Broadcom is in an excellent position; speaker likes it but has reservations about past debt refinancing.

Snowflake and Broadcom have just released their earnings , and we will be comparing some of these figures with various opportunities in the hardware and software sectors.

Let's take a quick look at what happened with Broadcom's earnings, where the company's stock fell by 3% after it once again missed its revenue forecast for the next quarter. This happened last time due to dedicated chip deliveries , and the stock then fell by 20%, and it is now down another 3% after trading hours. That's not a good thing. What's going on?

On the other hand , Broadcom missed its fourth-quarter forecast, with an error rate of only 0.7%.

Anyway, now let's think about Broadcom. So, that's the software side that's thriving because of the open-center coverage , but you know, the valuation is questionable , right? Then you literally have the exact opposite story.

It's almost like a tale of two cities . Here's a company that 's valued at $1.75 trillion. It has a projected 2026 cash flow of $52 billion. $13.6 billion of that is in this damn quarter here. $13 billion in the quarter, and the free cash flow projection is $1.6 billion." $ 50-51 billion means a 3% cash flow yield.

That's pretty good for a $ 1.75 trillion company , oops. A 3% free cash flow yield, that's incredible. They've stopped borrowing, so they've been paying down debt in the last two quarters, and before that, they did a little refinancing.

That's the one thing I do n't like about Broadcom. It's the one thing that's stopping me from wanting to buy this company, even though I really wanted to and I was dying to own it. I have a thesis on that eventually.

But I have $48 billion in short-term cash, which is enough to pay my bills. I have $20.5 billion in bills, okay. So, I have $28 billion in available cash, basically. I have $57 billion in long-term debt, so let's say $ 30 billion after I spend my cash if I want to spend it on it .

You know, $ 30 billion in long-term debt for a $1.75 trillion company, maybe not a big deal. Maybe I'm thinking Just, "Man , $30 billion sounds like a lot." But then again, the company literally has a 55% net profit margin.

It's absolutely insane how much money they're making.

Ah, let's see what the bottom line was this quarter . Ah, the bottom line was actually a little weaker this quarter. So, the year-over-year forecast brings them down to around 55%.

You'll see net income after income taxes, and after all that crap, compared to their net revenue, 29,591, is 44%. Still, dude, that's way ahead of Apple. It's a level of net profit that rivals Microsoft's.

Their net profit is projected to be above 54%, closer to 55%, especially over the next few years. They're making a lot of money at the bottom line.

Now, in fairness, could some of the negativity toward Broadcom be due to the threat of frontier AI becoming less appealing?

Okay, moving on to Broadcom, what did we see at Broadcom? We saw revenue accelerating 85% year over year , and sequential growth of 33%. Those are crazy growth numbers. But what's the answer?

Yes. Also, weaker pricing power and a higher cost of revenue. So, just like Credo, their costs grew faster than their revenue, at least this quarter and year over year . So, those were the two comparisons we made.

In both cases, you had faster cost growth. However, in Broadcom's case, their R &D spending was actually negative. And their general, administrative, and selling expenses were negative.

So, they offset the higher cost of goods sold by essentially being a more efficient company. That's impressive. You know, if you look here, Credo had to increase sales by 43%. Broadcom clearly outperformed them .

In other words, Broadcom was much more efficient. Credo was actually less efficient , unfortunately, this quarter, and they had weaker pricing power. Broadcom was more efficient, but they suffered a bit from that pressure on profit margins.

So, now you look at the valuation. That was interesting. So, I look at Broadcom's valuation, and Broadcom comes in with a growth rate of The price-to-earnings (PEG) is nine, which is crazy because there's a four-year projected growth of 34% and it's trading at 30x.

The frontier side, unfortunately, is also going to be Marvell, Broadcom, and Credo. This is about frontier technologies for data centers, and hyperscales. So, some of those that are struggling a bit, are kind of on this frontier side.

UI Path has margins of 24% to 25%, so that's still about half of Broadcom's margins.

Broadcom is in an excellent position. I really like it.