Securities in This Article
Key Morningstar Metrics for Broadcom
What We Thought of Broadcom’s Earnings
Broadcom AVGO posted strong fiscal fourth-quarter results above guidance. Guidance for January-quarter artificial intelligence revenue was impressive, as was a new $11 billion AI chip order from Anthropic for the second half of 2026, and the announcement of a new custom AI chip customer in 2026.
Why it matters: Broadcom’s AI chip business is accelerating, and we project even greater astronomic growth over the next two years. We see phenomenal demand for Google’s TPU chip, layering in of new customers, and big incremental orders from existing customers driving immense demand.
- Google is the firm’s lead AI customer, and the latest generation of its TPU chip exhibits superb performance that is driving significant orders. The TPU is no longer exclusively internal to Google—we now expect significant orders from Anthropic and Meta for these chips and systems.
- Anthropic will accrue revenue in the second half of fiscal 2026, with $21 billion in wholly incremental orders. Broadcom’s brand new customer adds $1 billion in incremental revenue in fiscal 2026. In 2027, we expect OpenAI to supplement the firm’s existing five customers.
The bottom line: We raise our fair value estimate for wide-moat Broadcom to $480 per share, from $365, behind a significantly stronger AI chip growth forecast. We see a 5% after-hours selloff as missing the forest for the trees. Investors now have a terrific opportunity to buy into an AI winner.
- We attribute the selloff to commentary on gross margin dilution from AI chips. We aren’t concerned with this, given that these chips are operating-margin-accretive. The firm’s AI backlog might’ve missed investor targets too, but we see upside to this and view it highly positively.
- We now expect an even larger surge in second-half fiscal 2026 revenue behind the second Anthropic order. We forecast total AI chip revenue to far more than double in fiscal 2026, and see significant momentum continuing into 2027.
Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
The author or authors do not own shares in any securities mentioned in this article.
Find out about Morningstar’s editorial policies.
