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Broadcom Remains So Full of Promise And Continues to Disappoint

Broadcom's AI business is growing faster than almost any chip company on earth, yet the stock keeps sliding after every earnings beat. Something is stopping the market from rewarding results that look undeniably strong.

By Alex Sirois
Published October 7, 2026, 7:15am ET · 3 min read

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A close-up, composite image featuring the intricate gold pins of a CPU socket on a green circuit board, partially obscured by a transparent overlay of financial market data. The data includes stock prices, percentage changes (some positive green/white, some negative orange), a line graph, and a 3D bar chart with a prominent red arrow pointing upwards. The colors are predominantly green, blue, white, gold, and red, conveying a busy financial and technological landscape.
A visual representation of the intersection between semiconductor technology, AI advancements, and fluctuating market performance, reflecting trends relevant to companies like Broadcom. © Shutterstock

Broadcom (NASDAQ:AVGO | AVGO Price Prediction) trades at $375.81. The company posts record AI results while the stock trails the market.

Broadcom designs custom AI accelerators (XPUs) for frontier-model builders such as Alphabet (NASDAQ:GOOGL), OpenAI and Meta Platforms (NASDAQ:META). It also sells the Ethernet switches that connect those chips and runs VMware infrastructure software. AI semiconductor revenue reached $16.7 billion last quarter, which works out to 56% of total revenue.

The stock has frustrated holders. Broadcom beat EPS estimates in all 8 of its latest reported periods, yet shares moved an average of -1.25% the day after. Shares sit 23.8% below their 52-week high of $493.28.

A $230 Billion AI Roadmap at 19x Forward Earnings

Third-quarter revenue rose 85.5% to $29.59 billion, and non-GAAP EPS of $3.32 exceeded the $3.24 estimate. Management guided fourth-quarter AI revenue to $21.7 billion, up 236%, and projected about $115 billion in AI revenue for fiscal 2027 and $230 billion for fiscal 2028. CEO Hock Tan said Broadcom is “very much on target to exceed $30 in earnings per share in fiscal 2028.”

Measured against that runway, a forward P/E of 19 and a PEG ratio of 0.361 look cheap. A long-term Google deal covers “multi-tens of billions of dollars of TPUs annually,” and OpenAI is on track to become the second-largest XPU customer.

Six Customers, Thinner Margins and Slipping Estimates

That growth rests on a very small base. Tan said it directly: “We have only six customers to deal with.” As XPU and memory content rise, gross margin should fall to about 73% in the fourth quarter from 78% a year ago. Deployments also depend on land, power and data center shells, which Tan called “a big concern” (we covered seven of the suppliers behind that expansion in a free AI infrastructure report). Broadcom may also provide “modest residual value guarantees” on customer financing deals.

Analysts are cutting numbers. Over the trailing 30 days, fiscal 2027 EPS estimates drew 27 downward revisions and 12 upward. A trailing P/E of 46 leaves little room for disappointment.

Record Cash Flow Meets a Construction Timeline

Free cash flow of $13.67 billion, equal to 46% of revenue, plus a guided 66% operating margin support the upside thesis. Customer concentration and supply limits drive the downside risks. The stock trades near its 50-day average of $373.22 and its 200-day average of $367.50, a sign the market has settled on a price for now.

A fourth quarter at the guided $34.8 billion with margins on target would support the upside thesis. More estimate cuts or delayed deployments would support the downside risks.

Wall Street Sees 41% Upside the Market Keeps Ignoring

The consensus target is $531.31, which implies 41.4% upside. Treat targets as one input, since they carry no guarantee. The 50 covering analysts rate the stock as follows:

  • Strong Buy: 7
  • Buy: 40
  • Hold: 3
  • Sell: 0

Shares are up 9.18% year to date, behind the S&P 500’s 14.26%. Over one year, Broadcom rose 12.85%, and the index returned 16.01%. The five-year return of 731.2%, far above the index’s 77.62%, explains why investors keep expecting more.

What Broadcom Must Prove Before the Beats Pay Off

At $375.81, Broadcom’s valuation rests on execution.

Execution has been strong. The stock needs proof that the fiscal 2027 plan will arrive on schedule. The next earnings report is the first test, and AI revenue near guidance with steady operating margin would support the upside thesis.

The stock could rerate if execution holds, or face another post-earnings drop if it slips. Each quarter, keep an eye on gross margin, estimate revisions and how quickly customer data centers come online.

Broadcom has earned its promise, and the stock still has to earn the return.

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Alex Sirois

Alex Sirois is a financial writer with experience spanning both retail and institutional investing. He has written for InvestorPlace and held roles at BNY Mellon and Bernstein, giving him a perspective that bridges Main Street portfolios and Wall Street analysis.
Alex holds an MBA from George Washington University and has built his career across multiple industries, including e-commerce, education, and translation — a breadth of experience that informs how he breaks down complex financial topics for everyday investors. His writing is conversational, actionable, and grounded in long-term, buy-and-hold investing principles.
At 247 Wall St., Alex focuses on delivering analysis that is both accessible and useful, with a clear emphasis on helping readers make more informed decisions with their money.

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