Accelerating AI Demand And VMware Integration Will Expand Future Opportunities
Broadcom's analyst price target has been increased from approximately $370 to $387 per share, as analysts cite strong revenue growth expectations following significant AI partnerships and expanded custom chip deployments with OpenAI.
Analyst Commentary
Recent analyst commentary reflects strong optimism regarding Broadcom's growth trajectory, with successive price target increases following its new strategic partnerships and record custom chip deployments. The following summarizes the key takeaways from the most recent Street research notes:
Bullish Takeaways- Bullish analysts have significantly raised their price targets, in some cases to $460 per share. They highlight momentum from major AI deals and a robust custom silicon pipeline.
- Multiple firms are raising revenue and earnings per share estimates for Broadcom into 2026 and beyond. They see substantial upside as large-scale AI infrastructure projects ramp up and mature.
- Recent custom silicon and networking deals are seen as evidence of Broadcom's deepening relationships with major cloud and AI players. This further enhances its positioning as a top supplier in next-generation AI clusters.
- Analysts expect continued customer diversification and note that Broadcom's custom solutions now compete more directly with entrenched players. This reflects stronger execution and increased confidence in securing large, multi-year projects.
- Bearish analysts remain cautious about potential competitive pressures, especially as rival companies secure large investments and obtain similar AI infrastructure contracts with key customers.
- There is also concern over potential margin compression, as Broadcom pursues more rack-scale solutions. These are high-volume but could carry lower profitability compared to traditional offerings.
- Some analysts flag regulatory and supply chain risks, particularly surrounding any shifts in U.S.-centric chip manufacturing requirements. These changes could impact order patterns and overall sector volatility.
- Skepticism remains regarding the execution risk of large multi-year deals, as successful delivery will be crucial for justifying the elevated valuation levels that recent price targets reflect.
What's in the News
- Apple has introduced its proprietary N1 wireless networking chip across the iPhone 17 lineup, further reducing dependence on Broadcom as a wireless chip supplier (DigiTimes).
- OpenAI, backed by Microsoft, is set to begin mass production of its own AI chip co-designed with Broadcom. Shipments are planned for next year to support internal AI workloads (Financial Times).
- MediaTek has secured Meta's new 2nm ASIC order over Broadcom for mass production slated for the first half of 2027. This reflects strong competition in the advanced chip space (DigiTimes).
Valuation Changes
- Fair Value: Increased from $370.36 to $386.68 per share. This reflects a modest upward revision in Broadcom’s estimated intrinsic value.
- Discount Rate: Decreased slightly from 10.25% to 10.21%, signaling a marginal reduction in the perceived risk associated with Broadcom’s future cash flows.
- Revenue Growth: Projected annual growth has risen from 26.63% to 29.12%. This indicates higher confidence in Broadcom’s top-line expansion potential.
- Net Profit Margin: Dipped marginally from 42.78% to 42.63%, suggesting slightly tighter margins despite the revenue growth outlook.
- Future P/E: Lowered from 46.02x to 45.44x, pointing to a small decrease in expected future earnings multiples.
Disclaimer
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