Weekly Digest: Key Updates from Snap, NVIDIA, VMware, Snowflake, and Williams-Sonoma (May 23–27)

This week, quarterly reports were published by Snap, NVIDIA, Snowflake, and Williams-Sonoma. Broadcom confirmed buying VMware. The details of what happened are provided below.

Broadcom buys VMware for $61 billion

On Sunday 22 May, Bloomberg reported that the manufacturer of semiconductors, Broadcom, was negotiating the purchase of cloud service developer VMware.

On the next day, the shares of VMware Inc. (NYSE: VMW) surged 24.78% to $119.43. After a minor correction, the quotes went on growing and closed at $124.36 on Thursday.

Bloomberg confirmed the purchase on 26 May. The amount of the agreement is $61 billion, making it the second-largest acquisition this year. By this agreement, the shareholders of the cloud company will receive $142.5 for each share they are holding, while the microchip manufacturer will bear on itself the debt of $8 billion.

On Thursday, the shares of Broadcom Inc. (NASDAQ: AVGO) jumped 3.58% to $550.66. Through the acquisition of VMware, the corporation will speed up the expansion of its business of developing corporate software.

The falling of Snap shares dragged down other stocks

On Monday 23 May, at the close of the trading session, Snap Inc., the American company owning the Snapchat messenger, decreased its earnings growth and corrected the profit forecast for Q2 2022. Moreover, it declared a slowdown in employing new staff and looking for ways to decrease spending.

The main reason for giving up the forecast voiced in April is the decline in the demand for online ads that constitute the main source of the company's income. Moreover, the management mentioned the other factors that impacted it negatively, namely the rising inflation and interest rates, supply issues, changes in the policy of global tech platforms and resources, as well the worsening of the economy due to the military conflict in Ukraine.

On 24 May, the shares of Snap Inc. (NYSE: SNAP) recorded a 43.08% drop to $12.79. This marked the largest intraday decline in the company's history. Nevertheless, on Wednesday and Thursday, the stock quotes rose 10.71% and 4.59%, respectively.

Note that the decline of Snap shares affected the stock of other representatives of the tech sector, which earnings are reliant on online ads.

The first on the list is Pinterest Inc. (NYSE: PINS) (-23.64%), followed by Meta Platforms Inc. (NASDAQ: FB) (-7.62%), Twitter Inc. (NYSE: TWTR) (-5.55%), and Alphabet Inc. (NASDAQ: GOOGL) (-4.95%). According to Bloomberg, the market capitalisation of these companies recorded a loss of about $180 billion over Tuesday.

NVIDIA’s strong report and modest forecast

On Wednesday 25 May, the developer of graphic processors and microchips, NVIDIA, published its financial statistics for Q1, financial 2023, which exceeded analysts' expectations.

Compared to the statistics of last year, from February to April, NVIDIA saw its earnings increase 46% to $8.29 billion.  Net profit increased 15% to $1.62 billion and EPS rose 16% to $0.64.

The segment of data centres brought NVIDIA $3.75 billion (+83%), the sector of video games — $3.62 billion (+31%), professional visualisation — $622 million (+67%), and car components — $138 million (-10%).

However, the company voiced quite a modest forecast for this quarter considering supply issues, the Covid restrictions in China, and a decrease in Russia-based business. The revenue in May—July is expected to reach $8.1 billion.

On 25 May, NVIDIA Corporation shares (NASDAQ: NVDA) jumped 5.08% to $178.51. Note that while waiting for the quarterly report, the stock quotes fell 4.4% to $161.54.

Snowflake shares dropped due to weak forecast

On Wednesday, Snowflake, the developer of data storage cloud software, published a report for Q1, financial 2023. The company is trying to extend its business by suggesting new instruments to retail sales and healthcare companies.

Over February—April, Snowflake earnings skyrocketed 84.5% to $422.4 million, while the consensus forecast had reached $412. 8 million. The net loss recorded an 18.4% drop to $165.8 million, and the loss per share declined 24.3% to $0.53. Analysts polled by FactSet had expected EPS at $0.52.

As for the forecast for Q2, financial 2023, Snowflake management hopes that general earnings will grow 71–73% and corrected operating margin will reach -2%. Wall Street analysts forecast a 72% growth in earnings and a margin of 0.3%.

On 26 May, the expectations of the current forecast sent the stock quotes of Snowflake Inc. (NYSE: SNOW) down 4.5% to $126.8. A stronger decline was demonstrated before the publication of the report — by 6.64% to $129.63.

Williams–Sonoma report: noticeable growth of earnings and profit

On 25 May, the financial results for February-April 2022 were shared by the retailer of kitchen tools and home utensils, Williams–Sonoma. The results turned out better than the market had expected.

Earnings grew 8% to $1.89 billion, net profit increased 11.5% to $254.11, and EPS rose 20.7% to $3.5. Experts had expected an EPS of $2.9 and earnings to reach $1.81 billion.

Williams–Sonoma never changed the forecast for this financial year: it is counting on $10 billion in earnings. After the report was published, the shares of Williams–Sonoma Inc. (NYSE: WSM) jumped 9.02% to $114.98, and on the next day, they surged 13.06% more, to $130.

Summing up

Broadcom is acquiring VMware for $61 billion — the news sent the stock quotes of the companies up 4% and 25%, respectively.

Snap slashed its earnings forecast and corrected profit for this quarter, making its shares lose 43%, and dragging along the stock prices of other tech companies.

NVIDIA shared a strong report and a modest forecast, which pushed its quotes up 5%.

The shares of Snowflake lost 5% after a weak forecast, while Williams–Sonoma shares jumped 9% after the quarterly statistics exceeded expectations.