What Management Said
Read the full Q4 2025 transcript ↗In our fiscal 2025, consolidated revenue grew 24% year-over-year to a record $64 billion, and it's driven by AI semiconductors and VMware. AI revenue grew 65% year-over-year to $20 billion, driving the Semiconductor revenue for this company to a record $37 billion for the year. In our Infrastructure Software business, strong adoption of VMware Cloud Foundation, or VCF, as we call it, drove revenue growth of 26% year-on-year to $27 billion. Total revenue was a record $18 billion, up 28% year-on-year, and above our guidance on better-than-expected growth in AI Semiconductors, as well as Infrastructure Software.
Q4 consolidated adjusted EBITDA was a record $12.12 billion, up 34% year-on-year. In semiconductors, revenue was $11.1 billion, as year-on-year growth accelerated to 35%. And this robust growth was driven by the AI Semiconductor revenue of $6.5 billion, which was up 74% year-on-year. And this represents a growth trajectory exceeding 10x over the 11 quarters we have reported this line of business.
I'm pleased today to report that during this quarter, we acquired a fifth XPU customer through a $1 billion order placed for delivery in late 2026. Demand here has even been stronger as we see customers build out their data center infrastructure ahead of deploying AI accelerators. We expect these $73 billion in AI backlog to be delivered over the next 18 months, and in Q1, fiscal 2026, we expect our AI revenue to double year-on-year to $8.2 billion. Turning to non-AI semiconductors, Q4 revenue of $4.6 billion was up 2% year-on-year and up 16% sequentially based on favorable wireless seasonality.
- Record fiscal 2025 revenue of $64 billion, up 24% year-on-year, driven by AI semiconductors and VMware.
- Fiscal 2025 AI revenue grew 65% to $20 billion; semiconductor revenue reached a record ~$37 billion and software revenue $27 billion (+26%).
- Record Q4 revenue of $18 billion, up 28% year-on-year and above guidance on stronger AI semiconductors and infrastructure software.
- Record Q4 adjusted EBITDA of $12.2 billion, up 34% year-on-year, at 68% of revenue and above the 67% guidance.
- Q4 AI semiconductor revenue of $6.5 billion, up 74% year-on-year; custom accelerator business more than doubled year-over-year.
- Received an additional $11 billion Anthropic order (on top of the prior $10 billion) and acquired a fifth XPU customer via a $1 billion order, both for late 2026.
- AI backlog of $73 billion to ship over 18 months, nearly half of the record $162 billion consolidated backlog; AI switch backlog alone exceeds $10 billion.
- Infrastructure software revenue of $6.9 billion, up 19% and above outlook; software backlog grew to $73 billion from $49 billion a year ago on $10.4 billion of Q4 TCV.
- Fiscal 2025 free cash flow grew 39% to $26.9 billion; raised the quarterly dividend 10% to $0.65 (15th consecutive annual increase).
- Non-AI semiconductor recovery remained limited; all end markets except broadband were down year-over-year as enterprise spending showed limited signs of recovery.
- Consolidated gross margin fell 50 basis points sequentially to 77.9% on semiconductor product mix.
- Management flagged that AI gross margins are structurally lower and will dilute consolidated gross margin as system/rack sales ramp in 2H 2026 (offset by operating leverage).
- Non-GAAP tax rate set to rise from 14% to ~16.5% in fiscal 2026 on global minimum tax and geographic income mix.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Consolidated revenue | Q1 FY2026 | $19.1B, up 28% YoY |
| Semiconductor revenue | Q1 FY2026 | ~$12.3B, up 50% YoY |
| AI semiconductor revenue | Q1 FY2026 | $8.2B, up ~100% YoY (doubling) |
| Infrastructure software revenue | Q1 FY2026 | ~$6.8B, up 2% YoY |
| Non-AI semiconductor revenue | Q1 FY2026 | ~$4.1B, flat YoY, down sequentially on wireless seasonality |
| Adjusted EBITDA margin | Q1 FY2026 | ~67% of revenue |
| Consolidated gross margin | Q1 FY2026 | down ~100 bps sequentially on higher AI mix |
| Non-GAAP tax rate | Q1 / FY2026 | ~16.5% |
| Infrastructure software revenue | FY2026 | Low double-digit percentage growth |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Total revenue | +28% | Better-than-expected AI semiconductors and infrastructure software. |
| AI semiconductor revenue | +74% | Custom accelerator (XPU) adoption more than doubled as customers train LLMs and monetize via inference. |
| Semiconductor revenue | +35% | Acceleration driven by AI; record $11.1 billion. |
| Infrastructure software revenue | +19% | Strong VCF adoption and bookings; $10.4 billion TCV vs $8.2 billion a year ago. |
| Adjusted EBITDA | +34% | Revenue growth and operating leverage; 68% of revenue. |
| Operating income | +35% | Record $11.9 billion; operating margin 66.2%, up 70 bps sequentially. |
| Semiconductor operating margin | +250 bps | Operating leverage on AI-led revenue growth; margin ~59%. |
| Free cash flow (FY2025) | +39% | Strong cash generation to $26.9 billion. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Custom XPU customer count | 4 customers | 5 customers after a new $1 billion order for late-2026 delivery | — |
| Anthropic orders | $10 billion order (Q3) | Additional $11 billion order for delivery in late 2026 | — |
| AI backlog disclosure | $110 billion total company backlog (Q3) | $162 billion consolidated backlog; $73 billion AI backlog over 18 months | — |
| Sales model | Chip-level sales | System/rack sales for customer four (full-system responsibility), diluting gross margin but accretive to operating dollars | — |
| OpenAI relationship | Not a named customer | 10 GW agreement/alignment over 2027-2029; separate XPU program advancing, little revenue expected in 2026 | — |
| TPU merchant extension | TPUs used internally by Google | Google TPUs (Ironwood) also used externally by Apple, Cohere and SSI for AI cloud compute | — |
Q&A Summary
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