Broadcom Inc. (NASDAQ: AVGO) experienced a decline on September 3rd, following the release of its fiscal third quarter earnings report. The company reported revenues of $29.6 billion and earnings per share of $3.32, surpassing analyst expectations in both areas. Notably, Broadcom’s semiconductor revenue surged by 221% year-over-year, reaching $16.7 billion. Jim Cramer, a noted commentator, previously praised CEO Hock Tan and took to Twitter to discuss the earnings alongside results from Snowflake Inc. (NYSE: SNOW):
“Snowflake, expensive, but huge blowout.”
“Broadcom is a ‘conference call’ stock, always has been. Have to hear what Hock has to say.”
“Hock giving you some nice raises for next year and the year after. That’s what we have been looking for. Maybe I am too hopeful… Small position for the trust…”
“Snowflake a thing of beauty. AVGO an overtime save…”
“So Snowflake remains the best way for the uncertain to get compute but Broadcom tells a story of an explosion of business coming. Snowflake will have a huge move…. Broadcom? More nuanced…”
“Volume expanding all morning on Broadcom dramatically lower than last night’s after-hours trading. Be careful: someone must know something.”
Broadcom, being one of the rare firms capable of designing custom AI chips, is riding a narrative that emphasizes these products. The firm also raised its projections for AI semiconductor revenue, expecting $115 billion for the fiscal year 2027 and $230 billion for fiscal year 2028. This growth is partly driven by its Ethernet products and shipments associated with OpenAI. Moreover, Broadcom has partnered with major tech companies to develop AI accelerators, making it a vital component of the AI infrastructure ecosystem.
However, these high expectations bring challenges. Broadcom’s fourth quarter revenue forecast of $34.8 billion fell short of the consensus estimate of $35.03 billion, causing concerns about a potential peak in growth. Furthermore, the AI semiconductor revenue guidance for the fourth quarter suggests a slowdown, projecting only 30% growth compared to the 54% seen in Q3. The company is also facing margin pressure from its VMware acquisition.
In contrast, Snowflake Inc.’s shares rose by an impressive 21% the day after it released its Q2 fiscal 2027 results. Similar to other SaaS companies, Snowflake’s narrative is centered around its AI initiatives and their potential for sustainable growth. In its latest earnings report, Snowflake revealed that a significant number of its clients were utilizing the Cortex AI platform. This platform, which includes the CoCo AI coding development agent and CoWork, a conversational AI workplace, hinted at progress in AI monetization. Approximately 2,000 clients signed up for CoCo in Q2, with 60% of accounts implementing its use, while 40% of accounts were using the CoWork platform.
Despite this progress, it’s worth noting that Snowflake’s financial results fell short in terms of profitability. The company posted a net loss of $192 million for Q2, which was steeper than losses reported by competitors like Confluent. Additionally, R&D expenses for Q2 saw a 15% year-over-year increase, and Snowflake’s 15% non-GAAP operating margin remains below that of peers like MongoDB, which has a 24% margin.
Examining hedge fund sentiment, Broadcom seems to lead, as 170 funds tracked by Insider Monkey had investments in the company, compared to 103 for Snowflake. However, Snowflake’s software exposure provides it with a higher forward P/E multiple of 161, in contrast to Broadcom’s 19.76. Yet, this premium is accompanied by a greater short interest percentage, with 5.6% of Snowflake shares being shorted versus 1% for Broadcom.
