A handful of major companies reported their quarterly results this week, including Oracle (ORCL) and Broadcom (AVGO). The Q3 earnings season has largely yielded solid results, with 99% of S&P 500 companies reporting as of December 5, according to FactSet. Analysts estimate a 13.4% increase in earnings per share during the third quarter, which, if sustained, would mark the fourth consecutive quarter of double-digit earnings growth and an acceleration from the 12% earnings growth rate reported in Q2.
Expectations were significantly lower prior to the quarter, with analysts forecasting a mere 7.9% increase in earnings per share for Q3 as of September 30. Specialty retailers such as GameStop (GME), AutoZone (AZO), and Chewy (CHWY) offered insights into consumer spending patterns, and Costco (COST) also provided a quarterly update.
The marquee report of the week came from Oracle, which caused some market unease after it reported that its AI costs surpassed Wall Street’s expectations, while its revenue fell short. This announcement followed earnings reports from Adobe (ADBE) and Broadcom, which marked the conclusion of the third-quarter reporting season.
Broadcom Reports Record Revenue Driven by AI Demand
Broadcom’s stock rose 3% in after-hours trading as the chipmaker reported strong demand for its AI chips, contributing to record revenue in its fiscal fourth quarter. The company forecasted that AI revenue would double in Q1. In the fourth quarter, Broadcom reported record revenue of $18.0 billion, a 28% year-over-year increase, primarily driven by a 74% rise in AI semiconductor revenue. CEO Hock Tan expressed optimism, stating, “We see the momentum continuing in Q1 and expect AI semiconductor revenue to double year-over-year to $8.2 billion.”
Meanwhile, RH (RH) also experienced a stock jump of 4% after releasing its earnings on Thursday. The luxury furniture retailer reported revenue growth of 9% year-over-year to $883.8 million, slightly surpassing estimates. However, its earnings per share of $1.83 fell short of the expected $2.18. In light of these results, RH adjusted its full-year revenue outlook lower, now anticipating growth of 9% to 9.2% for 2025.
On the other hand, Lululemon (LULU) announced its CEO, Calvin McDonald, will step down on January 31, though he will remain with the company as a senior adviser until March 31. McDonald, who has led the company since 2018, will be succeeded temporarily by CFO Meghan Frank and CCO André Maestrini. Under McDonald’s leadership, Lululemon’s stock has surged 42.8%.
In a strong showing, Costco beat Wall Street expectations across all key metrics in its fiscal first quarter, posting adjusted earnings per share of $4.50, ahead of estimates of $4.28. Revenue reached $67.3 billion, slightly above anticipated figures, while same-store sales growth of 6.4% exceeded forecasts. E-commerce sales also remained a bright spot, growing 20.5% year-over-year.
Looking ahead, analysts are keenly observing the effects of tariffs and declining consumer sentiment on various sectors. AutoZone reported a fiscal first-quarter earnings miss, attributing its underperformance to tariff-related price increases. The company posted profits of $31.04 per share on revenue of $4.62 billion, falling short of expectations. Its gross profit margin fell as it navigated substantial inventory charges due to these increases.
As AI continues to garner attention, mentions of the technology on earnings calls have reached a record high in Q3. FactSet noted that 306 S&P 500 companies discussed AI in their earnings reports, the highest level in a decade. This trend underscores the growing importance of AI in shaping corporate strategies and investor perceptions in a rapidly evolving economic landscape.
In summary, while the latest earnings reports reveal a mixed bag of performance metrics across different sectors, the overarching narrative remains one of cautious optimism. Companies like Broadcom are benefitting significantly from AI demand, whereas others like Oracle face scrutiny over rising costs. As the earnings season progresses, corporate America’s responses to market pressures and consumer behavior will be pivotal in shaping the economic outlook.
See also
Broadcom Reports $64B Revenue for FY 2025, AI Growth Hits $20B with 65% Surge
Broadcom Projects $19.1B Revenue Amid 5% Share Drop, Citing Lower AI Margins
Nvidia Expands H200 AI Chip Production Amid Surging Chinese Demand and New U.S. Export Rules
BlackRock Reveals AI Skills Are Essential in Finance, Rejects AI-Generated Resumes
Workiva Appoints Barbara Larson CFO, Aims to Strengthen AI Reporting Strategy
