Key Takeaways:
- AI Surge: Broadcom (AVGO) is capitalizing on the AI boom, with AI revenue growing 65% year-over-year to a record $20 billion, driven by hyperscaler demand for custom accelerators.
- Price Projection: Our model projects the stock could climb to $691 per share by October 2028.
- Expected Returns: This target implies a stunning 28.1% annualized return, positioning the stock as a “Strong Buy” for growth investors.
- Software Powerhouse: The infrastructure software segment is firing on all cylinders, with VMware Cloud Foundation (VCF) driving revenue growth of 26% year-over-year.
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Broadcom (AVGO) has transformed from a traditional chipmaker into the backbone of the AI economy.
The company closed its Fiscal Year 2025 with record consolidated revenue of $64 billion, up 24% year-over-year. The growth engine? Artificial Intelligence. Demand for custom AI accelerators (XPUs) is insatiable, with sales more than doubling as Broadcom secured orders from a fifth major customer.
Simultaneously, the VMware acquisition is proving to be a masterstroke. Infrastructure software revenue reached $6.9 billion in Q4, with adjusted EBITDA margins hitting 67%, proving that Broadcom’s “acquisition and optimize” playbook is working flawlessly.
With the stock trading at $344.97, the market may still be underestimating the duration and magnitude of this AI-led supercycle.
See analysts’ full growth forecasts and estimates for Broadcam stock (It’s free) >>>
What the Model Says for AVGO Stock
We evaluated Broadcom’s potential through 2028, factoring in the explosive growth of its custom silicon business and the margin accretion from VMware.
Our model signals a “Strong Buy.” Using a bullish forecast of 37.5% Revenue Growth (CAGR) and 65.0% Operating Margins, the model projects the stock could reach $691 by the end of 2028.
This implies a 28.1% annualized return over the next three years.
This return profile suggests that Broadcom is not just an “AI play” but potentially the most undervalued large-cap AI stock relative to its growth rates.
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for AVGO stock:
1. Revenue Growth: 37.5%
AI and VMware are driving a new tier of growth.
The momentum is undeniable. In semiconductors, revenue growth accelerated to 35% in Q4, driven by a 74% surge in AI semiconductor revenue. The company has a backlog of $162 billion, with $73 billion specifically tied to AI orders expected to be delivered over the next 18 months.
We forecast aggressive revenue growth of 37.5% CAGR through 2028. This assumes the “AI Capex” cycle continues for multiple years and Broadcom retains its dominant share in custom silicon for hyperscalers.
2. Operating Margins: 65.0%
Broadcom is known for its discipline. In Q4, Gross Margin was 77.9%, and Adjusted EBITDA margin was 68% of revenue. The integration of VMware is already accretive, with infrastructure software operating margins reaching 78%.
We project operating margins to stabilize at 65.0%, reflecting a mix shift where high-margin software continues to grow alongside the hardware business.
3. Exit P/E Multiple: 27.7x
Broadcom currently trades at 36.3x earnings, which is elevated but justified by its growth.
Our model assumes an exit multiple of 27.7x by 2028. We chose a multiple that actually contracts from today’s levels. This is a conservative approach. It implies that even if investor enthusiasm cools and the multiple compresses, the sheer weight of earnings growth will drive the stock price higher.
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What Happens If Things Go Better or Worse?
The upside is significant, but it relies on continued AI execution (these are estimates, not guaranteed returns):
- Low Case: If AI demand hits an “air pocket,” returns could compress to 11.6% annual return, still beating the market average.
- Mid Case: In our standard advanced scenario, we project an 18.8% annual return, reaching a price of $790 by 2030.
- High Case: If AI adoption accelerates further and margins expand to 55%, returns could reach a massive 25.7% annual return over the longer 5-year horizon.
See what analysts forecast for the next 5 years for AVGO stock (Free with TIKR) >>>
How Much Upside Does BroadcamStock Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
