The share price of Broadcom (AVGO), a leading semiconductor firm, fell to $318, followed by RBC’s top analyst Srini Pajjuri downgrading her rating for the firm. She decreased the target price from $370 to $340, and signalled to ‘hold’ the shares. The downgrades highlight the fear of Anthropic’s TPU ramp-up ending by mid-2027.
Broadcom’s revenue is closely linked to the manufacturing of ASICs (custom chips built for specific purposes). And Anthropic has been pumping billions into the firm for custom chips, contributing up to $21B in order to the $73 backlog. Experts estimate that this demand will significantly decrease by mid- 2027 as Anthropic plans on diversifying its architecture with Nvidia chips. NVIDIA’s next-generation chips might also reduce reliance on Broadcom.
Financial Snapshot: Broadcom Inc. (AVGo)
Broadcom is one of the big players in the U.S. tech sector with a market capitalization of $1.51 trillion. It ranks 9th in the Nasdaq 100 index, above Walmart and below Tesla, with a weightage of 4.52%. It reported a $63.8B revenue in FY25 (24% YoY) and diluted EPS of $4.77- marking a massive 288% gain over its FY24 EPS of $1.23.
The Q4 2025 earnings reports of the firm beat market estimates by 3.3% with a revenue of $18B. The key metrics for the year FY25:
Income and Cash Flow:
| Metric | FY 2025 | FY 2024 | Change |
|---|---|---|---|
| Net Revenue | $63.9B | $51.6B | +24% |
| Net Income | $23.1B | $5.9B | +292% |
| Earnings per Share – Diluted | $4.77 | $1.23 | +288% |
| Cash Flow from Operations | $27.5B | $20.0B | +38% |
| Free Cash Flow | $26.9B | $19.4B | +39% |
Segment Revenue:
| Segment | FY 2025 | FY 2024 | Change |
|---|---|---|---|
| Semiconductor Solutions | $36.9B (58%) | $30.1B (58%) | +22% |
| Infrastructure Software | $27.0B (42%) | $21.5B (42%) | +26% |
| Total | $63.9B | $51.6B | +24% |
The guidance on Q1 2026 indicates that the firm expects a revenue of $19.1 billion. The estimates factor in a 50% jump in the semiconductor revenue to $12.3 billion. The revenue from software is expected to be at $6.8B.
Key Developments
Broadcom recently made headlines with the launch of VMware Telo Cloud Platform 9, which promises 40% TCO savings and 30% lower power via hardware efficiency. VMware is a Broadcom subsidiary that contributes to 42% of its revenue via cloud software. The newly released cloud platform targets telco infrastructure amid the AI boom.
In short, the new software will let telecom companies run their 5G/6G networks on cheap cloud servers that feature AI to auto-fix issues. They also help the telecom operators to bring down the electricity consumption, ultimately saving them billions of dollars. Although this serves as a positive driver for the firm, it is proving to be inadequate to counter the AI hardware obsolescence fear.
Analysts’ take on Broadcom
Although Srini Pajjuri has rated Broadcom Hold, many other analysts, including J.P. Morgan’s Harlan Sur sees major upside. Sur projects an upside of 48.99% with a target price of $475. Timothy Arcuri shares the same projection as his target price, also $475. The Wall Street consensus (calculated based on 29 analyst ratings) is 40.97% upside with a target price of $449.44.
