push

app.py

@@ -16,8 +16,8 @@ def extract_text_from_pdf(pdf_file):
 # Create a Gradio interface
 interface = gr.Interface(
     fn=extract_text_from_pdf,
-    inputs=gr.inputs.File(label="Upload PDF"),
-    outputs=gr.outputs.Textbox(label="Extracted Text"),
+    inputs=gr.File(label="Upload PDF"),
+    outputs=gr.Textbox(label="Extracted Text"),
     title="PDF Text Extractor",
     description="Upload a PDF file to extract and display its text content."
 )

flagged/log.csv

@@ -0,0 +1,682 @@
+Upload PDF,Extracted Text,flag,username,timestamp
+/Users/richardhsu/pdf_upload/flagged/Upload PDF/df016a9cf3c724acbaf36497283ca4669fa5629f/2024Q2.pdf,"'Broadcom Inc. (NASDAQ:AVGO) Q2 2024 Earnings Conference Call June 
+12, 2024 5:00 PM ET
+Company Participants
+Ji Yoo - Head, IR
+Hock Tan - President and CEO
+Kirsten Spears - CFO
+Charlie Kawwas - President, Semiconductor Solutions Group
+Conference Call Participants
+Vivek Arya - Bank of America Securities
+Ross Seymore - Deutsche Bank
+Stacy Rasgon - Bernstein
+Harlan Sur - JPMorgan
+Ben Reitzes - Melius Research
+Toshiya Hari - Goldman Sachs
+Blayne Curtis - Jefferies
+Timothy Arcuri - UBS
+Thomas O'Malley - Barclays
+Karl Ackerman - BNP Paribas
+CJ Muse - Cantor Fitzgerald
+William Stein - Truist Securities
+Operator
+Welcome to Broadcom Inc. Second Quarter Fiscal Year 2024 Financial 
+Results Conference Call. At this time, for opening remarks and introductions, I
+would like to turn the call over to Ji Yoo, Head of Investor Relations of 
+Broadcom Inc.
+Ji Yoo
+Thank you, Operator, and good afternoon, everyone. Joining me on today's 
+call are Hock Tan, President and CEO; Kirsten Spears, Chief Financial Officer
+and Charlie Kawwas, President, Semiconductor Solutions Group.
+Broadcom distributed a press release and financial tables after the market 
+closed, describing our financial performance for the second quarter of fiscal 
+year 2024. If you did not receive a copy, you may obtain the information from 
+the Investor section of Broadcom's website at Broadcom.com.
+This conference call is being webcast live and an audio replay of the call can 
+be accessed for 1 year through the Investor section of Broadcom's website. 
+During the prepared comments, Hock and Kirsten will be providing details of 
+our second quarter fiscal year 2024 results, guidance for our fiscal year 2024, 
+as well as commentary regarding the business environment. We'll take 
+questions after the end of our prepared comments.
+Please refer to our press release today and our recent filings with the SEC 
+for information on the specific risk factors that could cause our actual results 
+to differ materially from the forward-looking statements made on this call. In 
+addition to US GAAP reporting, Broadcom reports certain financial measures 
+on a non-GAAP basis. A reconciliation between GAAP and non-GAAP 
+measures 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'll now turn the call over to Hock.
+Hock Tan
+Thank you, Ji. And thank you everyone for joining today. In our fiscal Q2 2024
+results -- consolidated net revenue was $12.5 billion, up 43% year-on-year as 
+revenue included a full quarter of contribution from VMware. But if we exclude
+VMware, consolidated revenue was up 12% year-on-year. And this 12% 
+organic growth in revenue was largely driven by AI revenue, which stepped up
+280% year-on-year to $3.1 billion, more than offsetting continued cyclical 
+weakness in semiconductor revenue from enterprises and telcos.
+Let me now give you more color on our two reporting segments. Beginning 
+with software. In Q2 infrastructure software segment revenue of $5.3 billion 
+was up 175% year-on-year and included $2.7 billion in revenue contribution 
+from VMware, up from $2.1 billion in the prior quarter. The integration of 
+VMware is going very well. Since we acquired VMware, we have modernized 
+the product SKUs from over 8,000 disparate SKUs to four core product 
+offerings and simplified the go-to-market flow, eliminating a huge amount of 
+channel conflicts.
+We are making good progress in transitioning all VMware products to a 
+subscription licensing model. And since closing the deal, we have actually 
+signed up close to 3,000 of our largest 10,000 customers to enable them to 
+build a self-service virtual private cloud on-prem. Each of these customers 
+typically sign up to a multi-year contract, which we normalize into an annual 
+measure known as Annualized Booking Value, or ABV. This metric, ABV for 
+VMware products, accelerated from $1.2 billion in Q1 to $1.9 billion in Q2.
