Broadcom (AVGO) Hit With Street-Low Target Despite Strong Quarter – Here's Why

Broadcom (AVGO) has received a new Street-low price target even after the semiconductor company posted another strong quarter. Despite upbeat results, near‑term revenue guidance did not fully meet the high bar investors had set, which weighed on the stock. Top-rated DA Davidson analyst Gil Luria cut his price target to $350 from $400, while keeping a Hold rating. The new target implies 2.2% downside risk from the current level.

The analyst also raised concerns that the company leans heavily on big AI customers and that long‑term demand depends on tight land, power, and data center buildout needs. Luria now values Broadcom at 19× his updated FY27 EPS estimate.

Strong Quarter, but Guidance Fell Short of High Hopes

Broadcom reported Q3 revenue of $29.6 billion, up 85% year over year and slightly above estimates. Its semiconductor unit grew 127% to $20.8 billion, now making up 70% of total revenue. The company said shipments of its custom AI chips, called XPUs, rose 3.5× from last year and now account for 73% of its AI revenue.

The company gave long‑term AI revenue guidance through 2028 to show the strength of its pipeline. The company expects AI chip revenue to double in 2027 to $115 billion, then rise again in 2028 to $230 billion, far above Wall Street's 2028 expectations.

AVGO also shared its delivery plans for its biggest AI customers, saying it will ship 1 GW to Anthropic in 2026, 5 GW in 2027, and 10 GW in 2028. For OpenAI, the company expects to deliver 1.3 GW in 2027 and 5 GW in 2028.

Management expects the cost per gigawatt to stay steady at $20 billion to $30 billion, noting that more powerful chips need fewer units to hit 1 GW.

Broadcom expects a slight margin dip next quarter due to higher memory costs inside its chips. Q4 gross margin is expected to be 73%, down from 75%.

Is AVGO a Good Stock to Buy?

On TipRanks, analysts have a Strong Buy consensus rating on Broadcom stock based on 25 Buys and three Holds assigned in the past three months. Further, the average stock price target of $523.38 per share implies 46.24% upside potential.