Assessing Broadcom (AVGO) Valuation After Latest Earnings Provide Fresh Insight into Growth and Margins

Broadcom (AVGO) shares have been drawing attention after the company announced its latest quarterly results, which provided a clearer look at both its revenue growth and profit margins. Investors are analyzing what these numbers might mean for the upcoming months.

See our latest analysis for Broadcom.

Broadcom’s share price has powered ahead this year, notching a 59% year-to-date gain, while its 1-year total shareholder return has more than doubled at 121%. Solid quarterly results and momentum in semiconductors have kept sentiment strong, with recent price action suggesting that investor confidence is still building rather than reaching a peak.

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But with Broadcom’s stock surging and valuation near analyst targets, the key question remains: Is there still room for upside for new investors, or has the market already factored in the company’s future growth potential?

Most Popular Narrative: 5.8% Undervalued

With Broadcom’s fair value now pegged at $392 and shares last closing at $369.63, the market is trading just below the narrative’s target. This prompts a closer look at how much upside remains, and whether a premium is justified by projected growth.

Broadcom is experiencing accelerating demand for custom AI accelerators (XPUs) from hyperscale and large language model customers, underscored by the addition of a major fourth customer and a strengthened backlog. This indicates robust multi-year revenue growth in the AI semiconductor segment.

Read the complete narrative.

The most closely followed narrative points to explosive demand, high-profile customer momentum and ambitions for market leadership, all driving a valuation few expected. But what are the game-changing assumptions behind this punchy fair value target? There are bold projections on future profits, margins, and growth that will surprise even veteran investors. Click to reveal the forecast that is setting Broadcom apart for bulls and skeptics alike.

Result: Fair Value of $392 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, with rival chipmakers mounting a competitive push and Broadcom’s AI customer base concentrated among just a few hyperscalers, downside risks remain real.

Find out about the key risks to this Broadcom narrative.

Another View: Valuation by Multiples

While the fair value estimate paints an optimistic picture, Broadcom’s current price-to-earnings ratio stands at 92.8x, substantially higher than both the US Semiconductor industry average of 36.1x, its peer average of 63.8x, and a fair ratio of 67.4x that the market could move toward. This premium highlights greater valuation risk if growth slows. Is bullish sentiment running ahead of fundamentals?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Broadcom Narrative

If you see Broadcom’s outlook differently or want to dig into the numbers yourself, you can shape your own perspective in just a few minutes. Do it your way

A great starting point for your Broadcom research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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