Broadcom Shares Find Support from Wall Street Analysts

Broadcom US11135F1012

Following a sharp post-earnings sell-off, Broadcom's stock has faced significant pressure in recent days. Investor concerns have centered on margin compression within the company's high-growth artificial intelligence (AI) segment. However, a series of fresh analyses from major Wall Street firms are now challenging this narrative, offering a bullish counterpoint. What is the basis for their renewed optimism?

The current weakness comes on the heels of an exceptionally strong quarterly report. For its fiscal fourth quarter, Broadcom posted record revenue of $18.0 billion, representing a year-over-year increase of 28%. This surge was primarily fueled by its AI semiconductor business, which soared by 74%. The company also surpassed expectations for adjusted earnings per share.

Despite these records, the market's focus shifted decisively to profitability. In its December 11 report, management highlighted that the rapid pivot toward custom AI accelerators is associated with lower gross margins. For the current fiscal year, Broadcom anticipates its gross margin will contract by approximately 100 basis points.

This presents a clash of two dynamics: robust top-line growth contrasted with less comfortable profitability in the core AI operation. This "margin trade-off" logic has unsettled many investors, as near-term profit growth may lag revenue expansion.

Structural Strengths and Long-Term AI Positioning

On Thursday, a wave of positive analyst commentary emerged to reframe this short-term focus. J.P. Morgan analyst Harlan Sur reaffirmed his Overweight rating, casting Broadcom in a pivotal role for data center growth. He projects AI-related revenue will reach $55 to $60 billion by fiscal 2026—a monumental figure compared to the current base.

Sur contends that hyperscaler investments in AI infrastructure are poised to reaccelerate in the coming year. Broadcom, he argues, is deeply entrenched in this ecosystem with its solutions, positioning it to benefit not from single products but from the entire data center expansion cycle.

Echoing this long-term view, Bank of America identified Broadcom as a "Top Pick" for 2026. Analyst Vivek Arya emphasized the strategic shift toward custom silicon, developed in partnership with major clients like Google and Meta. These collaborations are seen as a stable growth engine that should more than offset any temporary margin dilution, according to the firm's research.

Jefferies analyst Blayne Curtis added that AI demand is broadening beyond just GPUs, extending into custom chips and networking technology—precisely where Broadcom holds traditional strength. Collectively, these analysts paint a picture of a company accepting near-term margin pressure to secure a substantially larger share of the expanding AI market.

Backlog, Capital Return, and Valuation Context

Broadcom's correction coincides with a sector-wide transition into an "execution phase" for AI semiconductors. Following the euphoria of 2024, investors in late 2025 are scrutinizing the profitability of massive AI investments more closely. Stocks facing near-term margin pressure are being judged more critically, even with solid order books.

For Broadcom, that order book is a key stabilizing factor. CEO Hock Tan pointed to a backlog exceeding $10 billion for switching products alone. The company's total consolidated backlog stands above $73 billion, meaning a significant portion of expected revenue for the next 12 to 18 months is already under contract.

The company remains aggressive on capital return, announcing a 10% increase in its quarterly dividend to $0.65 per share, payable on December 31, 2025. This marks the 15th consecutive annual dividend hike, though this move initially failed to stem the selling pressure at the start of the week.

The recent decline has impacted the stock's valuation. Following the weakness, the share price trades notably below the average analyst target. While the stock closed yesterday at €281.30, the consensus price target from major firms equates to approximately $468, implying over 40% potential upside from current U.S. trading levels.

Technical Perspective and Forward Guidance

From a charting standpoint, the stock appears bruised in the short term. Over the past seven sessions, shares have declined roughly 8%, with the 30-day loss around 9%. This places Broadcom about 20% below its mid-December 52-week high, yet it remains comfortably above its April 52-week low. The current price sits approximately 10% below the 50-day moving average but nearly 12% above the 200-day line—a mix indicating short-term weakness within a still-intact long-term uptrend.

Operationally, the company is setting the stage for continued growth. For the first quarter of fiscal 2026, Broadcom has provided revenue guidance of $19.1 billion, signaling a continuation of its momentum. Until the next quarterly report in March 2026, however, two factors are likely to dominate sentiment: the broader market mood toward semiconductor stocks and fresh indications regarding the AI investment plans of major cloud providers. Should evidence mount that AI-related orders are accelerating as anticipated, the current period may well be remembered as a consolidation phase following a powerful rally.