Broadcom price target rises as stock falls: analysts explain

Broadcom’s price target debate has gotten sharper this week. The company posted record second-quarter results, then watched the stock slide anyway, because investors wanted a bigger promise on AI.

That is the split AVGO holders are dealing with now: strong numbers, a weaker share price, and analysts arguing that the market may be treating conservative guidance like a warning label.

Why Broadcom stock fell after record earnings

Broadcom reported revenue of $22.19 billion in fiscal Q2, up 48% from a year earlier, while AI semiconductor revenue reached $10.8 billion, up 143% year over year, data shows. Free cash flow came in at $10.26 billion, or 46% of revenue, a number that would make most finance teams reach for the calculator and the celebration budget.

The stock still sold off hard. Morningstar said shares fell 14% after hours last week, after investors had been hoping for a bigger jump in the company’s AI outlook for 2027 and beyond.

The quarter itself was not the problem. Broadcom’s guidance was.

Management kept its fiscal 2027 AI revenue outlook at “more than $100 billion,” and guided third-quarter AI semiconductor revenue to $16 billion, Morningstar reported last week. Those are big numbers. They just were not the kind of step-change update a stock near all-time highs had already begun to price in.

Nikhs put the mood in plainer language. The quarter “was not weak,” it was strong versus the numbers, but not strong enough versus the buy-side AI bar that had moved ahead of consensus, Nikhs wrote on Wednesday. By then, expectation had become the tougher comparison.

Broadcom’s own release showed the operating engine is still humming. The company guided fiscal third-quarter revenue to about $29.4 billion, up 84% from a year earlier, with non-GAAP operating margin expected to hold around 67%, data shows. It also declared a quarterly dividend of $0.65 per share and said its $10 billion share repurchase program remains active, data shows.

Why analysts are raising the Broadcom price target

The main reason analysts are lifting the Broadcom price target is not some grand valuation epiphany. It is simpler than that: they think the company is still sandbagging its own outlook.

Morningstar raised its fair value estimate to $650 from $550 after the selloff, the firm said last week. Its case rests on rapid long-term XPU growth and improving incremental margins from custom AI chips.

Morningstar also said it sees the $100 billion fiscal 2027 AI revenue target as a sandbag, not a ceiling, and now models close to $200 billion in AI chip revenue in fiscal 2028, according to the note. The stock traded at about 18 times consensus fiscal 2028 earnings after the selloff, while Morningstar values it at 25 times its own 2028 estimate, the firm said.

That is the heart of the AVGO price target story. Not mystery. Not magic. Just a disagreement over how much of the AI buildout Broadcom still gets to own.

Customer relationships also help explain why bulls are leaning in. Broadcom has multi-year, multi-generation AI silicon and networking agreements with Google, Meta, Anthropic, and OpenAI, giving it order visibility through 2028, Seeking Alpha reported last week. In semiconductors, that kind of visibility is rare enough to matter. It gives long-range models something sturdier than hope and a spreadsheet full of heroic assumptions.

Nikhs laid out a more aggressive path too. In the bullish case, the note sees fiscal 2029 earnings per share of $38 to $42, which would imply a stock value of $760 to $900 at 20 to 22 times earnings if networking stays strong, software scales, and operating margins stay above 60%, Nikhs wrote on Wednesday. A more restrained base case, with margins in the high 50s, still supports fiscal 2029 EPS of $30 to $34 and a stock value of $480 to $610 at 16 to 18 times, Nikhs wrote on Wednesday.

The risk behind higher Broadcom analyst ratings

The pushback is not about whether AI demand exists. It is about who keeps the economics when everyone wants a bigger slice.

Seeking Alpha noted last week that roughly 40% of Broadcom’s revenue comes from just five hyperscale customers, a concentration that gives those customers real use on pricing, contract terms, and timing, Seeking Alpha reported on Thursday. That matters as those same customers push internal silicon programs and keep looking at alternatives.

It also explains why margins sit at the center of the debate. Broadcom’s AI semiconductor revenue is rising fast, but the same analysis said gross margins are already under pressure from a hardware-heavy mix, Seeking Alpha wrote on Thursday. Growth can look thrilling on a revenue chart and still be less impressive once the margins start to narrow.

There is also the software piece, especially VMware. Nikhs argued that software execution now belongs inside the AI resilience case, not off to the side as a legacy acquisition, Nikhs wrote on Wednesday. If software slows, Broadcom becomes more dependent on one very hot, very cyclical revenue stream. That is not the sort of diversification investors usually have in mind when they pay up for quality.

Seeking Alpha offered a more conservative base case as well, with fiscal 2027 EPS of $19 to $20 and fair value of $400 to $480 at 20 to 23 times earnings, Seeking Alpha said on Thursday. That is a wide gap from the bullish view, which is usually a sign that the debate is still alive rather than settled.

What investors should watch next for AVGO

The next clean test is whether Broadcom actually delivers the $16 billion in AI semiconductor revenue it guided for the third quarter, data shows. Nikhs said around that level keeps the thesis intact, while a miss would raise timing concerns, Nikhs wrote on Wednesday.

Investors will also be listening for any language that nudges the fiscal 2027 AI path beyond “more than $100 billion.” Morningstar’s case rests on the idea that management is still underselling the runway, the firm said last week. If the company starts sounding more explicit about fiscal 2028 and beyond, the Broadcom stock price target conversation could move higher again. If it does not, the market will keep doing what it did after earnings, which is demanding proof instead of promises.

For now, Broadcom is a company with record revenue, record EBITDA, and record AI momentum, yet the stock still got punished because investors were shopping for a bigger map. That is a familiar problem for expensive stocks, but not an easy one. The numbers have to keep outrunning the story.