Wall Street analysts set Broadcom's (AVGO) stock price after strong earnings

Broadcom (AVGO) reported stronger-than-expected fiscal Q3 results, with adjusted EPS of $1.69 and revenue of $15.96 billion, up 22% year-over-year, and issued an upbeat Q4 revenue forecast of $17.4 billion. This performance, significantly propelled by a 63% year-over-year increase in AI semiconductor revenue to $5.2 billion and a new $10 billion order from a key AI customer, led to a nearly 10% surge in shares and prompted widespread analyst upgrades, underscoring the company's accelerating AI momentum and its material impact on future growth projections.

Analysis

Broadcom's fiscal Q3 results and Q4 guidance have materially reinforced its growth narrative, pivoting decisively towards artificial intelligence. The company surpassed consensus estimates with adjusted EPS of $1.69 and revenue of $15.96 billion, a 22% year-over-year increase, and projected Q4 revenue of $17.4 billion against an expected $17.02 billion. This outperformance is fundamentally driven by its AI semiconductor business, which saw revenue climb 63% year-over-year to $5.2 billion. The most significant catalyst, however, is the disclosure of a new $10 billion order from a fourth major AI customer, which analysts speculate could be OpenAI. This development is expected to make custom processors a dominant segment and has led to a wave of bullish analyst revisions, with firms like Piper Sandler and Bernstein raising price targets to $375 and $400, respectively, and upgrading forward estimates for fiscal 2026 and 2027. While one analyst noted potential margin pressures from the new engagement, the overwhelming consensus is that the company's AI-driven growth is accelerating, justifying the stock's nearly 10% post-earnings surge and 44% year-to-date gain.

Key Decisions for Investors

• Given the strong earnings beat, upwardly revised guidance, and unanimous analyst upgrades, investors should recognize the fundamental support for the stock's recent rally and ongoing bullish momentum.
• Monitor future earnings calls for specific updates on the execution and scaling of the new $10 billion custom processor order, as its successful ramp-up is now the primary driver of the elevated long-term growth expectations.
• Despite the 44% year-to-date appreciation, the substantial upward revisions to multi-year AI revenue suggest the valuation is becoming increasingly justified, warranting a reassessment for those underweight the name.
• Pay close attention to gross and operating margins in upcoming quarters to assess the profitability of the new large-scale AI engagements, as this was flagged as a potential, albeit minor, headwind.