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Broadcom (AVGO) stock has rebounded strongly, gaining 36% in three months. This sharp rebound highlights renewed investor confidence, driven by easing concerns over a potential economic slowdown and Broadcom’s solid financial performance.
The company, which provides semiconductor and infrastructure software solutions, is benefitting from two major catalysts. First, demand for artificial intelligence (AI) chips continues to surge, providing a strong tailwind for its semiconductor division. Second, momentum is building in its VMware business, which Broadcom acquired in November 2023, adding significant strength to its infrastructure software portfolio.
Wall Street is bullish on Broadcom, with analysts citing strong growth driven by rising demand for AI semiconductors. The company is expected to benefit from solid revenue in this space and improved operating efficiency, which could boost its sales and profits in the coming quarters. Moreover, the highest analyst price target for Broadcom stock tracked by Barchart is $340, suggesting potential upside of around 30% from current levels.
Broadcom’s Recent Performance and Outlook
Broadcom has consistently posted robust financial results. In its most recent quarter, the company reported consolidated revenue of $15 billion, a 20% increase from a year ago, primarily driven by its semiconductor business, which has been supercharged by demand for AI-related products.
Semiconductors accounted for 56% of Broadcom’s revenue during the quarter, with $8.4 billion in sales from this segment alone. AI semiconductors generated over $4.4 billion, up 46% year over year. AVGO’s Q2 marked the ninth consecutive quarter of growth in AI-related chip sales, reflecting Broadcom’s expanding dominance in this space. Key product lines such as its Tomahawk switches and Jericho routers are likely to see solid growth as demand for AI infrastructure accelerates.
Moreover, Broadcom recently unveiled its next-generation Tomahawk 6 switch, which significantly reduces latency and power consumption. The new product will likely strengthen Broadcom’s positioning in the AI space.
Broadcom is also focusing on developing custom AI accelerators (XPUs) tailored to the specific needs of customers, which is expected to accelerate its growth. Broadcom expects the AI-driven momentum in its business to carry through 2026. For the current quarter (Q3), it has forecast AI semiconductor revenue of $5.1 billion, a year-over-year increase of 60%.
While AI is driving Broadcom’s broader semiconductor portfolio, non-AI semiconductor revenue remains subdued. Nonetheless, its broadband and enterprise networking revenues are showing signs of recovery, supporting future revenue growth.
Besides semiconductors, the company’s infrastructure software solutions are likely to support its growth. In Q2, software revenue hit $6.6 billion, up 25% year-over-year. The conversion of enterprise customers from perpetual licenses to VMware Cloud Foundation (VCF) subscriptions has created a solid recurring revenue business.
The positive trajectory is expected to continue in the software segment. For Q3, Broadcom anticipates infrastructure software revenue of $6.7 billion, a 16% increase year-over-year.
AVGO’s High Valuation Is Justified
Even with the recent recovery in its stock price, AVGO remains appealing from a valuation perspective. Broadcom trades at a forward price-earnings (P/E) multiple of 45.7x, which may seem high at first glance, but is justified by the company’s rapid earnings growth. Wall Street expects AVGO’s earnings per share (EPS) to rise 47.4% in fiscal 2025 and more than 28% in 2026.
In short, Broadcom is likely to benefit from solid AI demand, focus on offering custom accelerators, and a growing infrastructure software business.
Will AVGO Stock Hit $340 Soon?
Broadcom’s recent rally reflects strong investor confidence backed by solid demand for AI semiconductors and a rapidly expanding infrastructure software portfolio. With demand for AI chips supporting future revenue growth and Broadcom’s focus on improving efficiency, the company will likely deliver solid earnings growth.
Analysts remain optimistic and maintain a “Strong Buy” consensus rating on AVGO, indicating upside potential as the company’s Tomahawk 6 switch and custom AI accelerators gain traction. Further, as AI adoption accelerates and recurring software revenue builds, Broadcom stands to deliver solid returns — with a price target of $340 within reach.
