Broadcom just posted one of its biggest quarters ever, forcing Wall Street to reset the AVGO stock price target.
Shares of the chipmaker have already climbed sharply this year, riding a wave of demand tied to artificial intelligence.
Valued at a market cap of $1.76 trillion, Broadcom (AVGO) stock has returned more than 300% over the last three years.
After accounting for dividend reinvestments, cumulative returns are closer to 2,500% over the past decade.
Morgan Stanley just raised its price target on Broadcom stock after the company’s fiscal third-quarter results (ended in July), citing surging AI chip revenue and a customer list that includes the biggest names building frontier AI models.
Why Broadcom stock keeps climbing
Broadcom makes custom AI chips, known as XPUs, along with networking gear that connects massive data centers.
Its biggest customers include Google, Anthropic, OpenAI and Meta, companies racing to build out computing power for their AI systems.
That race has turned into a windfall for Broadcom.
During the company’s earnings call on Sept. 2, CEO Hock Tan said AI semiconductor revenue grew 221% from a year earlier and jumped 54% from the prior quarter.
Total company revenue rose 86% year over year to $29.6 billion. Operating income grew even faster, up 92% year over year, with margins rising to 68%.
Non-GAAP earnings per share came in at $3.32, beating both Wall Street’s estimate of $3.22 and Morgan Stanley’s own forecast of $3.24, according to the bank’s research note shared with me.
Broadcom also guided fourth-quarter revenue to $34.8 billion, ahead of Street estimates of roughly $34.66 billion.
Morgan Stanley raises AVGO stock price target
Morgan Stanley analyst Joseph Moore raised his price target on Broadcom stock to $505 from $502, while keeping his Overweight rating, according to the firm’s Sept. 3 research note.
Moore’s team pointed to a few things driving the increase:
- Third-quarter results and next quarter guidance beat prior company guidance.
- Broadcom’s 2027 AI revenue outlook of $115 billion tracks closely with the bank’s own $120 billion estimate.
- Two AI labs are expected to be Broadcom’s largest customers by calendar 2028, signaling growing customer breadth beyond Google.
- Gross margin pressure from pricier memory chips is offset by strong operating leverage.
- The stock still trades at a discount to many AI-focused chip peers, even after this year’s rally.
Moore’s team wrote:
“We highlighted in our preview some expectations issues that may limit near term upside, but the results are impressive.”
More Bank Stock Resets:
- Bank of America revamps AMD stock price target for 2026
- Morgan Stanley resets Microsoft stock forecast ahead of earnings
- Goldman Sachs revamps SpaceX stock price target for 2026
The report added that AI revenue growth of more than triple in the back half of the year, along with plans to double again next year, is remarkable given the size of Broadcom’s business.
Morgan Stanley’s risk-reward framework lays out a base case of $505, a bull case of $640 if AI revenue growth surprises to the upside, and a bear case of $300 if new customer chip programs fail to reach full production.
Moore is a 5-star analyst as per TipRanks. Over the last 12 months, following Moore’s trades would have helped investors generate a 24.70% average return.
What Broadcom’s CEO is telling investors
On the earnings call, Tan leaned into the scale of what’s happening with Broadcom’s biggest AI customers.
He described the company’s role in helping Anthropic and OpenAI fund the enormous cost of building AI infrastructure, comparing it to helping talented students get through college.
He then explained why Broadcom is willing to keep investing so heavily to support them.
Related: BMO sees writing on the wall for Broadcom stock after earnings
“Every gigawatt of compute they deploy, they could achieve $30 billion of ARR, annual revenue per gigawatt,” Tan said. “That is a hell of a business model. For us, that is a great investment to focus on doing.”
Tan also gave investors a rare multi-year outlook, telling analysts that fiscal 2027 AI semiconductor revenue is expected to double to roughly $115 billion, then double again to $230 billion in fiscal 2028.
He framed those figures as conservative estimates based on secured supply chains, not a promise of maximum demand.
“We are very careful, and to be honest, we try be conservative,” Tan told analysts when asked about supply constraints.
What comes next for Broadcom stock
Broadcom’s next earnings report is scheduled for after market close on Wednesday, Dec. 9, when the company will report full fourth quarter and fiscal year 2026 results.
Related: Marvell vs. Broadcom: the custom silicon shift
Investors will watch whether demand from Google, Anthropic, OpenAI and Meta continues at the pace Tan described, and whether supply bottlenecks tied to memory chips, factory capacity and data center construction ease as the company expands its manufacturing footprint in Singapore.
Based on consensus estimates compiled by Tikr.com:
- Analysts tracking AVGO stock forecast revenue to increase from $106 billion in fiscal 2026 to $358 billion in fiscal 2030.
- Over that period, free cash flow is projected to improve from $49 billion to $197 billion.
- If AVGO stock is priced at 20x forward FCF, which is reasonable, it could return over 100% within the next three years.
Out of the 29 analysts covering Broadcom stock, 26 recommend “Buy”, and three recommend “Hold”. The average AVGO stock price target is $518, 45% above current levels.
For now, Morgan Stanley’s revised price target signals continued confidence that Broadcom’s AI chip business still has plenty of room to run, even after a run-up that has already reshaped how investors value the stock.