+For reference, for the consolidated Broadcom software portfolio, ABV grew 
+from $1.9 billion in Q1 to $2.8 billion over the same period in Q2. Meanwhile, 
+we have integrated SG&A across the entire platform and eliminated 
+redundant functions. Year-to-date, we have incurred about $2 billion of 
+restructuring and integration costs and drove our spending run rate at 
+VMware to $1.6 billion this quarter, from what used to be $2.3 billion per 
+quarter pre-acquisition.
+We expect spending will continue to decline towards a $1.3 billion run rate 
+exiting Q4, better than our previous $1.4 billion plan, and will likely stabilize at 
+$1.2 billion post-integration. VMware revenue in Q1 was $2.1 billion, grew to 
+$2.7 billion in Q2, and will accelerate towards a $4 billion per quarter run rate. 
+We therefore expect operating margins for VMware to begin to converge 
+towards that of classic Broadcom software by fiscal 2025.
+Turning to semiconductors, let me give you more color by end markets. 
+Networking. Q2 revenue of $3.8 billion grew 44% year-on-year, representing 
+53% of semiconductor revenue. This was again driven by strong demand from
+hyperscalers for both AI networking and custom accelerators. It's interesting 
+to note that as AI data center clusters continue to deploy, our revenue mix has
+been shifting towards an increasing proportion of networking.
+We doubled the number of switches we sold year-on-year, particularly the 
+PAM-5 and Jericho3, which we deployed successfully in close collaboration 
+with partners like Arista Networks, Dell, Juniper, and Supermicro. Additionally,
+we also double our shipments of PCI Express switches and NICs in the AI 
+backend fabric. We're leading the rapid transition of optical interconnects in AI
+data centers to 800 gigabit bandwidth, which is driving accelerated growth for 
+our DSPs, optical lasers, and PIN diodes. And we are not standing still. 
+Together with these same partners, we are developing the next generation 
+switches, DSP, and optics that will drive the ecosystem towards 1.6 terabit 
+connectivity to scale out larger AI accelerated clusters.
+Talking of AI accelerators, you may know our hyperscale customers are 
+accelerating their investments to scale up the performance of these clusters. 
+And to that end, we have just been awarded the next generation custom AI 
+accelerators for these hyperscale customers of ours. Networking these AI 
+accelerators is very challenging, but the technology does exist today. In 
+Broadcom, with the deepest and broadest understanding of what it takes for 
+complex, large workloads to be scaled out in an AI fabric. Proof in 
+point, seven of the largest eight AI clusters in deployment today use 
+Broadcom Ethernet solutions.
+Next year, we expect all mega-scale GPU deployments to be on Ethernet. We
+expect the strength in AI to continue, and because of that, we now expect 
+networking revenue to grow 40% year-on-year compared to our prior 
+guidance of over 35% growth. Moving to wireless. Q2 wireless revenue of 
+$1.6 billion grew 2% year-on-year, was seasonally down 19% quarter-on-
+quarter and represents 22% of semiconductor revenue.
+And in fiscal '24, helped by content increases, we reiterate our previous 
+guidance for wireless revenue to be essentially flat year-on-year. This trend is 
+wholly consistent with our continued engagement with our North American 
+customer, which is deep, strategic, and multiyear and represents all of our 
+wireless business. Next, our Q2 server storage connectivity revenue was 
+$824 million or 11% of semiconductor revenue, down 27% year-on-year. We 
+believe though, Q2 was the bottom in server storage. And based on updated 
+demand forecast and bookings, we expect a modest recovery in the second 
+half of the year. And accordingly, we forecast fiscal '24 server storage 
+revenue to decline around the 20% range year-on-year.
+Moving on to broadband. Q2 revenue declined 39% year-on-year to $730 
+million and represented 10% of semiconductor revenue. Broadband remains 
+weak on the continued pause in telco and service provider spending. We 
+expect Broadcom to bottom in the second half of the year with a recovery in 
+2025. Accordingly, we are revising our outlook for fiscal '24 broadband 
+revenue to be down high 30s year-on-year from our prior guidance for a 
+decline of just over 30% year-on-year.
+Finally, Q2 industrial rev -- resale of $234 million declined 10% year-on-year. 
+And for fiscal '24, we now expect industrial resale to be down double-digit 
+percentage year-on-year compared to our prior guidance for high single-digit 
+decline.
+So to sum it all up, here's what we are seeing. For fiscal '24, we expect 
+revenue from AI to be much stronger at over $11 billion. Non-AI 
+semiconductor revenue has bottomed in Q2 and is likely to recover modestly 
+for the second half of fiscal '24.
+On infrastructure software, we're making very strong progress in integrating 
+VMware and accelerating its growth. Pulling all these three key factors 
+together, we are raising our fiscal '24 revenue guidance to $51 billion. And 
+with that, let me turn the call over to Kirsten.
+Kirsten Spears
+Thank you, Hock. Let me now provide additional detail on our Q2 financial 
+performance, which included a full quarter of contribution from VMware. 
