Key Highlights
- AI semiconductor sales reached a record $16.7 billion during Broadcom’s fiscal Q3 2026, representing a 221% year-over-year increase.
- Shares of AVGO have declined approximately 26% since reaching a June peak of $480.77.
- Leadership projects AI-related revenue will climb to $115 billion by 2027 and escalate to $230 billion in 2028.
- The company unveiled a $35 billion infrastructure financing partnership with Apollo and Blackstone, supporting over 20 gigawatts of computing power.
- Analyst consensus remains firmly bullish with a Strong Buy rating and an average target price of $521.41, suggesting potential gains of approximately 41%.
Trading near $367, Broadcom shares have retreated roughly 26% from the June closing peak of $480.77. This decline stands in stark contrast to the company’s recent operational performance, which ranks among its most impressive quarters to date.
The company reported total quarterly revenue of $29.6 billion for Q3 2026, marking an 86% year-over-year expansion. Within this figure, AI semiconductor revenue experienced explosive growth of 221%, reaching $16.7 billion. Custom-designed accelerators represented approximately 73% of AI chip revenue.
The Semiconductor Solutions division generated $20.84 billion in revenue, surging 127% annually and comprising 70% of overall sales. Meanwhile, Infrastructure Software revenue climbed 29% to $8.75 billion, propelled by increased VMware private-cloud deployments.
Adjusted earnings per share nearly doubled, hitting $3.32. The company generated $13.7 billion in free cash flow, representing an impressive 46% margin relative to revenue.
Expanding AI Revenue Trajectory
Looking ahead to Q4, Broadcom issued guidance calling for total revenue of $34.8 billion, a 93% increase. AI semiconductor revenue alone is projected to reach $21.7 billion, up 236%. Leadership now anticipates approximately $58 billion in AI semiconductor revenue for the complete fiscal year.
During remarks at the Goldman Sachs Communacopia and Technology Conference, CEO Hock Tan outlined projections showing AI revenue potentially hitting $115 billion in 2027 before doubling to $230 billion in 2028. He emphasized that these projections face greater constraints from infrastructure limitations than from customer appetite.
Energy availability has emerged as a critical constraint. Tan highlighted electrical grid access, transformer procurement, regulatory approvals, and construction schedules as primary factors restricting the pace at which AI data centers can become operational.
The company collaborates with six leading AI model developers on customized XPU processors. Its customer roster includes Google, OpenAI, and Anthropic. Broadcom maintains a long-term supply agreement with Google extending through 2031 for TPUs and networking hardware. Additionally, it committed to provide OpenAI with 10 gigawatts of custom silicon capacity, successfully delivering the JalapeƱo ASIC prototype within a nine-month timeframe.
AI chip orders surpassed $30 billion in the most recent quarter. Confirmed deployment commitments encompass more than 10 gigawatts for Anthropic, five gigawatts for OpenAI, and three gigawatts for Meta.
Valuation Metrics and Wall Street Perspective
Currently, shares trade at approximately 31.7 times the fiscal 2026 consensus earnings estimate of $11.64 per share. Should fiscal 2027 earnings reach the anticipated $19.39, the forward price-to-earnings multiple would compress to roughly 19 times at current levels.
Management expects free cash flow to reach the mid-$40 billion range during 2027. CEO Tan indicated the board may consider enhanced dividend payments or share repurchase programs when it convenes in December.
From a technical standpoint, AVGO trades marginally below its 200-day moving average of $369.97. The Relative Strength Index registers 46.14, indicating neutral-to-moderately bearish momentum. Critical support appears positioned around the $358 level.
Citigroup reaffirmed its Buy recommendation and elevated its price objective to $515 on September 4. Macquarie upgraded AVGO to Outperform with a $490 target on September 3. DA Davidson maintained a Neutral stance with a $350 price target.
The collective Wall Street view reflects a Strong Buy consensus, comprising 26 Buy ratings alongside three Hold ratings. The mean price target sits at $521.41.
During Wednesday’s premarket trading, AVGO edged down 0.03% to $368.46.
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