Broadcom: The $350 Billion AI Signal Has A $29 Billion Footnote

Broadcom is rated Buy, with a $470 price target and 37% upside, as the market underappreciates its AI revenue visibility and earnings power. Management guides for $115B in FY2027 AI semiconductor revenue, supported by secured supply, hyperscaler deployments, and robust infrastructure software margins. Gross margin pressure is expected to persist due to XPU mix and memory content, but operating leverage and software profitability should cushion earnings. XPV financing introduces customer credit risk, but current free cash flow is prioritized for debt reduction over buybacks, supporting a conservative base case.

Broadcom Inc. (AVGO) fell after reporting one of the strongest quarters in its history. According to the company's Q3 FY2026 earnings release, revenue reached $29.59 billion, up 86% year over year, non-GAAP EPS increased 96% to $3.32, AI