+Consolidated revenue was $12.5 billion for the quarter, up 43% from a year 
+ago. Excluding the contribution from VMware, Q2 revenue increased 12% 
+year-on-year. Gross margins were 76.2% of revenue in the quarter. Operating
+expenses were $2.4 billion and R&D was $1.5 billion, both up year-on-year 
+primarily due to the consolidation of VMware.
+Q2 operating income was $7.1 billion and was up 32% from a year ago with 
+operating margin at 57% of revenue. Excluding transition costs, operating 
+profit of $7.4 billion was up 36% from a year ago, with operating margin of 
+59% of revenue. Adjusted EBITDA was $7.4 billion or 60% of revenue. This 
+figure excludes $149 million of depreciation. Now a review of the P&L for our 
+two segments, starting with semiconductors. Revenue for our semiconductor 
+solutions segment was $7.2 billion and represented 58% of total revenue in 
+the quarter. This was up 6% year-on-year.
+Gross margins for our semiconductor solutions segment were approximately 
+67%, down 370 basis points year-on-year, driven primarily by a higher mix of 
+custom AI accelerators. Operating expenses increased 4% year-on-year to 
+$868 million on increased investment in R&D, resulting in semiconductor 
+operating margins of 55%.
+Now moving on to infrastructure software. Revenue for infrastructure software
+was $5.3 billion, up 170% year-on-year, primarily due to the contribution of 
+VMware and represented 42% of revenue. Gross margin for infrastructure 
+software were 88% in the quarter, and operating expenses were $1.5 billion in
+the quarter, resulting in infrastructure software operating margin of 60%. 
+Excluding transition costs, operating margin was 64%.
+Now moving on to cash flow. Free cash flow in the quarter was $4.4 billion 
+and represented 36% of revenues. Excluding cash used for restructuring and 
+integration of $830 million, free cash flows of $5.3 billion were up 18% year-on
+-year and represented 42% of revenue. Free cash flow as a percentage of 
+revenue has declined from 2023 due to higher cash interest expense from 
+debt related to the VMware acquisition and higher cash taxes due to a higher 
+mix of US income and the delay in the reenactment of Section 174.
+We spent $132 million on capital expenditures. Days sales outstanding were 
+40 days in the second quarter, consistent with 41 days in the first quarter. We 
+ended the second quarter with inventory of $1.8 billion down 4% sequentially. 
+We continue to remain disciplined on how we manage inventory across our 
+ecosystem. We ended the second quarter with $9.8 billion of cash and $74 
+billion of gross debt. The weighted average coupon rate and years to maturity 
+of our $48 billion in fixed rate debt is 3.5% and 8.2 years respectively.
+The weighted average coupon rate and years to maturity of our $28 billion in 
+floating rate debt is 6.6% and 2.8 years, respectively. During the quarter, we 
+repaid $2 billion of our floating rate debt, and we intend to maintain this 
+quarterly repayment of debt throughout fiscal 2024. Turning to capital 
+allocation. In the quarter, we paid stockholders $2.4 billion of cash dividends 
+based on a quarterly common stock cash dividend of $5.25 per share.
+In Q2, non-GAAP diluted share count was 492 million as the 54 million shares
+issued for the VMware acquisition were fully weighted in the second quarter. 
+We paid $1.5 billion withholding taxes due on vesting of employee equity, 
+resulting in the elimination of 1.2 million AVGO shares. Today, we are 
+announcing a 10-for-1 forward stock split of Broadcom's common stock to 
+make ownership of Broadcom stock more accessible to investors and to 
+employees.
+Our stockholders of record after the close of market on July 11, 2024, will 
+receive an additional nine shares of common stock after the close of market 
+on July 12, with trading on a split-adjusted basis expected to commence at 
+market open on July 15, 2024. In Q3, reflecting a post-split basis, we expect 
+share count to be approximately 4.92 billion shares.
+Now on to guidance. We are raising our guidance for fiscal year 2024 
+consolidated revenue to $51 billion and adjusted EBITDA to 61%. For 
+modeling purposes, please keep in mind that GAAP net income and cash 
+flows in fiscal year 2024 are impacted by restructuring and integration-related 
+cash costs due to the VMware acquisition. That concludes my prepared 
+remarks. Operator, please open up the call for questions.
+Question-and-Answer Session
+Operator
+Thank you. [Operator Instructions] And our first question will come from the 
+line of Vivek Arya with Bank of America. Your line is open.
+Vivek Arya
+Thanks for taking my question. Hock, I would appreciate your perspective on 
+the emerging competition between Broadcom and NVIDIA across both 
+Accelerators and Ethernet switching. So on the Accelerator side, they are 
+going to launch their Blackwell product that many of the same customers that 
+you have a very large position in the custom compute. So I'm curious how you
+think customers are going to do that allocation decision, just broadly what the 
+visibility is.
+And then I think Part B of that is as they launch their Spectrum-X Ethernet 
+switch, do you think that poses increasing competition for Broadcom and the 
+Ethernet switching side in AI for next year? Thank you.
