Broadcom Second-Quarter Earnings Preview: $100 Billion Market Value Volatility Warning, AI Infrastructure Demand Faces Verification

Reviewing Broadcom's first-quarter fiscal 2026 financial results, the overall performance was impressive. Total revenue for the period reached $19.3 billion, with semiconductor solutions generating $12.52 billion, accounting for 65% of the total, and infrastructure software revenue totaling $6.796 billion, representing 35%.

In terms of highlights, the company's AI semiconductor business experienced rapid growth, with first-quarter revenue reaching $8.4 billion, a 106% increase year-over-year. AI revenue for the second quarter is projected to reach $10.7 billion, with a staggering year-over-year growth rate of 140%.

Broadcom has established partnerships with six leading AI companies, including Google, Meta, Anthropic, and OpenAI, and is deeply involved in the research, development, and production of their proprietary chips. Related long-term orders are locked in through 2028, providing solid support for performance over the next three years.

Following the release of the first-quarter results, several major Wall Street firms forecast that Broadcom's revenue growth will accelerate significantly over the coming quarters. The company's revenue guidance for the second fiscal quarter indicates a year-over-year growth rate of 47%, substantially higher than the 29% actual growth in the first quarter. Analysts also expect that as new orders enter the delivery phase in the fourth fiscal quarter, year-over-year revenue growth could approach 100%, before moderating as the company enters the next fiscal year.

Wall Street currently expects Broadcom's second-quarter revenue to increase 47% year-over-year to $22.04 billion; earnings per share are projected to jump 51% year-over-year to $2.39.

Broadcom's upcoming earnings report will be a critical juncture to verify the sustainability of AI infrastructure demand. As the company's revenue structure continues to lean toward hardware businesses—which are generally characterized by lower profit margins—overall profitability will face certain risks of structural pressure. At the same time, whether the company's massive $73 billion backlog can be smoothly converted into actual revenue will also be a core focus for the market.

Wall Street will primarily track shipments of custom chips such as Google's TPU and Meta's MTIA, as well as the simultaneous growth of the high-speed Ethernet business.

Attention also needs to be paid to operating margins to evaluate the integration results of the $69 billion acquisition of VMware. Finally, full-year AI revenue guidance and updates on long-term orders locked in through 2031 will also directly determine the future trend of this AI chip leader.

Simply put, the core focus is on the sustainability of corporate growth and profitability. Any signals of slowing order growth or gross margin pressure (such as those caused by custom development for major customers like OpenAI) could trigger a valuation rerating.

As of May 27, the consensus rating for Broadcom among 30 Wall Street analysts is "Strong Buy," with a distribution of 26 "Buy" ratings, 4 "Hold" ratings, and zero "Sell" ratings, accounting for a high "Buy" rating ratio of 86.7%.

In terms of the target price, analysts' average 12-month price target for Broadcom is $478.56, which represents a potential upside of 12.76% based on the closing price on May 26.

Ahead of Broadcom's second-quarter earnings report, several major investment banks continued to raise their target prices: Citi hiked its price target from $475 to $500 and reiterated its status as a top pick in the semiconductor sector; Goldman Sachs issued a $500 target price and maintained a "Buy" rating; Wells Fargo raised its target price by 26.74% to $545.

UBS analyst Timothy Arcuri noted that Broadcom recently shifted some AI chip orders related to Anthropic to a more standardized ASIC chip layout, which might dampen short-term revenue growth but enhance profit margins. The firm raised its target price for Broadcom by 4.21% to $490 and maintained its "Buy" rating.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.