quarter and next quarter shipments. you talked about $30 billion of ai bookings in the quarter which is a lot i guess relative to this quarter and next quarter shipments Can you talk about the dynamic? can you talk about the dynamic Why is there so much backlog now, or is there-- You sort of said you can react to upside with supply, just why so many bookings this quarter relative to revenue? why is there so much backlog now or is there-- you sort of said you can react to upside with supply just why so many bookings this quarter relative to revenue

Speaker 7: Well, there's a huge demand of compute. See, a lot of our large, these few six customers now, they realize that lead time to get compute, you need lead time. You need to be thoughtful. That's not just asking for wafers to get the chips or memory to ensure their HBMs are available or DRAMs available. They're also talking about, "Hey, I got to have the power, the power shell." All this is planning ahead. What we are seeing, the bookings that are coming, is not for immediate delivery. Some are hope to have, the reality they all accept is they need to align quite a few other things in place before they can deliver. Well, there's a huge demand of compute. well there's a huge demand of compute See, a lot of our large, these few six customers now, they realize that lead time to get compute, you need lead time. see a lot of our large these few six customers now they realize that lead time to get compute you need lead time You need to be thoughtful. you need to be thoughtful That's not just asking for wafers to get the chips or memory to ensure their HBMs are available or DRAMs available. that's not just asking for wafers to get the chips or memory to ensure their hbms are available or drams available They're also talking about, "Hey, I got to have the power, the power shell." All this is planning ahead. they're also talking about "hey i got to have the power the power shell." all this is planning ahead What we are seeing, the bookings that are coming, is not for immediate delivery. what we are seeing the bookings that are coming is not for immediate delivery Some are hope to have, the reality they all accept is they need to align quite a few other things in place before they can deliver. some are hope to have the reality they all accept is they need to align quite a few other things in place before they can deliver They are placing their orders early, and they're placing their orders now, and they are placing their orders in fairly huge demand, which basically gives us a lot more visibility than we normally otherwise would have in semiconductors. Our visibility runs all the way to 2028 right now. Three months ago, I can tell you our visibility run pretty much 2027. Today, it runs to 2028. That's a big part of the reason why we are creating this XPU platform as really the platform to plan to build up this capacity for those frontier model customers of ours who are seeing, as you guys are seeing in some of the financials they are telling you and in the experiences you have, which is driving huge amount of consumption of tokens from those compute capacity we are giving them. They are placing their orders early, and they're placing their orders now, and they are placing their orders in fairly huge demand, which basically gives us a lot more visibility than we normally otherwise would have in semiconductors. they are placing their orders early and they're placing their orders now and they are placing their orders in fairly huge demand which basically gives us a lot more visibility than we normally otherwise would have in semiconductors Our visibility runs all the way to 2028 right now. our visibility runs all the way to 2028 right now Three months ago, I can tell you our visibility run pretty much 2027. three months ago i can tell you our visibility run pretty much 2027 Today, it runs to 2028. today it runs to 2028 That's a big part of the reason why we are creating this XPU platform as really the platform to plan to build up this capacity for those frontier model customers of ours who are seeing, as you guys are seeing in some of the financials they are telling you and in the experiences you have, which is driving huge amount of consumption of tokens from those compute capacity we are giving them. that's a big part of the reason why we are creating this xpu platform as really the platform to plan to build up this capacity for those frontier model customers of ours who are seeing as you guys are seeing in some of the financials they are telling you and in the experiences you have which is driving huge amount of consumption of tokens from those compute capacity we are giving them We have the benefit now of a lot of lead time, we're planning that. It's not because of shortage of our components, it's also the other elements that need to be put in place, which particularly relates to power and connection into an infrastructure globally or through America, at least, that enables inference to be distributed through to consumers and enterprises throughout the country. We're just getting a lot of lead time. We have the benefit now of a lot of lead time, we're planning that. we have the benefit now of a lot of lead time we're planning that It's not because of shortage of our components, it's also the other elements that need to be put in place, which particularly relates to power and connection into an infrastructure globally or through America, at least, that enables inference to be distributed through to consumers and enterprises throughout the country. it's not because of shortage of our components it's also the other elements that need to be put in place which particularly relates to power and connection into an infrastructure globally or through america at least that enables inference to be distributed through to consumers and enterprises throughout the country We're just getting a lot of lead time. we're just getting a lot of lead time

Speaker 10: Very helpful. Thank you. Very helpful. very helpful Thank you. thank you

