Investors in Broadcom (AVGO) have started the year on a disappointing note, with shares of the semiconductor giant dropping by 10% in early 2026, contrasting sharply with a 10% increase in the PHLX Semiconductor Sector index during the same period. This downturn has been largely driven by negative sentiment surrounding artificial intelligence (AI) stocks, raising concerns about the sustainability of the substantial investments being made in AI data centers. Moreover, Broadcom’s own remarks regarding the pressure on margins due to the rapid sales growth of its AI-related products have contributed to the stock’s recent struggles.
Nevertheless, it is critical to remember that Broadcom posted record revenue in fiscal 2025, ending in November of last year, and is well-positioned for continued growth this year. The anticipation surrounding the company’s upcoming first-quarter fiscal 2026 results, set for release on March 4, has the potential to revive the stock’s trajectory.
Broadcom’s robust order book is a promising sign for its performance. The company is projecting first-quarter revenue of $19.1 billion, which signifies a 28% increase compared to the same quarter last year. Notably, Broadcom concluded fiscal 2025 with an impressive backlog totaling $162 billion, of which $73 billion was designated for AI chips. Management has indicated that they expect to manage this AI-related backlog in the coming six quarters, forecasting a quarterly revenue run rate that may surpass $12 billion. This puts Broadcom in a strong position to exceed its fiscal Q1 AI revenue guidance of $8.2 billion, enhancing the potential for a significant boost in overall revenue.
Furthermore, confidence among analysts regarding Broadcom’s growth trajectory is palpable. Predictions for fiscal 2026 revenue are currently estimated at $97.6 billion, reflecting a remarkable improvement of 53% from the previous year. This stands in contrast to fiscal 2025, which saw an increase of 24%, suggesting that Broadcom’s growth rate could more than double in the current fiscal year. Analysts also anticipate a similar surge in earnings, significantly outpacing the average earnings growth of 14% for companies in the S&P 500 index.
Currently, Broadcom trades at 32 times its forward earnings, a valuation premium compared to the S&P 500’s forward earnings multiple of 22. This premium is arguably justified by the company’s expected earnings growth. The 12-month median price target set by analysts suggests a potential rise of 43% from current levels, with an impressive 96% of the 55 analysts covering the stock rating it as a buy. This robust outlook indicates that it may be an opportune moment to consider investing in Broadcom, particularly as the company gears up for what could be a significant recovery following its impending financial report.