Broadcom (NASDAQ:AVGO) has been hit hard over the past couple of sessions in the wake of the semi giant’s fiscal fourth quarter report. Despite a strong showing, shares have dropped by 16.5% over the past few trading days, with investors seemingly concerned about the lack of a full-year AI revenue guide.
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But having hosted an in-person investor meeting on Friday with AVGO’s entire management team, UBS’s Timothy Arcuri, an analyst ranked 8th among the thousands of Street stock experts, came out of the confab with the sense there has been a “significant overreaction by the market.”
In fact, based on the commentary regarding AI semi revenue for F2026, Arcuri has now raised his estimates. The analyst expects AI semi revenue to exceed $60 billion, nearly tripling year-over-year. The 5-star analyst has also increased his F27 revenue estimate to $135 billion and EPS to $14.15.
Arcuri also noted several takeaways from the meeting. For one, on the earnings call, the company reported a $73 billion AI backlog covering 18 months, but emphasized this is “extremely conservative” and actual shipments are likely to occur within the coming year.
Secondly, total backlog grew ~50% sequentially in FQ4, with the AI semis backlog more than doubling. Excluding the new $11 billion from Anthropic, backlog still increased $20-25 billion, meaning that it is largely from Alphabet and Meta, with no contribution yet from OpenAI.
Third, the company expects the $21 billion in rack shipments to Anthropic to spill into F2027 due to power shell readiness, noting that Anthropic is currently the only rack customer, while OpenAI (once added) will be a traditional ASIC customer. Additionally, while AVGO did not provide a specific gross margin guide for this $21 billion of rack revenue, it did not “push back” on a 45-50% range.
Overall, the company believes F2026 gross margin will likely decline while operating margin should remain at least flat year-over-year (Arcuri is calling for a 30 bps dip). AVGO highlighted XPU gross margins of ~55% and AI Networking at ~80%, suggesting blended margins of ~60% for AVGO components in the AI rack, while pass-through parts will lower the effective margin to 45-50%.
Finally, compared to a year ago, when AVGO estimated a three-customer XPU+Networking TAM of $60-90 billion in C2027 based on Training workloads, the company now sees significantly higher potential. This is due to XPUs benefiting from accelerated AI inference demand and AI LLM labs capturing more of the enterprise market due to stack complexity and rapid innovation.
“Ultimately, AVGO was confident it can deliver AI revenues above current Street expectations for F2026 and indicated it will beat any number that management has seen on the buy-side or sell-side,” summed up Arcuri.
To this end, Arcuri maintained a Buy rating on AVGO shares and raised his price target from $472 to $475, implying the stock will gain ~46% in the months ahead. (To watch Arcuri’s track record, click here)
That’s hardly the only bullish take circulating on Wall Street right now; all told, the stock claims a Strong Buy consensus rating, based on a mix of 27 Buys vs. 2 Holds. Going by the $461.93 average target, a year from now, investors will be pocketing returns of more than 40%. (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.