I'm having trouble understanding Broadcom's claimed AI revenue results and projections

[ChrisGar]

I've been thinking about the question you're raising for several days now. To me, the answer is non-obvious. Google Cloud has an operating margin of 30.1% (4Q25), but they are hardly an AI pure play. The majority of Google Cloud's revenue, CAPEX, and operating expenses are probably not AI-related. Also, everything about TPUs is expensive. The interconnects (scale-up and scale-out) are proprietary, and I suspect they also use high-margin partners like Broadcom (but I'm not sure who for optical interconnects), so I suspect TPUs and their chassis, racks, and networks are higher cost than AMD's or Nvidia's (even for NVLink and InfiniBand). No one else has enough volume yet to count.
.....

So, to get back to your question, I think it is not clear that Google Cloud TPUs are more profitable than AMD GPUs.

TPUs are used to mainly drive their internal workloads -- more than the Cloud. TPUs are used to drive the ~$300B in advertising for example.
I'm not sure how an outsider could calculate that ROI or margins.

 

[blueone]

I assume you meant Nvidia GPUs in the last line?

No, I specifically meant AMD GPUs. Nvidia's gross and net margins are higher than anyone else's, including all three major cloud computing companies'.

Nvidia margins are enormous (more than 70%?) because they can charge what the market will stand (silicon + IP + CUDA) and there's little merchant competition. I would expect that any custom chip (like a TPU) will be cheaper than this, even allowing for Broadcom's margins -- which are also high, but unlikely to be *as* high as Nvidia (especially in volume) because they add less value to the raw silicon than Nvidia do. Cheapest of all is an all-in-house custom chip, but few companies are capable of doing this for such humongous devices.

You're forgetting about the cost of networking. Nvidia's networking chips and other hardware certainly have lower unit costs than Google's proprietary designs do. Nvidia's networking business is #1 in the world now, and they do all of the design in-house, which has got be cheaper than what Broadcom charges.

 

[blueone]

TPUs are used to mainly drive their internal workloads -- more than the Cloud. TPUs are used to drive the ~$300B in advertising for example.
I'm not sure how an outsider could calculate that ROI or margins.

I agree that TPUs are probably mostly for in-house use, but their contribution to Google's advertising business must also be modest, because TPU unit volume is only about 2.5 million units for 2025. I also agree, and stated, that I'm guessing.