+Hock Tan
+Very interesting question, Vivek. On AI accelerators, I think we are operating 
+on a different -- to start with scale, much as a different model. It is -- and on 
+the GPUs, which are the AI accelerator of choice on merchant -- in a 
+merchant environment is something that is extremely powerful as a model. It's
+something that NVIDIA operates in, in a very, very effective manner.
+We don't even think about competing against them in that space, not in the 
+least. That's where they're very good at and we know where we stand with 
+respect to that. Now what we do for very selected or selective hyperscalers is,
+if there's a scale and the skills to try to create silicon solutions, which are AI 
+accelerators to do particular very complex AI workloads. We are happy to use 
+our IP portfolio to create those custom ASIC AI accelerator. So I do not see 
+them as truly competing against each other. And far for me to say I'm trying to
+position myself to be a competitor on basically GPUs in this market. We're 
+not. We are not a competitor to them. We don't try to be, either.
+Now on networking, maybe that's different. But again people may be 
+approaching and they may be approaching it from a different angle. We are as
+I indicated all along, very deep in Ethernet as we've been doing Ethernet for 
+over 25 years, Ethernet networking. And we've gone through a lot of market 
+transitions, and we have captured a lot of market transitions from cloud-scale 
+networking to routing and now AI. So it is a natural extension for us to go into 
+AI. We also recognize that being the AI compute engine of choice in 
+merchants in the ecosystem, which is GPUs, that they are trying to create a 
+platform that is probably end-to-end very integrated.
+We take the approach that we don't do those GPUs, but we enable the GPUs 
+to work very well. So if anything else, we supplement and hopefully 
+complement those GPUs with customers who are building bigger and bigger 
+GPU clusters.
+Vivek Arya
+Thank you.
+Operator
+One moment for our next question, and that will come from the line of Ross 
+Seymore with Deutsche Bank. Your line is open.
+Ross Seymore
+Hi guys. Thanks for taking my question. I want to stick on the AI theme, Hock. 
+The strong growth that you had in the quarter, the 280% year-over-year, could
+you delineate a little bit between if that's the compute offload side versus the 
+connectivity side? And then as you think about the growth for the full year, 
+how are those split in that realm as well? Are they kind of going hand-in-
+hand? Or is one side growing significantly faster than the other, especially 
+with the I guess, you said the next-generation accelerators are now going to 
+be Broadcom as well?
+Hock Tan
+Well, to answer your question on the mix, you are right. It's something we 
+don’t really predict very well, not understand completely except in hindsight. 
+Because it's like, to some extent, to the cadence of deployment of when they 
+put in the AI accelerators versus when they put in the infrastructure that puts it
+together, the networking. And we don't really quite understand it 100%. All we 
+know, it used to be 80% accelerators, 20% networking. It's now running closer
+to two-thirds accelerators, one-thirds networking and we'll probably head 
+towards 60%-40% by the close of the year.
+Ross Seymore
+Thank you.
+Operator
+Thank you. One moment for our next question. And that will come from the 
+line of Stacy Rasgon with Bernstein. Your line is open.
+Stacy Rasgon
+Hi, guys. Thanks for taking my question. I wanted to ask about the $11 billion 
+AI guide. You'd be at $11.6 billion even if you didn't grow AI from the current 
+level in the second half. And it feels to me like you're not suggesting that. It 
+feels to me like you think you could be [guided] (ph). So why wouldn't that AI 
+number be a lot more than $11.6 billion? It feels like it ought to be. Or am I 
+missing something?
+Hock Tan
+Because I guided just over $11 billion, Stacy could be what you think it is. It's 
+-- quarterly shipments get sometimes very lumpy. And it depends on rate of 
+deployment, depends on a lot of things. So you may be right. You may 
+estimate it better than I do, but the general trajectory is getting better.
+Stacy Rasgon
+Okay. So I guess again, how do I -- are you just suggesting that, that more 
+than $11 billion is sort of like the worst it could be because that would just be 
+flat at the current levels, but you're also suggesting that things are getting 
+better into the back half?
+Hock Tan
+Correct.
+Stacy Rasgon
+Okay. So I guess we just take that, that's a very -- if I'm reading it wrong, 
+that's just a very conservative number?
+Hock Tan
+That's the best forecast I have at this point, Stacy.
+Stacy Rasgon
+All right. Okay, Hock, thank you. I appreciate it.
+Hock Tan
+Thank you.
+Operator
+One moment for our next question, and that will come from the line of Harlan 
+Sur with JPMorgan. Your line is open.
+Harlan Sur
+Yeah, good afternoon. Thanks for taking my question. Hock, on cloud and AI 
+networking silicon, good to see that the networking mix is steadily increasing. 
+Like clockwork, the Broadcom team has been driving a consistent two year 
+cadence, right of new product introductions, Trident, Tomahawk, Jericho 
+family of switching and routing products for the past seven generations. You 
+layer on top of that your GPU -- TPU customers are accelerating their 
+cadence of new product introductions and deployments of their products.
