Key Takeaways
- Broadcom’s Q3 FY26 earnings announcement is scheduled for September 2, with analysts projecting EPS of $3.22, representing a 90.5% year-over-year surge
- Projected revenue stands at $29.24 billion, marking an impressive 83.3% year-over-year climb
- The company partnered with OpenAI to create the JalapeƱo inference chip, which demonstrated superior performance compared to Nvidia’s Blackwell processors in initial evaluations
- Anthropic has committed to $21 billion in TPU purchases from Broadcom, secured through a long-term supply agreement
- Analysts maintain a Strong Buy rating on AVGO, with consensus price targets averaging $511, suggesting 37.5% potential upside
As Broadcom approaches its fiscal third-quarter earnings disclosure on September 2, market sentiment remains decidedly optimistic. AVGO shares were changing hands at approximately $371.54 before the announcement, reflecting a 4.49% daily gain.
Financial analysts are anticipating earnings of $3.22 per share, which would represent a substantial 90.5% increase compared to the same period last year. Revenue projections point to $29.24 billion, reflecting an 83.3% year-over-year expansion.
Christopher Rolland from Susquehanna maintained his Buy recommendation with a $490 target price. His outlook calls for a “generally in-line-to-slightly-positive quarter,” with AI networking and software divisions expected to lead performance.
Rolland identified supply chain bottlenecks affecting advanced manufacturing nodes as a possible headwind for AI processor growth in the immediate term. Nevertheless, he maintains an optimistic stance on Broadcom’s custom semiconductor operations.
The wider analyst community shares this positive outlook. AVGO has earned a Strong Buy consensus based on 24 Buy ratings alongside three Hold recommendations. The mean price target of $511 indicates approximately 37.5% upside potential from present trading levels.
Tensor Processing Units Lead Revenue Growth
The cornerstone of Broadcom’s revenue expansion is its custom AI semiconductor collaboration with Alphabet, producing Tensor Processing Units. Alphabet has elevated its capital expenditure guidance to a range between $195 billion and $205 billion, with intentions to boost spending even more in the coming year.
Anthropic has committed to $21 billion worth of TPU acquisitions from Broadcom, formalized through a multi-year supply arrangement. Broadcom records the semiconductor sales while Alphabet receives licensing compensation.
Broadcom continues as Alphabet’s principal collaborator for its primary training processors, establishing a stable foothold in this revenue stream.
In addition to TPUs, Broadcom recently partnered with OpenAI to engineer the JalapeƱo inference processor. Preliminary benchmarks showed the chip surpassing Nvidia’s Blackwell processors and TPUs in performance metrics. OpenAI intends to implement JalapeƱo across its server infrastructure before the year concludes.
High-Bandwidth Memory and Optical Technologies Strengthen Position
Broadcom has finalized a $200 billion arrangement with Samsung Electronics covering high-bandwidth memory, fabrication services, and advanced packaging capabilities extending through 2030. The company has additionally reserved advanced manufacturing capacity with Taiwan Semiconductor Manufacturing.
Securing HBM supply represents a significant strategic edge. Nvidia has monopolized substantial SK Hynix production, AMD has locked down Samsung inventory, and Micron’s HBM volume represents approximately one-third of its Korean competitors. Opportunities for newcomers are constrained.
Broadcom holds leadership positions in optical networking technologies, experiencing rapid adoption within AI data center infrastructure. The company dominates in optical digital signal processors and co-packaged optics, embedding optical components directly into its specialized chips.
Trading at a forward price-to-earnings ratio near 18 using fiscal 2027 projections, the valuation appears justified considering the substantial growth trajectory ahead.
Public entities and retail shareholders control 33.13% of AVGO. Vanguard represents the largest institutional investor with an 8.71% position.
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