Key Takeaways
- AVGO declined close to 3% following earnings release and has dropped approximately 15% in the last month, currently trading near $358
- Third quarter revenue reached an all-time high of $29.59 billion, representing an 85% year-over-year increase, while AI chip revenue soared 221% to $16.7 billion
- Fourth quarter revenue projection of $34.8 billion fell marginally short of Wall Street expectations hovering around $35 billion
- The company elevated its fiscal 2027 AI chip revenue forecast to $115 billion, while setting a 2028 objective of $230 billion
- Wall Street opinions vary widely, with analyst price targets spanning from $350 (DA Davidson, Neutral) to $600 (Cantor Fitzgerald, Overweight)
Despite delivering one of its most impressive quarterly performances to date on Thursday, Broadcom failed to win over investors. The company’s shares declined nearly 3% following the earnings announcement and have retreated roughly 15% during the past month, currently hovering around $358 per share. This positions the stock more than 25% beneath its peak reached in June.
Third quarter revenue registered at $29.59 billion, marking an 85% year-over-year climb and surpassing the Street’s $29.4 billion projection. Adjusted earnings per share reached $3.32, topping the consensus estimate of $3.24. Free cash flow jumped 95% to $13.7 billion.
The highlight was AI semiconductor revenue, which skyrocketed 221% to $16.7 billion. Custom XPUs experienced 3.5-fold year-over-year growth and now represent 73% of total AI revenue.
Looking ahead to Q4, Broadcom projected revenue of approximately $34.8 billion, representing 93% year-over-year growth. The issue? Several Wall Street analysts had positioned their forecasts between $35 billion and $35.4 billion. This modest shortfall proved sufficient to trigger investor concern.
Extended AI Projections Receive Upward Revision
Broadcom has increased its AI semiconductor revenue expectation for fiscal 2027 to approximately $115 billion, an upgrade from its previous outlook of more than $100 billion. The company also unveiled a fiscal 2028 projection of $230 billion, suggesting another doubling from the 2027 figure.
Major clients including Anthropic and OpenAI are fueling much of this confidence. Anthropic finalized an agreement with Broadcom in April for multiple gigawatts of next-generation TPU capacity beginning in 2027. OpenAI is collaborating with Broadcom on 10 gigawatts of custom AI accelerators extending through 2029.
BMO Capital elevated its price objective to $575 from $455, highlighting Broadcom’s six major AI customers and identifying Anthropic as among the most aggressive in expanding computational capacity. Macquarie upgraded AVGO to Outperform with a $490 target and projects Anthropic alone could acquire more than $40 billion from Broadcom during fiscal 2028.
Wall Street Opinion Remains Mixed
The bullish thesis doesn’t resonate with everyone. DA Davidson reduced its price target to $350 from $400 while maintaining a Neutral rating, emphasizing guidance-related concerns. RBC Capital held steady at $400 with a Sector Perform rating, highlighting component supply and infrastructure preparedness as possible headwinds.
RBC additionally observed that Broadcom trades at approximately 18.5 times projected 2027 earnings, representing a premium exceeding 30% compared to Nvidia on a stock compensation-adjusted basis.
Evercore ISI modestly reduced its target to $578 from $582 while preserving an Outperform rating. TD Cowen lowered to $475 from $500 but retained a Buy rating. Morgan Stanley increased to $505 from $502. Cantor Fitzgerald boosted its target to $600 from $525.
AVGO currently trades at approximately 34 times forward earnings, marginally below its semiconductor sector counterparts but significantly above the S&P 500’s 21 times multiple.
Truist Securities decreased its target to $520, pointing to a modest software shortfall and an AI revenue projection it considered slightly below consensus. KeyBanc maintained its Overweight rating and $575 target, emphasizing the elevated fiscal 2027 AI revenue guidance.
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