+So is this also driving faster adoption curve for your latest Tomahawk and 
+Jericho products? And then maybe just as importantly, like clockwork, it is 
+been two years since you've introduced Tomahawk 5 product introduction, 
+right which if I look back historically, means you have silicon and are getting 
+ready to introduce your next-generation three-nanometer Tomahawk 6 
+products, which would, I think, puts you two years to three years ahead of 
+your competitors. Can you just give us an update there?
+Hock Tan
+Harlan, you're pretty insightful there. Yes, we launched Tomahawk 5 in 2023. 
+So you're right, by late 2025, the time we should be coming out with 
+Tomahawk 6, which is the 100 terabit switch, yes.
+Harlan Sur
+And is the -- is this acceleration of cadence by your GPU and TPU partners, is
+that also what's kind of driving the strong growth in the networking products?
+Hock Tan
+Well, you know what, sometimes you have to let things take its time. But it's 
+two-year cadence so we're right on. Late 2023, once when we shoot it out to a
+Tomahawk 5 and adoption. You're correct with AI has been tremendous 
+because it ties in with the need for a very large bandwidth in the networking, 
+in the fabric for AI clusters, AI data centers. But regardless, we have always 
+targeted Tomahawk 6 to be out two years after that, which should put it into 
+late '25.
+Harlan Sur
+Okay, thank you Hock.
+Operator
+Thank you. One moment for our next question, and that will come from the 
+line of Ben Reitzes with Melius. Your line is open.
+Ben Reitzes
+Hi, thanks a lot. And congrats on the quarter and guide. Hock, I wanted to talk
+a little bit more about VMware. Just wanted to clarify if it is indeed going better
+than expectations. And how would you characterize the customer willingness 
+to move to subscription? And also just a little more color on Cloud Foundation.
+You've cut the price there, and are you seeing that beat expectations? Thanks
+a lot.
+Hock Tan
+Thanks, and thanks for your kind regards on the quarter. But it's -- as far as 
+VMware is concerned, we're making good progress. The journey is not over 
+by any means, but it is pretty much very much to expectation. Moving to 
+subscription, well, in VMware we are very slow compared to, I mean a lot of 
+other guys, Microsoft, Salesforce, Oracle, who have already been pretty much
+in subscription. So VMware is late in that process. But we're trying to make up
+for it by offering it and offering it in a very, very compelling manner because 
+subscription is the right things to do, right?
+It's a situation where you put out your product offering, and you update it, 
+patch it, but update it feature-wise, everything as capabilities on a continual 
+basis, almost like getting your news on an ongoing basis, subscription online 
+versus getting it in a printed manner once a week. That's how I compare 
+perpetual to subscription. So it is very interesting for a lot of people to want to 
+can't get on. And so to no surprise, they are getting on very well. The big 
+selling point we have as I indicated, is the fact that we are not just trying to 
+keep customers kind of stuck on just server or compute virtualization.
+That's a great product, great technology, but it's been out for 20 years. Based 
+on what we are offering now at a very compelling price point, compelling in a 
+very attractive price point, the whole stack, software stack to use vSphere and
+its basic fundamental technology to virtualize networking, storage, operation 
+and management, the entire data center and create this self-service private 
+cloud.
+And thanks for saying it, you're right, and we have priced it down to the point 
+where it is comparable with just compute virtualization. So yes, that is getting 
+a lot of interest, a lot of attention from the customers. We have signed up who 
+would like to deploy -- the ability to deploy private cloud, their own private 
+cloud on-prem. As a nice complement, maybe even alternative or hybrid to 
+public clouds, that's the selling point, and we are getting a lot of interest from 
+our customers in doing that.
+Ben Reitzes
+Great. And it's on track for $4 billion by the fourth quarter still, which is 
+reiterated?
+Hock Tan
+Well, I didn't give a specific time frame, did I? But it's on track as we see this 
+process growing towards a $4 billion quarter.
+Ben Reitzes
+Okay, thanks a lot Hock.
+Hock Tan
+Thanks.
+Operator
+Thank you. One moment for our next question, and that will come from the 
+line of Toshiya Hari with Goldman Sachs. Your line is open.
+Toshiya Hari
+Hi, thank you so much for taking my question. I guess kind of a follow-up to 
+the previous question on your software business. Hock, you seem to have 
+pretty good visibility into hitting that $4 billion run rate over the medium term, 
+perhaps. You also talked about your operating margin in that business 
+converging to classic Broadcom levels. I know the integration is not done and 
+you're still kind of in debt paydown mode. But how should we think about your 
+growth strategy beyond VMware? Do you think you have enough drivers, both
+on the semiconductor side and the software side to continue to drive growth 
+or is M&A still an option beyond VMware? Thank you.
