During the recent earnings call, Broadcom's CEO Hock Tan shared an optimistic outlook for the future of the AI chip market, predicting significant revenue growth in this area by 2027.
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He stated that Broadcom's serviceable addressable market (SAM) for AI-related products and networks is expected to be between $60 billion and $90 billion. Tan also revealed that Broadcom is currently collaborating with three major hyperscale customers, with two additional potential customers in advanced discussions, who plan to purchase millions of Broadcom's AI accelerators (XPU) to enhance their AI workloads.
Hock Tan emphasized that this process is not something that can be achieved in the short term, but rather a long-term development that will take several years. He noted that by 2027, these three customers are expected to deploy one million XPU clusters within the same architecture. This statement caused Broadcom's stock price to rise 24% on the same day, marking a milestone as the company's market value surpassed $1 trillion for the first time.
When discussing the company's overall performance, Hock Tan mentioned that Broadcom's revenue from traditional products grew by 11% year-over-year. He added that with Broadcom's completion of the $69 billion acquisition of VMware, VMware contributed $3.85 billion in revenue to Broadcom in the most recent quarter, leading to an overall revenue increase of 51%. Hock Tan noted that since the acquisition, he has successfully halved VMware's operating costs from $2.4 billion per quarter to $1.2 billion, and the company's profit margin has increased from 30% to 70%.
Additionally, Hock Tan mentioned that VMware has installed on 21 million CPU cores in the most recent quarter, up from 19 million cores in the previous quarter. Among the company's top 10,000 customers, 4,500 have migrated their virtualization environments to Broadcom's VMware cloud infrastructure.
However, the latest forecast from market research firm Forrester indicates that VMware customers are expected to reduce their deployments by 40% in the coming year. This trend is attributed to an increasing number of customers choosing to migrate to public clouds, on-premises alternatives, and new architectures. During the earnings call, Broadcom's CFO Kirsten Spears stated that the company will no longer disclose virtualization business revenue separately but will merge it with revenue from mainframe and other traditional software businesses.
Key Highlights:
🌟 Broadcom expects the serviceable addressable market for AI to reach $60 billion to $90 billion by 2027.
📈 Broadcom's market value surpasses $1 trillion for the first time due to surging demand for AI chips.
💰 Broadcom's overall revenue increases by 51% through the acquisition of VMware, with significant reductions in operating costs.
