Broadcom (AVGO) heads into June 3 earnings carrying a seemingly contradictory note that’s worth a closer look.
A notable Wall Street analyst just raised his price target on the company.
However, in the same note, he lowered how much AI revenue he expects Broadcom to bring in this year.
And that reads backward.
A higher target normally rides on bigger estimates, not smaller ones.
The reasoning behind this note will highlight what investors are actually paying for when Broadcom reports on June 3.
Why Susquehanna raised its Broadcom price target to $490
Susquehanna analyst Christopher Rolland lifted his Broadcom target to $490 from $450 and kept a positive rating, TipRanks reported, updating his model ahead of fiscal second-quarter results.
Rolland is not a casual voice here. He ranks 20th among more than 12,200 analysts tracked by the platform, with a 67% success rate and an average return of about 47.4% per rating over a year.
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Then comes the twist.
In that same update, Rolland trimmed his fiscal 2026 AI revenue estimate for Broadcom to about $55 billion from $62.5 billion, according to The Globe and Mail.
The cut traces back to one customer order, and understanding it explains the entire call.
What the Anthropic chip order means for Broadcom’s AI revenue
Broadcom builds custom AI chips known as ASICs, short for application-specific integrated circuits. These are processors designed for one customer’s exact workload rather than sold off the shelf.
Earlier expectations had Broadcom shipping full server racks to Anthropic, the AI lab behind Claude. Full racks bundle the chip with memory, networking, and other hardware, which piles on a lot of low-margin revenue.
Related: Broadcom guidance reveals one signal getting unusual attention
That order has now shifted to a chip-only arrangement. It brings in roughly 25% of the first expected revenue, but at far higher margins, Insider Monkey reported, citing UBS.
In plain terms, Broadcom will collect less total money from the Anthropic deal, but keep more of each dollar it does collect as profit, and that profit is what an analyst’s price target tends to reward.
For more context, Broadcom’s AI semiconductor revenue hit $8.4 billion in the first quarter of fiscal 2026, up 106% from a year earlier, according to its SEC filing.
The margin story Wall Street is betting on for AVGO
This is where the higher target starts to make sense. Rolland is paying up for cleaner, higher-margin earnings rather than raw revenue scale.
The momentum behind that view is real. Meta (META) recently laid out a two-year roadmap for its MTIA custom chips and named Broadcom as the provider.
Demand for Broadcom’s AI networking gear, the silicon that links thousands of chips inside a data center, also stays strong, though Rolland flagged that the broader networking supply chain remains tight.
CEO Hock Tan has told investors that Broadcom has a line of sight to more than $100 billion in AI chip revenue in 2027. Margins, not just volume, decide whether that goal turns into real earnings.
What to watch when Broadcom reports on June 3
Key numbers and signals for AVGO investors:
- Revenue: Wall Street expects about $22.12 billion, up roughly 47% year over year, according to a release on the Broadcom Investor Center.
- Earnings: Consensus sits near $2.40 in adjusted EPS, up about 52% from a year ago.
- AI guidance: Broadcom guided Q2 AI revenue to $10.7 billion in its first-quarter release.
- Volatility: Options traders are pricing in a move of about 10.65% in either direction after the report.
A revenue beat paired with light guidance could still rattle a stock priced for near perfection.
How Broadcom stock stacks up against the S&P 500
Broadcom has run hot this year, which raises the bar for the report.
Broadcom vs. the S&P 500:
- Year to date, AVGO is up about 30%, versus roughly 11% for the S&P 500.
- Over the past year, Broadcom has roughly doubled, to about 79%, while the index gained about 27%.
Source: Alpha Spread
That gap shows how much optimism is already priced in.
What still has to go right for the $490 call
The bullish case is not automatic. A few things need to line up:
- Guidance has to stay strong, since Rolland himself expects a more modest near-term outlook.
- The higher-margin chip mix has to show up in actual profit, not just management commentary.
- Networking supply has to loosen enough to meet the demand sitting in front of it.
- The valuation has to hold, with shares trading near 87 times earnings.
There are warning signs worth tracking, too. Insiders have sold about $356.4 million in stock over the past three months.
For now, the setup is clear. A trusted analyst sees more upside in Broadcom even with a smaller revenue line, and June 3 will test whether the margins back him up.
None of this is a recommendation to buy or sell. It is a read on why one respected analyst grew more bullish, and what would have to prove true for that call to pay off.
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