Key Highlights
- The chip giant’s AI semiconductor sales reached $16.7 billion during the third quarter of 2026, representing a 221% increase compared to the same period last year.
- Shares of AVGO have declined approximately 26% since reaching a peak of $480.77 in June.
- Chief Executive Hock Tan projects AI-related revenue will climb to $115 billion by 2027 and potentially double to $230 billion in 2028.
- The semiconductor firm announced partnerships with Apollo and Blackstone for a $35 billion financing initiative supporting more than 20 gigawatts of computing infrastructure.
- Analyst consensus reflects a Strong Buy rating with a mean price objective of $521.41, suggesting approximately 41% growth potential.
Trading near $367 per share, Broadcom’s valuation has retreated roughly 26% from the $480.77 closing peak achieved in June. This decline occurred despite the company delivering exceptionally robust quarterly performance metrics.
Third-quarter 2026 consolidated revenue totaled $29.6 billion, marking an 86% year-over-year expansion. The company’s AI semiconductor division experienced explosive growth of 221%, generating $16.7 billion. Custom accelerator solutions accounted for approximately 73% of AI chip revenue.
The Semiconductor Solutions segment delivered revenue of $20.84 billion, climbing 127% annually and representing 70% of consolidated sales. Meanwhile, the Infrastructure Software division generated $8.75 billion, increasing 29% as VMware private-cloud solutions gained broader adoption.
Adjusted earnings per share essentially doubled, reaching $3.32. The company produced $13.7 billion in free cash flow, equivalent to 46% of total revenue.
Expanding AI Revenue Trajectory
Looking toward the fourth quarter, Broadcom issued guidance calling for total revenue of $34.8 billion, representing 93% growth. AI semiconductor revenue specifically is projected to reach $21.7 billion, up 236%. Company leadership now anticipates approximately $58 billion in AI semiconductor sales for the complete fiscal year.
During his presentation at the Goldman Sachs Communacopia and Technology Conference, CEO Hock Tan outlined expectations for AI revenue to achieve $115 billion in 2027 before potentially doubling to $230 billion by 2028. He emphasized that infrastructure constraints, rather than customer appetite, represent the primary limiting factor for growth.
Power supply availability has emerged as a critical constraint. Tan highlighted that electricity grid access, transformer procurement, regulatory permitting processes, and physical construction schedules constitute the primary obstacles preventing faster AI data center deployment.
The company maintains collaborative relationships with six frontier-model developers for custom XPU chip production. Notable customers include Google, OpenAI, and Anthropic. A long-term supply agreement with Google extends through 2031, covering TPUs and networking hardware. Additionally, Broadcom committed to providing OpenAI with 10 gigawatts of custom silicon capacity, successfully delivering the Jalapeño ASIC prototype within a nine-month timeframe.
AI chip order bookings surpassed $30 billion during the most recent quarter. Committed infrastructure deployments encompass over 10 gigawatts for Anthropic, five gigawatts dedicated to OpenAI, and three gigawatts allocated to Meta.
Analyst Perspectives and Valuation Metrics
Current trading levels place shares at approximately 31.7 times the fiscal 2026 consensus earnings estimate of $11.64 per share. Should fiscal 2027 consensus earnings reach the projected $19.39, the forward price-to-earnings multiple would compress to roughly 19 times at present valuation levels.
Management anticipates free cash flow generation in the mid-$40 billion range throughout 2027. CEO Tan indicated the board of directors may evaluate enhanced dividend payments or share repurchase programs during December deliberations.
From a technical analysis perspective, AVGO shares are positioned marginally below the 200-day moving average of $369.97. The Relative Strength Index registers 46.14, indicating neutral-to-slightly bearish momentum characteristics. Critical support exists around the $358 level.
Citigroup reaffirmed its Buy recommendation while lifting the price objective to $515 on September 4. Macquarie elevated AVGO to an Outperform rating with a $490 target on September 3. DA Davidson sustained a Neutral stance with a $350 price target.
The aggregate Wall Street consensus reflects a Strong Buy recommendation, derived from 26 Buy ratings and three Hold ratings. The mean price target sits at $521.41.
During Wednesday’s premarket trading session, AVGO declined 0.03% to $368.46.
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