+Hock Tan
+Interesting question. And you're right. As I indicated in my remarks, even we 
+found the contribution from VMware this past quarter where we have AI 
+helping us, but we have non-AI semiconductor sort of bottoming out. We're 
+able to show 12% organic growth year-on-year. So almost have to say, so do 
+we need to rush to buy another company? Answer is no. But all options are 
+always open because we are trying to create the best value for our 
+shareholders who have entrusted us with the capital to do that.
+So I would not discount that alternative because our strategy, our long-term 
+model has always been to grow through a combination of acquisition, but also
+on the assets we acquire to really improve, invest, and operate them better to 
+show organic growth as well. But again, organic growth often enough is 
+determined very much by how fast your market would grow. So we do look 
+towards acquisitions now and then.
+Toshiya Hari
+All right. Thank you.
+Operator
+Thank you. One moment for our next question, and that will come from the 
+line of Blayne Curtis with Jefferies. Your line is open.
+Blayne Curtis
+Hi, thanks for taking my question. I wanted to ask you Hock, on the 
+networking business kind of ex AI. Obviously, I think there's an inventory 
+correction the whole industry is seeing. But just kind of curious, I don't think 
+you mentioned that it was at a bottom. So just the perspective, I think it's 
+down about [60%] (ph) year-over-year. Is that business finding a bottom? I 
+know you said overall whole semi business should -- non-AI should see a 
+recovery. Are you expecting any there any perspective on just customer 
+inventory levels in that segment?
+Hock Tan
+We see it behaving. I didn't particularly call it out, obviously because more 
+than anything else, I kind of link it very much to server storage, non-AI that is. 
+And we call server storage as at a bottom Q2, and we call it to recover 
+modestly second half of the year. We see the same thing in networking, which
+is a combination of enterprise networking, as well as the hyperscalers who run
+their traditional workloads on those, though it's hard to figure out sometimes. 
+But it is. So we see the same trajectory as we are calling out on server 
+storage.
+Blayne Curtis
+Okay, thank you.
+Operator
+Thank you. One moment for our next question, and that will come from the 
+line of Timothy Arcuri with UBS. Your line is open. Mr. Arcuri, your line is 
+open.
+Timothy Arcuri
+Hi, sorry. Thanks. Hock, is there a way to sort of map GPU demand back to 
+your AI networking opportunity? I think I've heard you say in the past that if 
+you spent $10 billion on GPU compute, you need to spend another $10 billion 
+on other [infrastructure] (ph), most of which is networking. So I'm just kind of 
+wondering if when you see these big GPU numbers, is there sort of a rule of 
+thumb that you use to map it back to what the opportunity will be for you? 
+Thanks.
+Hock Tan
+There is, but it's so complex, I stopped creating such a model, Tim. I've said it.
+But there is because one would say that for every -- you almost say, for every 
+$1 billion you spend on GPU, you probably would spend probably on 
+networking, and if we include the optical interconnects as part of it, though we 
+are not totally in that market, except for the components like DSPs, lasers, 
+PIN diodes that go into those, high-bandwidth optical connect. But if you just 
+take optical connects in totality, switching, all the networking components, it 
+goes into -- attaches itself to clustering a bunch of GPUs, you probably would 
+say that about 25% of the value of the GPU goes to networking, the rest on 
+networking.
+Now not entirely all of it is my available market. I don't do the optical connects,
+but I do the few components I talked about in it. But roughly, the simple way to
+look at it is probably about 25%, maybe 30% of all these infrastructure 
+components is kind of attached to the GPU value point itself. But having said 
+that, it's never – we are never that precise that deployment is the same way. 
+So you may see the deployment of GPU or purchase of GPU much earlier. 
+And the networking comes later or sometimes less the other way around, 
+which is why you're seeing the mix going on within my AI revenue mix. But 
+typically, you run towards that range over time.
+Timothy Arcuri
+Perfect Hock, thank you so much.
+Operator
+Thank you. One moment for our next question, and that will come from the 
+line of Thomas O'Malley with Barclays. Your line is open.
+Thomas O’Malley
+Hi, guys. Thanks for taking my question. And nice results. My question in 
+regards to the custom ASIC AI. Hock, you had a long run here of a very 
+successful business, particularly with one customer. If you look in the market 
+today, you have a new entrant who's playing with different customers. And I 
+know that you said historically, that's not really a direct customer to you. But 
+could you talk about what differentiates you from the new entrant in the 
+market as of late? And then there's been profitability questions around the 
+sustainability of gross margins longer term. Can you talk about if you see any 
+increased competition? And if there's really areas that you would deem more 
+or less defensible in your profile today? And if you would see kind of that 
+additional entrant maybe attack any of those in the future?
+Hock Tan
+Let me take the second part first, which is our AI -- custom AI accelerator 
+business. It is a very profitable business, and let me put to scale -- look 
+examine from a model point of view. I mean, each of these AI accelerators no 
+different from a GPU. The way these large language models get run 
+computing, get run on these accelerators, no one single accelerator, as you 
+know, can run these big large language models. You need multiple of it no 
+matter how powerful those accelerators are.
