Software took the AI bid before the bell while two hardware beats were sold

Methodology note: Morning report, generated before the September 3 US open. Sources cited inline.

Software Took The AI Bid Before The Bell While Two Hardware Beats Were Sold

Snowflake gained about 24% pre-market after product revenue rose 37% to $1.49 billion, a third consecutive quarter of acceleration. Two AI-hardware beats went the other way on the same tape. Broadcom fell 2.5% despite AI semiconductor revenue of $16.7 billion growing 221%, because a Q4 total-revenue guide of $34.8 billion missed by $230 million. Hewlett Packard Enterprise fell 3% after beating on revenue, earnings and next-quarter guidance. What is being paid for has narrowed from AI capex guided forward to AI consumption already in reported revenue — and it is happening as the long end backs off, with the 10-year at 4.784% against Wednesday's 4.818% high and the dollar under 99.50. Index futures are flat.

• Snowflake product revenue was $1.49 billion, up 37%, with AI workloads contributing about half of the acceleration; full-year product revenue guidance was raised to $6.07 billion (+36%), non-GAAP operating margin reached 15% in the quarter and the full-year margin guide went to 14.5% from 13.5%, on net revenue retention of 126% and remaining performance obligations of $9 billion, up 30%
• The print itself: adjusted EPS of $0.62 against $0.45 expected on revenue of $1.55 billion against $1.48 billion, and the stock closed after hours at $374.25, up $68.41 or 22.37%
• Broadcom's Q3 revenue of $29.59 billion beat the $29.36 billion consensus and rose 86% year over year, with Q4 AI revenue guided to $21.7 billion (+236%) — but total Q4 revenue of $34.8 billion came in under the $35.03 billion expected
• Hewlett Packard Enterprise reported revenue of $12.213 billion against $11.892 billion expected, up 33.7% year over year, adjusted EPS of $1.11 against $0.93, and guided next quarter to a $14.35 billion midpoint — 10.2% above consensus — while raising full-year revenue growth to 34–37%
• The dollar index weakened below 99.50, easing 0.13% to 99.545, as the 10-year Treasury yield slipped from its multi-year high to 4.784% — the ADP miss reaching the dollar and the long end a day after it reached the equity tape
• December gold futures opened at $4,436.40, up 0.5%, and traded $4,470.70 at 6:53 AM ET on the pullback in the dollar and yields, while Brent fell 0.40% to $95.25 and snapped a three-day rally, with WTI near $90.84
• CME FedWatch still prices a September 15–16 hike near 62–66%, roughly double where it sat before Chair Warsh's Jackson Hole speech on August 28

September 3, 2026 Pre-Market

What changed since last report

The pause in the long end is doing the work, and it explains which equities got the bid. Wednesday's 38,000 ADP print moved September hike odds only four points and never reached the rates tape that session; it is reaching it now, with the 10-year at 4.784% after touching 4.818% — the highest since November 2023 — and the dollar index through 99.50. Software is the longest-duration equity on the tape, so it re-rates first and hardest when the discount rate stops rising. That is why a single-name gap became a sector move, with Datadog, ServiceNow and Salesforce all bid on no news of their own, while Broadcom's 221% AI growth and Hewlett Packard Enterprise's beat-and-raise were sold. The distinction being drawn is not AI against not-AI. It is revenue already booked against revenue guided, discounted at a rate that has stopped going up.

Wednesday night's report set gold's fourth consecutive decline as its test, saying a move back above $4,450 alongside a firmer barrel would mark a haven premium finally being paid. Gold cleared the level at $4,470.70 by 6:53 AM ET, but Brent is lower at $95.25 — so the metal is trading the dollar and real yields rather than the Gulf, which is the framing that report used and it held. Base case (55%): the 10-year holds 4.70–4.85%, the 30-year stays under a 5.30% close, and the S&P ranges 7,620–7,740 through today's ISM Services and tomorrow's payrolls. Bull (20%): payrolls near consensus with average hourly earnings at or under 0.3% pulls hike odds under 50%, the 10-year breaks 4.70%, and the software bid broadens beyond the names that reported. Bear (25%): payrolls above 150,000, or a services prices component above 70 today, puts the 10-year through 4.818%, and the highest-duration equities give back the most.

Movers

• Datadog (+5%), ServiceNow (+3%) and Salesforce (+1.5%): the Snowflake read-across, none of the three carrying company news of their own — a repricing of software's discount rate rather than three separate results. It holds while the 10-year stays under 4.818%.
• Campbell's (-7%): fiscal 2027 earnings guidance of $1.65–$1.80 against a $1.83 FactSet consensus. A staples company guiding below consensus on cost is the tariff and energy pass-through the Beige Book described on Wednesday, showing up in a single company's own numbers rather than a survey's.
• Moderna (-1.9% to $151.32): giving back part of the Phase 3 cancer-vaccine move after closing a $3.0 billion zero-coupon convertible offering due 2032 on September 1 — dilution priced against a rally that has already happened.

What to watch

The ISM Services prices component, 10:00 AM ET. Consensus for the headline is 54.5 against 54.1 prior, with weekly jobless claims at 8:30 AM expected at 205,000 versus 203,000. The prices sub-index is the number that matters: manufacturing's Prices Index held at 71.1 on Tuesday, and a services reading above 70 makes that a national trend rather than a sector quirk, in the two-thirds of the economy where input costs reach consumers.

Tomorrow's payrolls against the software bid. Consensus is roughly 50,000–55,000 with unemployment at 4.1% and average hourly earnings 3.0% year over year. Software is the highest-duration equity on the tape, which makes it the first thing at risk if the print is hot: above 150,000 with firm earnings puts the 10-year through Wednesday's 4.818% high. Near consensus with earnings at or under 0.3% does the opposite. Resolves Friday at 8:30 AM ET.

The 30-year, five sessions inside 5.30% without a close above it. The long bond sits near 5.26%, having traded through the level twice and settled under it each time. Treasury's enlarged long-dated buybacks begin September 9 at $4 billion-plus per operation — after payrolls, not before — so the level is tested unsupported first. A daily close above 5.30% marks it crossed; a close under 5.15% says the buyback bid is being anticipated early.