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Luke Kawa

Broadcom soars as rave reviews for Gemini 3 boost appeal of its custom chips

When spectators saw Michael Jordan blossom as a basketball star, it made them want to buy Nike’s Air Jordans.

Mizuho reckons there’s a similar halo effect for Broadcom based on the rave reviews for Google’s latest GenAI model, which include this ringing endorsement from Salesforce CEO Marc Benioff.

“Gemini 3 was trained and powered on Google homegrown TPU chips, which benefits partner AVGO,” wrote Daniel O’Regan, Mizuho’s managing director of equity trading.

Custom chips (ASICs) are Broadcom’s specialty, and as O’Regan noted, Google and Broadcom codesigned these building blocks for Gemini 3. Boosts to Google’s capex budget have tended to buoy shares of Broadcom, since it’s a big beneficiary of these outlays.

The early positive reception to Gemini 3 implies that: a) Google will want to continue this relationship (and need more chips for training and inference!), and b) other GenAI developers might be more willing to pursue the custom chip route for AI models and inference, perhaps eating into market share for Nvidia’s GPU-based solutions.

To this end, Broadcom announced a collaboration with OpenAI in mid-October to develop and deploy 10 gigawatts of custom AI accelerators.

Nvidia CEO Jensen Huang has argued that GPU-centric data center solutions are superior because of how ubiquitous the firm’s CUDA software is in high-performance computing.

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markets
Helena Cheng

Lululemon’s stretch getting tested: Stock plunges after after outlook is cut

Lululemon shares are down double digits in premarket trading after the company cut its full-year sales and profit outlook, overshadowing a Q1 beat and raising fresh concerns about the brand’s turnaround efforts.

The company now expects fiscal 2026 revenue to be flat to down 1%, compared with its prior forecast for 2% to 4% growth. Guidance for full-year diluted earnings per share was dragged down to a range of $10.95 to $11.15, below the company’s previous guidance of $12.10 to $12.30 and well below Wall Street’s estimate of $13.26.

Key numbers for Q1:

  • EPS of $1.69 vs. the $1.68 expected.

  • Revenue of $2.47 billion vs. the $2.43 billion expected.

The modest top-line beat masked a widening divergence between Lululemon’s geographic markets. While international revenue rose 22% overall with a 30% increase in Mainland China, the bigger problem remains North America, where revenue fell 5%.

Interim co-CEO and CFO Meghan Frank acknowledged during the earnings call that recent product rollouts underperformed. A highly anticipated yoga campaign failed to generate its expected “halo effect” across broader product lines.

Profitability metrics took a major hit, with gross margins contracting by 410 basis points to 54.2% due to mounting tariff costs and promotional markdowns. Operating income consequently fell 37% year over year to $276.9 million.

“We experienced spikes of negative commentary in the media and on social channels with regard to our brand, which had an impact on traffic and overall top-line performance,” Frank said during the earnings call. “And second, not all of our product launches have met our expectations. While we have had several successful launches so far this year, we have seen others as we start Q2 not generate the anticipated guest response.”

Lululemon’s valuation has already been steadily compressing for years. While it was once one of retail’s richly valued stocks, investors have been questioning whether the company can return to the double-digit growth era.

The results also arrive during a leadership transition. Lululemon announced back in April that former Nike executive Heidi O’Neill is set to take over as CEO in September, with investors looking to her to revive growth in North America and restore the brand’s growth.

As Lululemon faces both macroeconomic pressure and brand-specific challenges, its stock has dropped around 40% year to date.

markets
Paige Oamek

US job growth skyrocketed in May, blasting past expectations

The US economy added 172,000 jobs in the month of May, the Bureau of Labor Statistics reported Friday, sending 10-year Treasury yields higher.

The strong May job market surprised economists. Experts had predicted only 85,000 new jobs — just half the reported number. The unemployment rate held steady at 4.3%, as expected.

The job growth story is a hopeful spot for the economy as consumers continue to feel inflationary pressure from the Iran war.

Job gains were buoyed by the leisure and hospitality sector, which added 70,000 jobs, as well as local government, healthcare, and education.

Both the March and April jobs reports were revised upward, making them collectively 93,000 higher than previously reported.

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