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Broadcom's AI forecasts climb faster than investors will pay for them
Broadcom raised its fiscal 2027 AI chip revenue target to $115 billion from $100 billion, yet its shares sit near $353, about 29% below their $495 high. Investors are paying for the quarter Broadcom can prove next and discounting the $230 billion it projects for fiscal 2028.
The Investor · Invest desk
What happened
- Fiscal third-quarter revenue rose 86% to $29.59 billion, and AI semiconductor revenue more than tripled to $16.7 billion, up 221% from a year earlier.
- Broadcom guided fourth-quarter revenue to about $34.8 billion, slightly below what some analysts had expected, and the shares fell after the report.
- That guide implies about $21.7 billion of fourth-quarter AI revenue, a 236% increase on the same quarter last year.
- The full-year fiscal 2026 AI revenue forecast went to $58 billion from $56 billion.
- Earnings are about 43% higher than at the start of the year, while the stock has gained 6%.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- exposure With AI at about 62% of guided fourth-quarter revenue, the chance that Google, Meta, OpenAI or Anthropic moves more chip design in-house now bears on most of Broadcom's sales.
- constraint If supply is the binding limit on near-term growth, as Crypto Briefing reports, Broadcom has little room to beat its guide by enough to force a re-rating.
- contradiction The average analyst target of about $533, roughly 50% above the share price, credits the long-range forecasts that the market price is discounting.
Divide 1.06 by 1.43, the share gain and the earnings rise since the start of the year [8], and the price investors pay for each dollar of Broadcom's profit has fallen by about 26% [1]. The long-range forecasts moved the other way in the same report. The 2027 AI target rose 15% [2], and the shares still fell on a fourth-quarter guide that came in slightly light [4].
That guide asks for a lot. At $34.8 billion against the third quarter's $29.59 billion, it is 17.6% sequential growth [3]. AI supplies $5.0 billion of the $5.2 billion increase [4], and everything else Broadcom sells holds at about $13 billion a quarter in both periods [5]. Crypto Briefing does not give the consensus figure the guide missed, only that it landed below what some analysts had penciled in [4].
The long-range targets can be turned into quarters and checked. Fiscal 2027's $115 billion is $28.75 billion of AI revenue a quarter on average, 32% above the $21.7 billion the fourth-quarter guide implies [6]. The $230 billion for fiscal 2028 works out to $57.5 billion a quarter (about 1.65 times the whole company's fourth-quarter revenue guide) [7].
One guide can account for the post-earnings dip, and Crypto Briefing blames the dip on it [4]. It cannot account for the 29% gap. The stock peaked near $495 after a run through late 2025 and into early 2026, at prices Crypto Briefing says already assumed heavy AI-driven growth [9]. The 26% compression in the multiple covers the whole year [1].
The fourth-quarter print can settle this in either direction, or not at all. A result above $34.8 billion that lifts the shares would show investors were waiting on the quarter. If the quarter beats and the multiple keeps shrinking, the discount sits on 2027 and 2028, or rather on the wider worry about whether AI spending lasts, the second condition Crypto Briefing sets for a re-rating [14]. Landing on the guide would settle neither.
I think the first outcome is the likelier one. The raise to the long-range targets did nothing for the price, and a slight shortfall in one quarter's guide sent it lower [4]. The counter-case is that the discount is about AI capital spending across the market, which one Broadcom quarter cannot remove, even though the major cloud providers are still talking about raising those budgets [14]. A beat that fails to lift the shares would prove this view wrong.
What to watch
- Fiscal Q4 2026 revenue against the roughly $34.8 billion guide, and whether a beat moves the shares toward the $533 average target.
- The first fiscal 2027 quarterly guide, measured against the $28.75 billion average quarterly AI revenue the $115 billion target requires.
- Cloud providers' AI capital spending plans, and any sign a large customer is moving custom chip design in-house.