Broadcom (NASDAQ:AVGO) stock might not hog the headlines as much as semi peers Nvidia and AMD, but it has quietly cemented a place amongst the world’s top 10 most valuable companies.
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The $1.4 trillion chip giant has made the most of the AI boom by doubling down on custom ASICs (application-specific integrated circuits) and high-speed networking infrastructure – becoming a key supplier of bespoke AI chips (ASICs) for hyperscalers like Google’s TPU programs, Meta, OpenAI, ByteDance and Apple. Rather than going head-to-head with Nvidia, Broadcom has positioned itself as a partner to major AI players by supplying tailored chips designed for specialized functions.
That strategy has paid off handsomely for shareholders, with the stock soaring nearly 500% over the past three years. The question now is whether the company can extend that momentum when it reports FQ3 earnings (July quarter) on Thursday.
According to Oppenheimer’s Rick Schafer, an analyst ranked in 8th spot amongst the thousands of Street stock experts, there should be “upside” to both the July results and the F4Q outlook.
Schafer projects semiconductor revenue, which makes up 56% of the business, to rise 8% quarter-over-quarter and 26% year-over-year. Within that, the AI segment – already more than half of Broadcom’s semi revenue – is expected to climb 16% sequentially to $5.1 billion. The company has disclosed it is working on seven AI ASIC projects, with new collaborations like Apple Baltra and OpenAI slated for 2026. As Schafer notes, networking strength should also persist as cloud service providers increasingly adopt ethernet for scale-out architectures.
Not all segments are poised for growth, however. Due to seasonal trends in wireless, Schafer thinks non-AI semiconductors, which account for 48% of the segment, will remain flat sequentially and decline 2% y/y. The wireless business – representing 20% of semis – could dip slightly as Apple moves to in-source WiFi/Bluetooth for the iPhone 17. Still, Schafer expects content losses to be offset by midband Tx/Rx gains shared with Skyworks, while broadband should edge higher as recovery continues.
Outside semis, software remains another steady pillar. Schafer sees revenue there growing 2% QoQ and 16% y/y, bolstered by the transition from perpetual licenses to three-year subscriptions. With 87% of Broadcom’s top 10,000 customers already on subscriptions by the end of FQ2, the shift is on track to be completed by fiscal 2026.
Summing up, Schafer takes a wholly favorable view of the company. “AVGO is the No. 2 AI franchise after NVDA,” he said. “Market leader in AI ASIC with seven projects announced. Core franchises in networking, wireless, broadband, server/storage, and software support sustainable growth and cash return. We remain long-term buyers.”
Accordingly, ahead of earnings, Schafer rates AVGO shares an Outperform (i.e., Buy), while raising his price target to $325, implying 10% upside in the months ahead.
Most of Wall Street is in agreement; with 28 Buys versus just 2 Holds, AVGO boasts a Strong Buy consensus rating. The average price target sits at $315.08, suggesting a 6% upside over the next 12 months. Not exactly something to write home about – yet history suggests that when it comes to AI chip stocks, analyst targets often trend higher as momentum builds. (See AVGO stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.