Some Wall Street analysts believe margin dilution and near-term revenue concerns could be key challenges for Broadcom in the near term. Shares fell 6% in premarket trading Friday, even as the semiconductor maker reported fourth-quarter earnings and higher sales. Broadcom also said it expects revenue for the quarter to be $19.1 billion, representing 28% year-over-year growth and ahead of the $18.3 billion expected by analysts surveyed by LSEG. Broadcom also expects AI chip sales to double from this time last year to $8.2 billion this quarter, Chief Executive Officer Hock Tan said in a statement. But other comments from the CEO also hurt the stock price on Friday morning. What hurt Broadcom in its financial results was its profit margin. UBS analyst Timothy Arcuri said: “While AVGO has provided solid results and guidance in a very crowded investor positioning environment, some of the comments on backlog and margins have been confusing and could encourage ‘selling the news’ activity in the short term.” Ross Seymour of Deutsche Bank echoed this sentiment. “While both of these AI revenue numbers (XPU ~75%, networking ~25%) are surging, the cost of this growth comes at the margin, especially with Anthropic’s increased rackscale,” Arcuri said. Meanwhile, Barclays’ Tom O’Malley noted that Broadcom’s OpenAI revenue growth was slightly slower than investors had previously expected, a slight headwind that “scared some investors in the aftermarket.” JPMorgan analyst Harlan Sarr added that some investors may have pushed the stock lower due to concerns that AI revenue in 2026 would be weaker than originally expected. “Judging by the aftermarket stock price reaction, many investors seem to have concluded that the $73 billion AI backlog cited by management suggests next year’s AI revenue will be in the $50 billion range (i.e., lower than some expected), but we believe this conclusion fails to distinguish AI revenue from the ‘trees.’ The $73 billion backlog for the next 18 months is not static,” Sur wrote. Meanwhile, Morgan Stanley analyst Joseph Moore cited weakness in some non-AI revenues as another sticking point. “The outlook for non-AI semiconductors is stable, but the near-term (software) outlook is slightly lower,” he said. JPMorgan’s Soule agreed, acknowledging that non-AI semiconductor revenue growth has been “slower to take off” than he expected. In short, most analysts ignored the earnings-related noise generated from this coverage and maintained their long-term bullish stance on Broadcom, citing the accelerating momentum of AI. Most analysts also raised their price targets following the results. Here’s how Wall Street’s biggest stores are reacting: Wells Fargo: Equal weight rating, $410 price target The bank’s price target has been raised from $345, suggesting less than 1% upside from Broadcom’s Thursday closing price. “AVGO delivered another explosive AI-driven quarter. Most notably, AI Semi Leverage for Q1 2026 and FY 2026 was +2 YoY. We remain on the sidelines as the stock price continues to represent a balanced risk/reward at current levels, with high leverage and expectations that future acquisitions will remain a capital use.” Deutsche Bank: Buy, $430 Deutsche Bank’s forecast has been raised from $400, suggesting a 6% upside. “Overall, AVGO is increasingly focused on the sustainability of its connectivity business, despite the focus on its XPU business, and is generally very confident in its AI revenue. As such, with Anthropic revenue growth, the addition of a 5th XPU customer, and an increasingly impressive AI backlog, we raise our PF EPS estimate by +20%, maintain a buy rating and move PT to $430 (previously Goldman Sachs: Buy, $450 Goldman Sachs’ price target is up from $435, representing an upside of about 11%. “We reiterate our Buy rating on Broadcom as we increasingly believe that its leading position in custom silicon will enable low-cost inference for many hyperscalers and model builders (particularly Google) and drive continued outperformance of Broadcom’s AI business relative to its peers. Broadcom expects some gross margin and operating margin dilution to be possible as the company ramps up its full-rack solutions (with higher pass-through components) starting in 2019. However, the company expects this business to continue to grow significantly in dollar terms and is seeking to offset some of this dilution through operating leverage and other cost optimizations. ” Morgan Stanley: Overweight, $462 Morgan Stanley’s target has been raised from $443, with a 14% upside expected. “Strong AI guidance for April is offset somewhat by lower non-AI rotations, higher rack rates at 2:26, and tough comps through 1:27 if rack orders are not repeated, but still a strong result. Estimates and PT are up.” UBS: Buy, $472 Analyst Timothy Arcuri’s forecast is 16% above Broadcom’s Thursday closing price. “Taken together, we expect AI revenue to grow significantly over 100% next year and approach these levels again in 2027. OpenAI is still early and is not included in AVGO’s backlog numbers.” JP Morgan: Overweight, $475 Sur price target raised from $400, for 17% upside. “Conservatively assume that Anthropic revenue after FY26 is zero (i.e. “one-and-done” TPU customers) and AVGO’s other customers (GOOG, META, ByteDance, and SoftBank/ARM (newly announced customers # 5)) Even assuming no growth in FY27, this would mean AI revenue in FY27 would be in the range of at least $110 billion to $115 billion (management also did not push back on the idea that AI revenue could double in FY27). This is the lens. Through this, we believe investors should look at the outlook for AI revenue growth over the next few years. Bernstein: Outperform, $475 Bernstein raised its price target to $475 from $400. “If you want to get too nitpicky, you could also note that non-AI semiconductors continue to be weak (although they have bottomed out), tax rates are rising, and AI revenues will be somewhat dilutive to overall gross margins given component pass-through. But we think this is all beside the point.The company remains a clear ASIC winner with numbers that should have a strong upside bias (and is entering very rare territory) as spending on AI continues.” Barclays raised its price target from $450. This latest forecast suggests the stock could rise 23% from here. “During the quarter, AVGO added a fifth customer with $1 billion in orders in FY26. OAI revenue in FY27 was up slightly from 2H FY26, which may have surprised some investors in the aftermarket. Overall, this was a solid performance and added new legs to the large-scale AI build.” Bank of America: Buy, $500 The bank raised its price target from $460. “The beat continues, quotes rise, and we ignore the noise of expectations… repeating the buy on our top pick.”
