In March 2026, Broadcom (AVGO) CEO Hock Tan indicated that the company is positioned to achieve more than $100 billion in AI revenue from chips in 2027. This underscores the company’s massive AI-driven growth potential and also explains why AVGO stock has trended higher by almost 90% in the last 52-weeks.
If analyst views hold true, the outlook is even more optimistic. Recently, Citi increased its price target for AVGO stock to $500 ahead of Q2 earnings. Citi opines that Broadcom’s total AI revenue can potentially be $115 billion for 2027 (above prior expectations of $100 billion).
Further, AI revenue from chips can hit $180 billion in 2028. This view is backed by the fact that Broadcom has custom AI chip agreements with Alphabet's (GOOG) (GOOGL) Google, Meta (META), Anthropic, OpenAI, and two unnamed customers.
Another potential stock upside catalyst is the possibility of a $35 billion financing from the likes of Apollo Global Management (APO) and Blackstone (BX). Confirmation of this deal would imply a robust cash buffer that’s likely to support the company’s phase of high growth.
About Broadcom Stock
Headquartered in Palo Alto, Broadcom is a developer and supplier of a broad range of semiconductor, semiconductor-based solutions, and infrastructure software solutions.
The company’s semiconductor and semiconductor-based solutions are offered to five major end markets. These include networking connectivity, wireless device connectivity, servers and storage systems, broadband, and industrial.
Broadcom is an innovator with a current portfolio of 19,000 patents. For FY25, the company invested $11 billion in R&D. Over the years, the company’s growth has also been supported by acquisitions. For FY25, Broadcom reported revenue of $63.9 billion.
Backed by AI tailwinds, Broadcom is positioned for robust growth. As the company’s order backlog swells, AVGO stock has trended higher by 22.6% in the last six months.
Swelling Free Cash Flows
Ultimately, valuation is a function of cash flows. For FY25, Broadcom reported free cash flow of $26.9 billion. Further, for Q1 FY26, the company’s FCF was $8 billion. This implies an annualized FCF potential of $32 billion. Considering the growth trajectory, it’s likely that Broadcom will hit the $50 billion annualized FCF rate in the next 18 to 24 months.
Besides providing flexibility for investment in innovation, robust cash flows also imply value creation through dividends and share repurchase. For Q1, the company spent $3.1 billion in cash dividends besides $7.8 billion in stock repurchases.
The agreement with some of the biggest hyperscalers ensures that cash flow visibility remains robust. Further, co-design agreements with hyperscalers coupled with aggressive R&D investments acts as an entry barrier. Therefore, the risk of competition and its impact on growth is mitigated to some extent. Overall, as the remaining performance obligation continues to swell, Broadcom is positioned to create value.
What Do Analysts Say About AVGO Stock?
Based on 42 analysts with coverage, AVGO stock has a consensus “Strong Buy” rating. While 35 analysts have a “Strong Buy” rating for AVGO stock, three have a “Moderate Buy,” and four have a “Hold” rating.
The mean price target of $469.94 represents potential downside of 12.7% from recent levels. Further, the most bullish price target of $630 suggests that AVGO could climb 51% from here.
Concluding Views
From a valuation perspective, AVGO stock trades at forward price-earnings to growth ratio of 43x. Valuations are attractive considering the point that analysts expect earnings growth of 76.73% and 64.12% for FY26 and FY27, respectively. The price-earnings-to-growth ratio is therefore less than 1x. This explains the overwhelmingly bullish rating of a majority of analysts.
Overall, Broadcom is positioned to achieve AI revenue from chips in excess of $100 billion by 2027. As the remaining performance obligation swells, there is revenue and robust cash flow visibility beyond the next few years. AVGO stock is therefore positioned for sustained value creation even as the market valuation tops $2 trillion.
On the date of publication, Faisal Humayun Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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