👉 Lululemon Lost $2.2B in Market Value

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Broadcom reported record revenue, operating income and free cash flow as demand for custom AI accelerators and networking products continued to surge. AI semiconductor revenue reached $16.7 billion, up 221% YoY and 54% sequentially, and now represents 56% of the company’s total revenue.

Semiconductor Solutions generated $20.8 billion in revenue, an increase of 127% YoY, while Infrastructure Software grew 29% to $8.8 billion. Within semiconductors, Broadcom’s XPU shipments increased more than 3.5x YoY and accounted for 73% of AI revenue, while AI networking revenue increased more than 2.5x. Non-AI semiconductor revenue remained much more subdued at $4.2 billion, increasing just 5%.

Management focused heavily on the accelerating adoption of custom AI accelerators across its six XPU customers. Broadcom shipped Google's Ironwood TPU v7 in high volume during the quarter, began production shipments of its next-generation TPU v8i, and shipped OpenAI's first-generation custom accelerator. CEO Hock Tan emphasized that these custom chips are increasingly optimized around each customer's specific AI workloads rather than relying solely on general-purpose GPUs.

More importantly, management dramatically increased its longer-term expectations for the AI business. Broadcom now expects AI semiconductor revenue to approximately double to $115.0 billion in fiscal 2027 and double again to roughly $230.0 billion in fiscal 2028, supported by demand from customers including Google, Meta, Anthropic and OpenAI. Management said it has already secured the supply necessary to support its fiscal 2027 outlook, although actual deployments remain dependent on customers bringing sufficient data-center power and infrastructure online.

Looking ahead, management expects fourth-quarter revenue of approximately $34.8 billion, representing 93% YoY growth, alongside non-GAAP operating income of approximately 66% of revenue. AI semiconductor revenue is expected to reach $21.7 billion next quarter, an increase of 236% YoY, as demand for custom accelerators and AI networking continues to accelerate.

Long Broadcom, and have been since 2022. Woohoo!

Snowflake reported another strong quarter as accelerating AI adoption and continued strength across its core data platform pushed product revenue growth to 37% YoY, marking the company's third consecutive quarter of growth acceleration. Remaining performance obligations increased 30% to $9.0 billion, while net revenue retention remained healthy at 126%.

AI was one of the biggest drivers of the quarter. CoCo surpassed 9,100 accounts after adding more than 2,000 during the quarter, while CoWork expanded to 5,800 accounts. Management said its broader portfolio of AI products contributed approximately half of Snowflake's recent growth acceleration, while migrations and continued strength across the core data platform accounted for much of the remainder.

Customer growth also remained strong. Snowflake added 692 net new customers, bringing its total customer base to 14,554, while 828 customers now generate more than $1.0 million in trailing twelve-month product revenue. Management highlighted that 65 customers have surpassed $10.0 million in annual product revenue, demonstrating continued expansion among Snowflake's largest enterprise customers.

Management emphasized that AI is increasingly creating a flywheel across the broader business rather than functioning as a standalone product category. Customers adopting CoCo, CoWork and other AI capabilities are also increasing consumption of Snowflake's core platform. Despite fast-growing AI workloads carrying lower contribution margins today, non-GAAP operating margin expanded by more than 400 basis points YoY to 15%, and management raised its full-year operating margin outlook.

Looking ahead, management expects third-quarter product revenue between $1.588 billion and $1.593 billion, representing 37% to 38% growth. Snowflake also raised its full-year product revenue guidance to $6.07 billion, representing 36% growth, while increasing its non-GAAP operating margin outlook to 14.5%.

Long SNOW.

Lululemon reported a disappointing quarter as inconsistent product launches and weakening brand momentum pressured demand across its two largest markets.

North America remained the biggest problem, with revenue declining -8% and comparable sales falling -12%. China Mainland revenue increased +4% on a reported basis but declined -2% in constant currency, while Rest of World revenue grew +6% in constant currency. Digital revenue declined -6% and store sales fell -6%, showing weakness across both major selling channels.

Product performance was particularly weak in several historically important categories. Women's revenue declined -4%, men's fell -1%, and accessories dropped -13%. Management said leggings sales declined approximately -20% during the quarter, and newer away-from-body styles have not yet grown enough to offset weakness in the company's core leggings franchise. The company is now reducing SKU density, increasing marketing investment and chasing roughly 20% more inventory into styles that are resonating with customers.

Profitability was also significantly supported by a one-time benefit. Lululemon received $134.5 million in tariff refunds during the quarter, increasing operating margin by 560 basis points and contributing $0.86 to diluted EPS. Management acknowledged that negative media and social commentary hurt traffic while customer response to several new products remained inconsistent, prompting the company to take a more cautious view of the second half.

Looking ahead, management expects third-quarter revenue between $2.29 billion and $2.32 billion, representing a -10% to -11% decline. Lululemon also lowered full-year revenue guidance to between $10.35 billion and $10.50 billion, representing a -5% to -7% decline, with diluted EPS now expected between $9.48 and $9.73.

No position.

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