Broadcom Talked About US$230 Billion. The Market Counted US$200 Million.

One batch of results, three different share prices. $Dell Technologies Inc.(DELL)$ closed 15.81 per cent higher on Wednesday at US$492.20. Credo's revenue more than doubled from the previous quarter and the stock closed down 20.04 per cent at US$165.22. $Broadcom(AVGO)$ left its answer until after the close, beat on both revenue and earnings, and saw its shares push above US$370 before being knocked back below US$350.

The hardest number in Dell's results is US$95 billion — a record order backlog for AI servers. It raised full-year revenue guidance by US$25 billion to US$192 billion at the same time. At least 15 firms moved their targets that day: UBS from US$455 to US$500, Truist from US$360 to US$505, Raymond James from US$500 to US$617, most of them changing the number and leaving the rating alone.

Jeff Clarke, Dell's chief executive, put the business plainly: this round of AI runs on chasing parts around the world, and "this is what we do" and "we love it". He also flagged a shortage of memory chips. As Barron's told it, Dell called out the shortage and Micron shrugged — Micron closed 2.43 per cent higher that day at US$956.08.

$Credo Technology Group Holding Ltd(CRDO)$ handed in a different sort of paper. It beat on both earnings and revenue, revenue rose 114.73 per cent from the previous quarter, and the stock still fell a fifth. Volume was 30.11 million shares, 4.1 times normal. What held it down was gross margin, and a price-to-earnings ratio of 58.87. J.P. Morgan kept its Overweight rating and cut its target to US$310.

Both beat. One rose about 15 per cent, the other fell a fifth. The difference is not in what they earned last quarter: Dell's paper showed signed orders and a raised forecast; Credo's showed a gross margin heading the wrong way.

$Broadcom(AVGO)$ closed the regular session 0.66 per cent lower at US$367.24, which was still the price before the results. What came after the close was a ninth straight quarter of beating: revenue of US$29.6 billion against the US$29.43 billion analysts were looking for, and adjusted earnings of US$3.32 a share against US$3.24. AI semiconductor revenue was US$16.7 billion, up 221 per cent from a year earlier and 54 per cent from the previous quarter. Free cash flow was US$13.7 billion, about 46 per cent of revenue.

The full-year AI revenue outlook went from US$56 billion to US$58 billion, and the numbers get bigger the further out they go. Hock Tan, Broadcom's chief executive, said he has line of sight to US$115 billion in fiscal 2027 and US$230 billion in fiscal 2028 — roughly four times this year's US$58 billion — that supply is secured, and that Anthropic is on track to become its largest custom chip customer in 2027.

Guidance for next quarter's total revenue came in at about US$34.8 billion against the roughly US$35 billion analysts expected, a shortfall of about US$200 million, or under one per cent. That was as far as the market read, and the shares fell close to 7 per cent after hours.

Break that US$34.8 billion apart: AI accounts for US$21.7 billion of it, up 236 per cent from a year earlier and growing faster than in the quarter just gone; everything else adds up to about US$13.1 billion, against US$12.9 billion last quarter. Almost all the growth is standing on one leg.

Broadcom is up only about 6 per cent this year while the chip sector has risen around 60 per cent, so it is not one of the names that had been chased. Guidance came in less than one per cent light and it was still marked down after hours. Options going into the results were priced for a move of about 8.2 per cent, and the fall stayed inside that.

Nvidia reported nothing itself and closed 3.21 per cent higher at US$224.41 on someone else's results. The reason given on the quote page was that Dell's beat and raise read as AI data-centre demand still being there. Reports also have Nvidia close to buying Hugging Face for about US$12.9 billion, with other reports putting it at US$14 billion. The Dow was up around 450 points at one stage.

$Palantir Technologies Inc.(PLTR)$ went the other way, closing 5.81 per cent lower at US$169.46, its worst day in seven months. Three pieces of good news that day landed on nothing: a US$192 million Army contract, the TITAN system entering production, and Peter Zaffino, formerly of AIG, joining as head of global financial services. What buried them was a cybersecurity AI for governments and critical infrastructure released the same day by Google DeepMind. Palantir is about 18 per cent below its 52-week high.

$Microsoft(MSFT)$ closed 0.84 per cent lower at US$496.82 and said it is reorganising its reporting segments to disclose Azure's quarterly revenue on its own from now on. Azure did more than US$29.4 billion last quarter and more than US$100 billion over the fiscal year — a figure that used to be reported wrapped in with everything else.

On the macro side, ADP had private payrolls adding 38,000 jobs in August against the 47,000 the market expected, the smallest gain since January; July was revised up to 46,000.

Where the jobs went and where they left is starkly split: education and health alone added 45,000, leisure and hospitality 16,000, construction 12,000 and finance 6,000; manufacturing shed 17,000 and professional services 16,000, with trade and transport, information, and mining all shrinking too. Goods-producing employers cut 10,000 between them while services added 48,000.

Friday brings the August payrolls report, where the market expects a gain of fifty-odd thousand, against 23,000 jobs lost in July and an unemployment rate forecast to stay at 4.1 per cent. ADP has never been a good guide to payrolls, though, and the two numbers often fail to line up. The ten-year Treasury yield is still around 4.8 per cent.

$S&P 500(.SPX)$ closed 0.46 per cent higher at 7,666.60, $Invesco QQQ(QQQ)$ rose 0.23 per cent and $SPDR S&P 500 ETF Trust(SPY)$ 0.44 per cent. Both the S&P and the Dow snapped three-day losing streaks, on oil steadying and the gain Nvidia led.

Hock Tan was talking about US$230 billion in fiscal 2028. What the market had in front of it was the US$200 million missing from next quarter. This is not disbelief about the far end — the US$115 billion and the US$230 billion both went on the call, and the supply is said to be locked in. It is that the US$230 billion is not due until fiscal 2028, and the paper gets marked this quarter. Dell's US$95 billion is signed, which is why it could rise about 15 per cent; Credo's paper had a gross margin heading the wrong way, which is why doubling its revenue did not count. The next paper to be marked is Friday's payrolls.

The above is personal analysis, not investment advice.

💬 【Talking Point】

ADP had private payrolls adding 38,000 jobs in August against the 47,000 the market expected, and the official August payrolls land on Friday. The two numbers often fail to line up. When they disagree, which one do you let move your positions?

💰 【Bounty】

Drop your view in the comments and there are coins in it for you! 🎁

🔔 Better shared than saved — tag a friend and split the coins!