+But also, and the way the models are run, there is a lot of memory access to 
+memory requirements. So each of this accelerator comes with a large amount
+of cache memory, as you call it, what you guys probably now know as HBM, 
+high-bandwidth memory specialized for AI accelerators or GPUs. So we're 
+supplying both in our custom business.
+And the logic side of it, where the compute function is on doing the chips, the 
+margin there are no different than the margin in any -- in most of any of a 
+semiconductor silicon chip business. But when you're attached to it, a huge 
+amount of memory, memory comes from a third-party. There are a few 
+memory makers who make this specialized thing. We don't do margin 
+stacking on that part. So by almost buying basic math will dilute the margin of 
+these AI accelerators when you sell them with memory, which we do. It does 
+push up revenue somewhat higher but it has diluted the margin.
+But regardless, the spend, the R&D, the OpEx that goes to support this as a 
+percent of the revenue, which is higher revenue, so much less. So on an 
+operating margin level, this is easily as profitable, if not more profitable, given 
+the scale that each of those custom AI accelerators can go up to. It's even 
+better than our normal operating margin scale. So that's the return on 
+investment that attracts and keeps us going at this game. And this is more 
+than a game. It is a very difficult business. And to answer your first question, 
+there is only one Broadcom, period.
+Thomas O'Malley
+Thanks Hock.
+Operator
+Thank you. One moment for our next question, and that will come from the 
+line of Karl Ackerman with BNP. Your line is open.
+Karl Ackerman
+Hi, thank you. Good afternoon. Hock, your networking switch portfolio with 
+Tomahawk and Jericho chipsets allows hyperscalers to build AI clusters using
+either a switch-scheduled or endpoint-scheduled network. And that, of course 
+is unique among competitors. But as hyperscalers seek to deploy their own 
+unique AI clusters, are you seeing a growing mix of white-box networking 
+switch deployments? I ask because while your custom sales and business 
+continues to broaden, it will be helpful to better understand the growing mix of 
+your $11 billion AI networking portfolio combined this year. Thank you.
+Hock Tan
+Let me have Charlie address this question. He's the expert.
+Charlie Kawwas
+Yes. Thank you, Hock. So two quick things on this. One is the – you are 
+exactly right that the portfolio we have is quite unique in providing that 
+flexibility. And by the way, this is exactly why Hock, in his statements earlier 
+on, mentioned that seven out of the top eight hyperscalers use our portfolio. 
+And they use it specifically because it provides that flexibility. So whether you 
+have an architecture that's based on an endpoint and you want to actually 
+build your platform that way or you want that switching to happen in the fabric 
+itself, that's why we have the full end-to-end portfolio. So that actually has 
+been a proven differentiator for us.
+And then on top of that, we've been working, as you know, to provide a 
+complete network operating system that's open on top of that using SONiC 
+and Psi, which has been deployed in many of the hyperscalers. And so the 
+combination of the portfolio plus the stack really differentiates the solution that
+we can offer to these hyperscalers. And if they decide to build their own NICs,
+their own accelerators are custom or use standard products, whether it is from
+Broadcom or other, that platform, that portfolio of infrastructure switching 
+gives you that full flexibility.
+Karl Ackerman
+Thank you.
+Operator
+Thank you. One moment for our next question, and that will come from the 
+line of C.J. Muse with Cantor Fitzgerald. Your line is open.
+CJ Muse
+Yeah. Good afternoon. Thank you for taking my question. I was hoping to ask 
+two part software question. So excluding VMware, your Brocade, CA, and 
+Symantec business now running $500 million higher for the last two quarters. 
+So curious, is that the new sustainable run rate or were there onetime events 
+in both January and April that we should be considering?
+And then the second question is as you think about VMware Cloud 
+Foundation adoption, are you seeing any sort of crowding out of spending like
+other software guys are seeing as they repurpose their budgets to IT? Or is 
+that business so less discretionary that it's just not an impact to you? Thanks 
+so much.
+Hock Tan
+Well, on the second one, I don't know about any crowding out, to be honest. 
+It's not. What we are offering, obviously, is not something that they would like 
+to use themselves, to be able to do themselves, which is they're already 
+spending on building their own on-prem data centers. And typical approach 
+people take, a lot of enterprises take historically continue today than most 
+people do a lot, people do is they have best of breed.
+What I mean is they create a data center that is compute as a separate 
+category, best compute there is and they often enough use vSphere for 
+compute virtualization due to improved productivity, but best of breed there. 
+And best of breed on networking and best of breed on storage with a common
+management operations layer, which very often is also VMware we realize. 
+And what we're trying to say is this mixed bag, and what they see -- is this 
+mixed bag best of [big] (ph) data center, very heterogenous, is not driving 
+that, is not a highly resilient data center.
