TLDR
- Broadcom (AVGO) received an upgrade to “Overweight” from Wells Fargo after shares dropped 4.2% on January 14
- Wells Fargo raised 2026 revenue projections to $100.3 billion and 2027 forecasts to $143.8 billion on AI momentum
- The chipmaker’s AI semiconductor business is expected to reach $52.6 billion in 2026 and $93.4 billion in 2027
- Q4 fiscal 2025 results exceeded expectations with revenue up 28% and AI semiconductor sales jumping 74%
- Analysts maintain “Strong Buy” consensus with average price target of $455.22, indicating 29% upside from current levels
Broadcom shares slipped 4.2% on January 14 as multiple headwinds converged. Reports of Chinese restrictions on U.S. software, a substantial debt offering, and insider selling created short-term volatility.
Wells Fargo saw opportunity in the weakness. The firm moved Broadcom from “Equal-weight” to “Overweight,” calling the decline a chance to buy rather than a reason to worry.
The upgrade came with substantially higher financial projections. Wells Fargo increased its 2026 revenue estimate to $100.3 billion from $97 billion.
Earnings per share forecasts rose to $10.80 from $10.36 for 2026. The 2027 outlook climbed even more dramatically to $143.8 billion in revenue and $15.35 in EPS.
Analyst Aaron Rakers pointed to clearer visibility on 2026 catalysts. The firm’s confidence stems partly from Broadcom’s expanding collaboration with Alphabet on tensor processing units.
AI Business Driving Revenue Surge
The revised estimates center entirely on artificial intelligence growth. Wells Fargo now expects AI semiconductor revenue to hit $52.6 billion in 2026.
That represents 116% growth year-over-year. The 2027 projection of $93.4 billion would mark another 78% increase as hyperscale customers ramp up AI infrastructure spending.
Broadcom’s latest quarterly results validate the optimistic outlook. The company reported Q4 fiscal 2025 earnings on December 11 that beat across the board.
Revenue climbed 28% to $18.02 billion, surpassing the $17.5 billion consensus. Adjusted EPS reached $1.95 versus analyst expectations of $1.87.
The AI semiconductor segment stole the show. Revenue jumped 74%, well above management’s own guidance and demonstrating accelerating customer demand.
Infrastructure software performed strongly too. The VMware business grew 19%, speeding up from the previous quarter despite some customer friction around pricing changes.
Non-GAAP operating income increased 35% to $11.9 billion. Cash and equivalents ended the quarter at $16.2 billion, up from $10.7 billion three months earlier.
Wall Street Backs Bullish View
Wells Fargo lifted its price target to $430 from $410 following the upgrade. Other firms are equally optimistic about Broadcom’s trajectory.
Mizuho analyst Vijay Rakesh raised his target to $480 from $450. He maintained an “Outperform” rating, citing strong AI momentum.
Oppenheimer analyst Rick Schafer kept a buy rating with a $450 price target. Barclays also issued a buy rating on January 16.
The Street consensus strongly favors Broadcom. Out of 42 analysts, 36 recommend “Strong Buy,” three suggest “Moderate Buy,” and three advise “Hold.”
The average price target sits at $455.22. That implies 29% upside potential from current price levels.
The most optimistic target of $535 suggests possible gains of 52%. Management guided for first-quarter fiscal 2026 AI semiconductor revenue to double year-over-year to $8.2 billion.
Total Q1 revenue guidance came in at $19.1 billion. The company expects adjusted EBITDA margins of 67%, indicating strong profitability alongside rapid growth.
Analysts project full-year 2026 earnings will surge 49% to $8.39 per share. Fiscal 2027 estimates call for another 46% jump to $12.23.
The stock currently trades at 40.8 times forward earnings. That’s above both industry benchmarks and Broadcom’s historical five-year average, reflecting premium valuations for AI exposure.
Broadcom has increased dividends for 15 consecutive years. The annual payout is $2.60 per share with a yield of 0.76%. Insider activity turned negative recently as Chief Legal Officer Mark David Brazeal sold 30,000 shares for $10.4 million earlier this month.
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