The benchmark S&P 500 is trading at a record high, driven in part by a strong earnings season for the first quarter of 2024. Nearly 80% of companies so far delivered better results than Wall Street expected, according to FactSet.
Earnings season is currently winding down, but a few prominent companies have yet to report. CrowdStrike (CRWD +0.74%) and Broadcom (AVGO 0.54%) have a strong track record of operational success -- which is why their respective stock prices are at all-time highs -- and they're set to report their latest financial results in June.
Here's why investors might want to buy into both companies next month and hold for the long term.
1. CrowdStrike: Artificial intelligence-powered cybersecurity
CrowdStrike is a leading provider of cybersecurity software. The company recognizes the growing sophistication of modern-day threats, which is why it relies on artificial intelligence (AI) to do most of the heavy lifting when it comes to identifying, preventing, and remediating security risks.
Employees are the most vulnerable part of any organization because they constantly interact with the outside world through emails, phone calls, and messaging platforms, which is why CrowdStrike says 90% of successful cyberattacks originate at the endpoint (computers and devices). But not every worker is a cybersecurity expert, so they can't be expected to identify threats or rectify incidents. Therefore, AI is playing a critical role in automating those processes in the background.
NASDAQ: CRWD
Key Data Points
CrowdStrike's Falcon platform is a holistic solution, with cloud security, identity protection, and exposure management accompanying its industry-leading endpoint security. The company also launched Charlotte AI last year, which is a generative AI chatbot that saves cybersecurity managers two hours per day by accelerating workflows. It can answer questions about an organization's security posture, as well as rapidly summarize incidents, which saves hours' worth of manual investigative work.
CrowdStrike's AI models are trained on more than 2 trillion security events every day, making them among the most sophisticated in the industry.
CrowdStrike delivered a record $3.06 billion in revenue in fiscal 2024 (ended Jan. 31), which was a 36% increase from the prior year. The company estimates it will generate up to $3.99 billion in revenue during fiscal 2025, which implies growth could remain above 30% for another year. For context, Palo Alto Networks is one of CrowdStrike's main rivals, and it's on track to grow its annual revenue by just 16% (albeit that company will bring in $8 billion, so it's a much larger operation).
In the longer term, CrowdStrike expects to grow its annual recurring revenue to $10 billion within the next seven years by expanding its product portfolio and the regions in which it operates. Even then, the company will have barely scratched the surface of its addressable market, which it estimates could be worth $225 billion by 2028.
CrowdStrike will kick off fiscal 2025 with the release of its first-quarter results on June 4, and provided the company continues to execute in line with its short- and long-term forecasts, investors could do well to take a long-term position in its stock.
2. Broadcom: A multifaceted AI play
When it comes to AI, few companies are as diversely exposed as Broadcom. Originally, it was a semiconductor and electronics company that created products like the optical mouse sensor in the 1990s (which eliminated the need for mouse pads). But that changed in 2016 when Broadcom merged with another semiconductor giant called Avago Technologies, because the enterprise has been on an acquisition spree ever since.
Broadcom bought semiconductor device supplier CA Technologies in 2018, cybersecurity company Symantec in 2019. and cloud software developer VMware in 2023. All told, Broadcom spent nearly $100 billion across the three deals, creating a conglomerate with a multifaceted approach to AI.
On the semiconductor side, Broadcom makes data center switches (among other things) that regulate how quickly data travels from one point to another. Its Tomahawk 5 switch is one of the fastest in the industry, and when developers are using thousands of graphics processing chips (GPUs) to train AI models, such hardware is very important.
Like many cybersecurity companies, Symantec is embedding AI into its products to drive better outcomes. It partnered with Alphabet's (Google) VertexAI to accelerate its development processes, and a chatbot called SymantecAI is now available to customers.
Finally, VMware allows businesses to create virtual machines, which means AI developers can split data center infrastructure across multiple workloads for maximum efficiency. For example, one user might only need 10% of a server's capacity, so VMware allows multiple users to plug into that same server so it operates at 100%. Efficiency is extremely important given there is a supply shortage of some of the semiconductor industry's best hardware, like Nvidia's GPUs.
NASDAQ: AVGO
Key Data Points
Broadcom generated a record $35.8 billion in revenue during fiscal 2023 (ended Oct. 29), which was an 8% increase from 2022. But thanks to the inclusion of VMware's financials, the conglomerate expects its revenue to jump nearly 40% to $50 billion during fiscal 2024.
The first quarter (ended Feb. 4) was off to a hot start, with 34% top-line growth, and the company is scheduled to release its second-quarter results on June 12. Few stocks can provide investors with exposure to AI in so many different forms as Broadcom, so it could be a great addition to any long-term portfolio.