+I mean, you have a mixed bag. So it goes down. Where do you find quickly 
+root cause? Everybody is pointing fingers at the other. So you got a problem, 
+not very resilient and not necessary secure between bare metal in one side 
+and software on the other side.
+So it's a natural thinking on the part of many CIOs we talk to, to say, hey, I 
+want to create one common platform as opposed to just [best-of-breed of age]
+(ph). So that gets us into that. So it is a greenfield that’s not bad, they started 
+from scratch. If it's a brownfield, that means they have existing data centers 
+trying to upgrade. It's -- that sometimes that's more challenging for us to get 
+that adopted.
+So I'm not sure there's a crowding out here. There's some competition, 
+obviously, on greenfield, where they can spend their budget on an entire 
+platform versus best-of-breed. But on the existing data center where you're 
+trying to upgrade, that's a trickier thing to do. And it cuts the other way as well 
+for us. So that's how I see it. So in that sense, best answer is I don't think 
+we're seeing a level of crowding out that is -- any and that very significant for 
+me to mention.
+In terms of the revenue mix, no, Brocade is having a great, great field year so 
+far and still chugging along. But will that sustain? Hell no, you know that. 
+Brocade goes through cycles like most enterprise purchases. So we're 
+enjoying it while it lasts.
+CJ Muse
+Thank you.
+Hock Tan
+Thanks.
+Operator
+Thank you. And we do have time for one final question, and that will come 
+from the line of William Stein with Truist Securities. Your line is open.
+William Stein
+Great. Thanks for squeezing me in. Hock, congrats on the yet another great 
+quarter and a strong outlook in AI. I also want to ask about something you 
+mentioned with VMware. In your prepared remarks, you highlighted that 
+you've eliminated a tremendous amount of channel conflict. I'm hoping you 
+can linger on this a little bit and clarify maybe what you did. And specifically 
+also what you did in the heritage Broadcom software business, where I think 
+historically, you've shied away from the channel. And there was an idea that 
+perhaps you'd reintroduce those products to the channel through a more 
+unified approach using VMware's channel partners or resources. So any sort 
+of clarification here, I think, would be helpful.
+Hock Tan
+Yes, thank you. That's a great question. Yes, VMware taught me a few things.
+They have 300,000 customers, 300,000. That's pretty amazing. And we look 
+at it. I know under CA, we took a position that let's pick an A-list strategic guy 
+and focus on it. I can't do that in VMware. I approached it differently. And I 
+start to learn the value of a very strong bunch of partners they have, which are
+a network of distributors and something like 15,000 VARs, value-added 
+resales supported with these distributors.
+So we have doubled down and invested in this resale network in a big way for
+VMware. It's a great move, I think but six months into the game. But we are 
+seeing a lot more velocity out of it. Now these resellers, having said that, tend 
+to be very focused on a very long tail of their 300,000 customers. The largest 
+10,000 customers of VMware are large enterprises who tend to -- they are 
+very large enterprises, the largest banks, the largest health care companies.
+And their view is I want very bespoke service, support, engineering solutions 
+from us. So we've created a direct approach, supplemented with the VAR of 
+choice where they need to. But on the long tail of 300,000 customers, they get
+a lot of services from the resellers, value-added resellers, and so in their way. 
+So we now strengthen that whole network of resellers so that they can go 
+direct, manage, supported financially with distributors.
+And we don't try to challenge those guys unless the customers. On the end of 
+the day, the customer chose where they like to be supported. So we kind of 
+simplify this together with the number of SKUs they have. In the past, unlike 
+what we're trying to do here, everybody is a partner. I mean, you're talking a 
+full range of partners. And whoever makes the biggest deal gets the lowest. 
+The partner that makes the biggest deal gets the lower -- biggest discount, 
+lowest price. And they are out there basically kind of creating a lot of channel 
+chaos and conflict in the marketplace.
+Here, we don't. The customers, I am aware. They can take it direct from 
+VMware to their direct sales force or they can easily move to the resellers to 
+get it that way. And as a third alternative which we offer, if they chose not -- 
+they want to run their applications on VMware and they want to run it 
+efficiently on a full stack. They have a choice now of going to a hosted 
+environment managed by network of managed service providers, which we 
+set up globally, that will run the infrastructure, invest and operate the 
+infrastructure. And these enterprise customers just run their workloads in and 
+get it as a service, basically VMware as a service. That's a third alternative, 
+and we are clear to make it very distinct and differentiated for our end-use 
+customers. They're available to all three is how they choose to consume our 
+technology.
+William Stein
+Great. Thank you.
+Operator
+Thank you. I would now like to hand the call over to Ji Yoo, Head of Investor 
+Relations, for any closing remarks.
+Ji Yoo
+Thank you, Cherie. Broadcom currently plans to report its earnings for the 
+third quarter of fiscal '24 after close of market on Thursday, September 5, 
+2024. 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. Operator, you may end the call.
+Operator
+Thank you all for participating. This concludes today's program. You may now 
+disconnect.
+",,,2024-07-25 21:01:29.337394