Analyst(s): Olivier Blanchard, Daniel Newman
Publication Date: June 10, 2025
Broadcom’s Q2 FY 2025 earnings highlight continued strength in AI semiconductors and infrastructure software. Growth was driven by robust demand for AI networking and steady enterprise adoption of VMware’s VCF stack, reinforcing momentum across both segments ahead of H2 FY 2025.
What is Covered in this Article:
- Broadcom’s Q2 FY 2025 financial results
- Strong momentum in AI networking driven by Ethernet solutions and Tomahawk switches
- Infrastructure software revenue bolstered by VMware VCF adoption
- Custom AI accelerator (XPU) deployment acceleration, and strategic outlook
- Guidance for Q3 FY 2025 and insights on semiconductor segment recovery trajectory
The News: Broadcom Inc. (NASDAQ: AVGO) announced its Q2 FY 2025 results, reporting record Q2 revenue of $15.0 billion, up 20% year-on-year (YoY) and in line with consensus estimates. Semiconductor solutions revenue reached $8.4 billion (+17% YoY), while infrastructure software revenue rose 25% YoY to $6.6 billion. Adjusted EBITDA rose 35% YoY to $10.0 billion, and the corresponding margin rose to 66.7% from 59.5% in the prior period. Non-GAAP net income increased 44% YoY to $7.8 billion (+1.5% above consensus), and non-GAAP diluted EPS rose to $1.58 (Q2 FY 2024: $1.10), which beat street expectations by 1.1%.
“Broadcom achieved record Q2 revenue on continued momentum in AI semiconductor solutions and VMware. Q2 AI revenue grew 46% YoY to over $4.4 billion, driven by robust demand for AI networking,” said Hock Tan, President and CEO of Broadcom Inc. “We expect growth in AI semiconductor revenue to accelerate to $5.1 billion in Q3, delivering ten consecutive quarters of growth, as our hyperscale partners continue to invest.”
Broadcom Q2 FY 2025 Sees Record Revenue, Solid AI and Software Growth
Analyst Take: Broadcom’s Q2 FY 2025 results highlight a quarter of sustained growth driven by its AI semiconductor business and robust VMware-driven infrastructure software sales. The company’s performance was fueled by significant demand from hyperscalers deploying Ethernet-based AI networking, combined with broad enterprise adoption of the VMware Cloud Foundation (VCF) stack. AI semiconductor revenue grew notably, highlighting the ongoing strategic importance of custom accelerators (XPUs) and networking solutions. Despite Broadcom’s impressive numbers, investor sentiment showed some caution as Q3 guidance only modestly exceeded consensus, falling short of loftier expectations set by recent share price momentum. Nevertheless, Broadcom remains firmly positioned for continued growth in AI solutions through FY 2025 and into FY 2026.
AI Networking Momentum Driven by Tomahawk 6 Launch
Broadcom’s AI semiconductor segment growth was primarily driven by strong demand in AI networking, which surged over 170% YoY, powered by robust sales of Ethernet-based networking solutions, including previous-generation Tomahawk switches and Jericho routers. During Q2, AI networking represented approximately 40% of total AI semiconductor revenues, highlighting Broadcom’s dominant position in scale-out and scale-up environments among major hyperscalers. Broadcom also recently announced the Tomahawk 6 switch, featuring 102.4 terabits per second of capacity. While initial Tomahawk 6 shipments in Q2 were limited to proof-of-concept deployments, strong early interest suggests it will significantly drive AI networking demand in upcoming quarters due to improved performance, reduced latency, and greater cluster scalability. The transition to Tomahawk 6, expected to ramp substantially from proof-of-concept to broader deployments, positions Broadcom strategically for sustained momentum in AI data-center networking solutions into FY 2026.
Infrastructure Software Strength from VMware and VCF Adoption
Infrastructure software revenue grew 25% YoY, supported by Broadcom’s successful conversion of enterprise customers from perpetual VMware vSphere licenses to subscription-based VCF stacks. Currently, over 87% of Broadcom’s 10,000 largest enterprise customers have transitioned to VCF, which allows enterprises to modernize on-premises private clouds, run container-based applications, and manage AI workloads. The accelerated adoption of VCF significantly boosted annual recurring revenue (ARR), underpinning Broadcom’s software segment growth trajectory. With approximately another year to a year and a half remaining for full customer conversion, the infrastructure software segment is expected to sustain robust growth momentum into FY 2026.
Expansion of Custom AI Accelerators (XPUs) to Accelerate
Broadcom highlighted notable progress with custom AI accelerators, reporting continued robust adoption from hyperscale customers. The company remains on track to deploy clusters exceeding one million custom XPUs by 2027 across at least three key hyperscale customers, primarily focused on training frontier AI models. Notably, management cited an accelerated pace of XPU deployments anticipated in the H2 FY 2026, driven by surging inference demand. Broadcom emphasized that hyperscale partners remain committed to their long-term AI investments despite macroeconomic uncertainties, doubling down on inference workloads to monetize their AI platforms. This shift indicates that hyperscalers are increasingly focused on quickly achieving returns from their substantial training investments, potentially accelerating Broadcom’s XPU revenue trajectory earlier than previously anticipated. Broadcom expects sustained annual growth of roughly 60% in its AI semiconductor segment through FY 2026, reaffirming a robust trajectory for its custom accelerator roadmap.
Cyclical Semiconductor Segments Remain Sluggish
Despite the positive momentum in AI and software, Broadcom’s non-AI semiconductor segments have yet to rebound fully, reflecting broader cyclical softness in the semiconductor market. Q2 FY 2025 revenues from non-AI semiconductors declined by approximately 5% YoY, primarily due to persistent weakness in industrial and wireless markets. Sequential improvements in broadband and enterprise networking segments offered some relief, but overall recovery remains gradual. Management guided that non-AI semiconductor revenue would likely stay flat at around $4 billion for Q3 FY 2025. This sluggish recovery highlights the continuing bifurcation in Broadcom’s semiconductor portfolio, with AI-focused products significantly outperforming cyclical categories – a trend likely to persist through at least the next several quarters.
Guidance and Final Thoughts
Broadcom’s Q3 FY 2025 guidance anticipates approximately $15.8 billion in revenue, reflecting a 21% YoY increase, modestly surpassing analyst consensus but below the highest market expectations. AI semiconductor revenue specifically is guided strongly at $5.1 billion (consensus: $4.8 billion), indicating sustained hyperscale demand and marking the tenth consecutive quarter of robust growth in the segment. Adjusted EBITDA margin guidance remains high at 66% despite an anticipated sequential decline in gross margins driven by an increasing mix of lower-margin XPUs. Although Broadcom’s guidance tempered investor expectations somewhat, the underlying fundamentals remain strong, with AI growth expected to persist at current elevated rates into FY 2026. Investors are likely to remain attentive to the non-AI semiconductor segment’s recovery trajectory and the pace of VMware customer subscription transitions as key determinants of Broadcom’s medium-term performance.
See the full press release on Broadcom’s Q2 FY 2025 earnings on the Broadcom website.
Disclosure: Futurum is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum as a whole.
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Author Information
Research Director Olivier Blanchard covers edge semiconductors and intelligent AI-capable devices for Futurum. In addition to having co-authored several books about digital transformation and AI with Futurum Group CEO Daniel Newman, Blanchard brings considerable experience demystifying new and emerging technologies, advising clients on how best to future-proof their organizations, and helping maximize the positive impacts of technology disruption while mitigating their potentially negative effects. Follow his extended analysis on X and LinkedIn.
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
