Broadcom CEO Hock Tan optimistic about AI, VMware deal hopeful | CRN

June 02, 2023, 1:10 pm EDT

I’d say at least half of the growth is still in our traditional business. The other half could be out of generative AI, Broadcom CEO Hock Tan tells investors.

Broadcom CEO Hock Tan offered no updates on when the pending merger between his company and VMware might be done during an earnings call Thursday, in which he revealed a winning frame for the chip giant and continued to talk about generative AI driving demand.

Tan said Broadcom sees a huge revenue uplift around demand for AI products related to the company’s semiconductor business. Tan said demand has increased and that by FY2024 products made for AI could account for a quarter of Broadcom’s semiconductor revenue.

“I know you all want to know how we are benefiting from this strong deployment of generative AI by our customers,” Tan told investors. “Put that into perspective, our revenue today from this opportunity represents approximately 15 percent of our semiconductor business. That said, it was only 10% in FY22. And we believe it could be more than 25% of semiconductor revenue in FY24.”

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Broadcom’s Q2 2023 revenue was $8.7 billion, up 8% year over year. Net income was $3.4 billion on earnings per share that were $8.15, up $2.22 from a year ago.

Tan said Broadcom also sees growth in the rest of its business, but said it’s also boosted by demand for AI products.

“It’s not entirely all of our growth,” he said. “I would say at least half of the growth is still in our traditional business. The other half may be out of Generative AI.

Regarding the pending acquisition of VMware, first announced about a year ago, Tan said the $61 billion deal is still pending through regulators around the world. He said the proposed merger has received legal clearances in Australia, Brazil, Canada, South Africa and Taiwan. Canadian officials told CRN that while the deal has been approved there, authorities can still challenge the merger up to a year after it closes if it’s found to result in anticompetitive practices.

“We still expect the transaction to close in Broadcom’s fiscal year 2023,” Tan said. “The combination of Broadcom and VMware enables enterprises to accelerate innovation and expand choice by addressing the most complex technology challenges in this multi-cloud era. And we’re hopeful that regulators will see that when they conclude their review.

Last month, Broadcom and VMware agreed to push the external date back to August 26th. If the deal is not closed by that date, both parties would push the external date to November 26, which is after the end of Broadcom’s fiscal year.

Meanwhile, regulators in the United States, the European Union and the United Kingdom are conducting extensive investigations into whether a merger between Broadcom and VMware would harm competitors or the market.

There are hearing dates in the UK and EU this summer. Both agencies said they believe the merger could hurt competition by limiting access of Broadcom’s competitors to VMware.

The FTC, which is reviewing the merger in the United States, said it had no comment.