Key Takeaways:
- AI Dominance: Broadcom’s AI semiconductor revenue hit a record $10.8 billion in Q2, up 143% year-over-year.
- Price Projection: Based on current execution, AVGO stock could reach $650 by October 2028.
- Potential Gains: That target points to a 70% total return from the current price of $382.07.
- Annual Return: Investors could see roughly 25% growth each year over the next 2.4 years.
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Broadcom (AVGO) posted a record fiscal Q2 in 2026. Total revenue hit $22.2 billion, up 48% from a year ago, beating guidance. Operating margin held at a record 67%, even as the AI semiconductor business scaled rapidly.
- AI semiconductor revenue reached $10.8 billion, with bookings of over $30 billion in the same quarter.
- Infrastructure software revenue grew 9% to $7.2 billion, with ARR up 17% year-over-year.
- Free cash flow was a record $10.3 billion, representing 46% of revenue.
- For full-year 2026, Broadcom expects AI semiconductor revenue of $56 billion, up roughly 180% from fiscal 2025.
- The company reaffirmed that AI semiconductor revenue will exceed $100 billion in fiscal 2027.
Despite the strong run, Broadcom trades at $382.07. Investors who believe the AI chip cycle has years to go may still see meaningful upside.
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What the Model Says for Broadcom Stock
We looked at Broadcom as demand for custom AI chips becomes one of the most powerful forces in technology spending.
The company makes two distinct things.
- First, it designs custom AI accelerators, called XPUs, for the world’s largest AI labs.
- Second, it sells the networking chips that connect those accelerators into massive clusters. Both are in high demand and growing fast.
What makes Broadcom’s position unusual is the depth of its customer relationships. It has long-term agreements with Google, Meta, OpenAI, and Anthropic covering multiple chip generations.
CEO Hock Tan described the company’s visibility as now extending through 2028, which is rare in the chip industry.
Using 52.8% annual revenue growth and 67.8% operating margins, our model projects the stock reaching $650 within 2.4 years.
This assumes a 16.3x price-to-earnings multiple, down from the current forward P/E of 24.3x. The compression reflects normalization as extraordinary AI-driven growth begins to moderate.
Our Valuation Assumptions
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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: 52.8%
Broadcom’s growth is being driven by a handful of the world’s biggest spenders.
Q3 2026 guidance calls for AI semiconductor revenue of $16 billion, up over 200% year-over-year.
Beyond 2026, the company expects to ship roughly 10 gigawatts of compute capacity in fiscal 2027, with even more in fiscal 2028.
The non-AI semiconductor business is also recovering, with Q3 revenue guided up 12%.
2. Operating margins: 67.8%
Margins are holding up despite massive revenue growth.
Software contributes 93% of gross margins, helping offset lower margins in the semiconductor segment.
Management expects operating margin to stay stable at around 67% even as AI chip revenue becomes an ever-larger share of the mix.
3. Exit P/E Multiple: 16.3x
Broadcom trades near 24x forward earnings today. We assume meaningful compression to 16.3x as revenue growth normalizes from current extraordinary levels.
Historically, AVGO has averaged 18–35x, depending on the period, so our assumption is on the conservative side.
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What Happens If Things Go Better or Worse?
Chip companies face boom-bust cycles and customer concentration risk. Here’s how Broadcom stock might perform under different scenarios through October 2030:
- Low Case: If revenue grows 31% a year and net margins settle near 52.2%, investors still see a 102.8% total return (17.5% annually).
- Mid Case: With 34.3% growth and 55.4% margins, the model points to a 178.4% total return (26.3% annually).
- High Case: If AI demand drives 37.6% growth and margins reach 58.1%, returns could total 271.8% (34.9% annually).
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The range depends on how fast hyperscaler spending scales, whether Broadcom maintains its XPU market share as competition grows, and how quickly non-AI semiconductors recover.
In the low case, AI spending normalizes faster than expected and margins compress.
In the high case, new customer ramps at OpenAI and Meta fire ahead of schedule, and the XPV compute platform generates revenues well beyond current expectations.
How Much Upside Does Broadcom Stock Have From Here?
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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!
