On Wednesday, Broadcom, Inc. (NASDAQ:AVGO) said demand tied to artificial intelligence infrastructure is boosting parts of its software business, with CEO Hock Tan dismissing concerns that the rise of AI and agentic AI could hurt long-term growth.
AI Demand Is Driving VMware Growth
Speaking during Broadcom’s fiscal second-quarter earnings call, Tan said the company is seeing stronger momentum in its infrastructure software business, particularly from VMware, as customers expand computing capacity to support AI workloads.
“We’re not seeing it,” Tan said when asked whether AI or agentic AI was affecting software growth and renewals. Instead, he pointed to rising hardware demand as a tailwind.
“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,” Tan said.
According to Tan, Broadcom expects this momentum to continue as enterprises increase spending on AI infrastructure over the coming quarters.
Broadcom Sees No Long-Term Threat From AI To Software Business
Tan said Broadcom’s software portfolio remains closely tied to the infrastructure layer of computing, making it less vulnerable to disruption from emerging AI applications.
“As you can see in Q3, we’re seeing accelerated growth, and we expect that to continue, I guess, for the next multiple quarters as this demand picks up,” he said.
Looking further out, Tan signaled confidence in the durability of Broadcom’s software strategy.
“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,” Tan said.
Broadcom Earnings Beat, Q3 Outlook Tops Estimates
Broadcom posted second-quarter revenue of $22.19 billion, slightly below Wall Street expectations of $22.27 billion.
However, the chipmaker reported adjusted earnings of $2.44 per share, topping analyst estimates of $2.40 per share.
Looking ahead, Broadcom forecasts third-quarter revenue of about $29.4 billion, ahead of consensus estimates of $28.54 billion, while projecting adjusted EBITDA to account for 68% of expected revenue.
Jensen Huang Says AI Boom Benefits Software Firms
Earlier this week, Nvidia Corp (NASDAQ:NVDA) CEO Jensen Huang sought to ease concerns around a potential “Saaspocalypse,” saying there has never been a better moment to be in the software business.
Speaking during his keynote at Computex in Taiwan, Huang said advances in agentic AI are driving significant breakthroughs, particularly in how AI systems use tools.
“A lot of people have said, ‘Jensen, AI is coming. Agentic AI is coming. Therefore, all of the software companies are going to go out of business.’ I said it’s exactly the opposite,” he said at the time.
Price Action: After-hours trading saw Broadcom shares plunge 13.78% to $413.21 after the stock closed Wednesday’s session up 0.49% at $479.23, according to Benzinga Pro.
Benzinga Edge Stock Rankings place AVGO in the 96th percentile for Quality, with the stock demonstrating strength across short, medium and long-term time frames.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo Courtesy: Michael Vi on Shutterstock.com
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