Good morning. QQQs -25bps off early as investors away jobs report tomorrow.
In Tech, AVGO -4% down early as Hock’s F28 guide failed to meaningfully change the debate & SNOW +24% on a big guide that has bulls thinking 40% a quarter earlier than expected. NTAP -9% on a weaker guide and HPE -5% on peak margin commentary. Semis -1% vs. Software +1% early. META +1% as their new Muse Spark has investors saying “frontier” earlier than expected ahead of Watermelon’s release.
Asia mixed overnight: : TPX +0.5%, NKY -0.17%, Hang Seng -0.39%, HSCEI -0.77%, SHCOMP +0.02%, Shenzhen +0.05%, Taiwan TAIEX -0.67%, Korea KOSPI +0.26%. Memory names weaker with Hynix -3%; Samsung -2.5% but Kioxia +1%. Softbank -6%
We’ll hit earnings first, then the usual.
Let’s get to it…
AVGO -4%: F3Q was modestly above Street and F4Q roughly in line, while the first explicit FY28 AI outlook of $230B and >$30 EPS materially reset AVGO’s out-year earnings power, but debates remain alive
F3Q revenue was $29.591B, +85.5% y/y (last q +47.9% y/y), vs. Street $29.443B, +84.6%, with non-GAAP EPS of $3.32 vs. $3.23 and operating margin of 67.9% vs. 66.9%. F4Q revenue guidance of $34.8B, +93% y/y, was essentially in line with Street, as AI semiconductor revenue of $21.7B came in ahead while software and non-AI semis were below.
The key #s on the call was FY27/FY28 AI revenue guidance of $115B/$230B, with FY27 below the roughly $130–150B buyside bogey but FY28 well above Street and supporting >$30 of EPS.
Bulls say AVGO’s two-year AI outlook is now materially de-risked, with the $115B/$230B FY27/FY28 revenue framework supporting $30+ of FY28 EPS and leaving the stock at only roughly 12–13x. They see FY27 as supply-constrained, view FY28 as achievable or beatable as OpenAI and Anthropic scale while arguing AVGO remains inexpensive versus NVDA and MRVL given its growth, margins and software diversification.
Bears came away from the print feeling the story has become uncomfortably more complex. The $115B FY27 outlook fell below $130B+ buyside expectations, the $230B FY28 number may already be embedded, and the growth is increasingly dependent on OpenAI and Anthropic rather than Google, where Hock’s commentary was notably weaker. The remaining debate is whether those customers can finance and absorb the required capacity, whether AVGO can sustain $20–30B of revenue per GW (Although Hock talked those #s down in the callback) and premium margins as deployment scales, and whether rising customer concentration and execution risk justify giving the stock a higher multiple in a still-poor AI tape.