Speaker 13: Thank you. We do have time for one final question, and that will come from the line of Joshua Buchalter with TD Cowen. Your line is open. Thank you. thank you We do have time for one final question, and that will come from the line of Joshua Buchalter with TD Cowen. we do have time for one final question and that will come from the line of joshua buchalter with td cowen Your line is open. your line is open

Speaker 11: Hey, guys. Thank you for taking my question. In the past, you've talked about sort of $15 billion, $20 billion per gigawatt of compute. Given the 10 that you implied is what you'll be doing next year, it implies a much larger number than $100 billion. You've also mentioned that the value per gigawatt does vary per project. I guess, how should we think about the evolution of your revenue per gigawatt over time? As I would expect on one hand, then-to-then pricing to increase on programs you're already shipping, but also there are other projects that are entering the model. Thank you. Hey, guys. hey guys Thank you for taking my question. thank you for taking my question In the past, you've talked about sort of $15 billion, $20 billion per gigawatt of compute. in the past you've talked about sort of $15 billion $20 billion per gigawatt of compute Given the 10 that you implied is what you'll be doing next year, it implies a much larger number than $100 billion. given the 10 that you implied is what you'll be doing next year it implies a much larger number than $100 billion You've also mentioned that the value per gigawatt does vary per project. you've also mentioned that the value per gigawatt does vary per project I guess, how should we think about the evolution of your revenue per gigawatt over time? i guess how should we think about the evolution of your revenue per gigawatt over time As I would expect on one hand, then-to-then pricing to increase on programs you're already shipping, but also there are other projects that are entering the model. as i would expect on one hand then-to-then pricing to increase on programs you're already shipping but also there are other projects that are entering the model Thank you. thank you

Speaker 7: Our revenue, our content per gigawatt will increase. Put it simply. Our content from the fact that our compute chip XPU will go up in price very dramatically, particularly when you not only put SRAM into it, sparse cores, you start putting embedding CPU cores into the same XPUs and making those chips basically multi-die with lots of HBM. The trajectory of content increase will go up. It just doesn't go up every month, every six months, or every quarter. It will follow one generation to the next, that the content will grow per gigawatt. Our revenue, our content per gigawatt will increase. our revenue our content per gigawatt will increase Put it simply. put it simply Our content from the fact that our compute chip XPU will go up in price very dramatically, particularly when you not only put SRAM into it, sparse cores, you start putting embedding CPU cores into the same XPUs and making those chips basically multi-die with lots of HBM. our content from the fact that our compute chip xpu will go up in price very dramatically particularly when you not only put sram into it sparse cores you start putting embedding cpu cores into the same xpus and making those chips basically multi-die with lots of hbm The trajectory of content increase will go up. the trajectory of content increase will go up It just doesn't go up every month, every six months, or every quarter. it just doesn't go up every month every six months or every quarter It will follow one generation to the next, that the content will grow per gigawatt. it will follow one generation to the next that the content will grow per gigawatt

Speaker 11: Thank you. Thank you. thank you

Speaker 13: Thank you. I would now like to turn the call over to Ji Yoo, Head of Investor Relations, for closing remarks. Thank you. thank you I would now like to turn the call over to Ji Yoo, Head of Investor Relations, for closing remarks. i would now like to turn the call over to ji yoo head of investor relations for closing remarks

Speaker 8: Thank you, operator. Broadcom currently plans to report its earnings for the third quarter of fiscal year 2026 after close of market on Wednesday, September 2nd, 2026. A public webcast of Broadcom's earnings conference call will follow at 2:00 P.M. Pacific Time. That will conclude our earnings call today. Thank you all for joining. Cherie, you may end the call. Thank you, operator. thank you operator Broadcom currently plans to report its earnings for the third quarter of fiscal year 2026 after close of market on Wednesday, September 2nd, 2026. broadcom currently plans to report its earnings for the third quarter of fiscal year 2026 after close of market on wednesday september 2nd 2026 A public webcast of Broadcom's earnings conference call will follow at 2:00 P.M. a public webcast of broadcom's earnings conference call will follow at 2:00 p.m Pacific Time. pacific time That will conclude our earnings call today. that will conclude our earnings call today Thank you all for joining. thank you all for joining Cherie, you may end the call. cherie you may end the call

Speaker 13: This concludes today's program. Thank you all for participating. You may now disconnect. This concludes today's program. this concludes today's program Thank you all for participating. thank you all for participating You may now disconnect. you may now disconnect