TLDR
- AVGO fell nearly 3% post-earnings and is down roughly 15% over the past month, trading around $358
- Q3 revenue hit a record $29.59 billion, up 85% year over year, with AI semiconductor revenue surging 221% to $16.7 billion
- Q4 revenue guidance of $34.8 billion came in slightly below Wall Street estimates of around $35 billion
- Broadcom raised its fiscal 2027 AI semiconductor revenue outlook to $115 billion, with a 2028 target of $230 billion
- Analysts are split, with price targets ranging from $350 (DA Davidson, Neutral) to $600 (Cantor Fitzgerald, Overweight)
Broadcom reported one of its strongest quarters on record Thursday, but the market wasn’t impressed. AVGO stock fell nearly 3% after earnings and is now down about 15% over the past month, trading around $358 a share. That puts it more than 25% below its all-time high set in June.
Q3 revenue came in at $29.59 billion, up 85% year over year and ahead of Wall Street’s $29.4 billion estimate. Adjusted earnings per share hit $3.32, beating the $3.24 consensus. Free cash flow surged 95% to $13.7 billion.
AI semiconductor revenue was the standout, rising 221% to $16.7 billion. Custom XPUs grew 3.5 times year over year and now account for 73% of that AI revenue.
For Q4, Broadcom guided for revenue of approximately $34.8 billion, good for 93% growth year over year. The problem? Some Wall Street forecasts were sitting closer to $35 billion to $35.4 billion. That small gap was enough to spook investors.
Long-Term AI Outlook Gets a Boost
Broadcom now expects AI semiconductor revenue of around $115 billion in fiscal 2027, up from a prior outlook of more than $100 billion. It also introduced a fiscal 2028 target of $230 billion, implying another doubling from 2027.
Key customers Anthropic and OpenAI are driving a chunk of that optimism. Anthropic signed a deal with Broadcom in April for multiple gigawatts of next-generation TPU capacity starting in 2027. OpenAI is working with Broadcom on 10 gigawatts of custom AI accelerators through 2029.
BMO Capital raised its price target to $575 from $455, citing Broadcom’s six major AI customers and calling out Anthropic as one of the most aggressive in expanding computing capacity. Macquarie upgraded AVGO to Outperform with a $490 target and estimates Anthropic alone could purchase more than $40 billion from Broadcom in fiscal 2028.
Analysts Remain Divided
Not everyone is buying the rally case. DA Davidson cut its price target to $350 from $400 while keeping a Neutral rating, pointing to guidance concerns. RBC Capital held at $400 with a Sector Perform rating, flagging component supply and infrastructure readiness as potential risks.
RBC also noted that Broadcom trades at roughly 18.5 times estimated 2027 earnings, a premium of more than 30% to Nvidia on a stock compensation-adjusted basis.
Evercore ISI trimmed its target slightly to $578 from $582 but kept an Outperform rating. TD Cowen cut to $475 from $500 but stayed at Buy. Morgan Stanley raised to $505 from $502. Cantor Fitzgerald lifted its target to $600 from $525.
AVGO now trades at around 34 times forward earnings, slightly below its semiconductor industry peers but well above the S&P 500’s 21 times multiple.
Truist Securities lowered its target to $520, citing a modest miss in software and an AI revenue outlook it viewed as slightly below consensus. KeyBanc kept its Overweight rating and $575 target, pointing to the raised fiscal 2027 AI revenue guidance.
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