At 15.93 P/S, Broadcom Is Overvalued: Buy, Sell or Hold the Stock?

Broadcom AVGO shares are overvalued, as suggested by the Value Score of D. In terms of the forward 12-month price/sales (P/S), AVGO is trading at 15.93X, close to the median of 17.69X and higher than the broader Zacks Computer and Technology sector’s 7.39X. Broadcom is also trading at a premium against peers, NVIDIA NVDA and Marvell Technology MRVL, shares of which are currently trading at 15.17X and 6.86X, respectively. So, what should investors do with the AVGO stock at the current level? Let us dig deeper to find out.

AVGO Shares Are Overvalued

AVGO Prospects Ride on Strong AI Revenues

Broadcom’s strong growth prospects are driven by growing AI revenues. AVGO is benefiting from strong demand for XPUs, which are a type of application-specific integrated circuits necessary to train Generative AI models. Alphabet GOOGL and Meta Platforms are major users of these XPUs. In fiscal 2025, AI revenues surged 65% to $20 billion from fiscal 2024. Broadcom’s current order backlog for AI switches exceeds $10 billion as AVGO’s latest 102-terabit per second Tomahawk 6 switch continues to gain traction. AVGO now expects first-quarter fiscal 2026 AI revenues to double year over year to $8.2 billion.

AVGO’s expanding clientele, which now includes Anthropic, has been a key catalyst. In the third quarter of fiscal 2025, Broadcom received a $10-billion order to sell Alphabet’s latest TPU Ironwood racks to Anthropic. In the fourth quarter of fiscal 2025, Broadcom received an additional order worth $11 billion from the same customer.

This, along with an innovative product portfolio, and an expanding partner base have helped Broadcom outperform the broader Zacks sector, as well as NVIDIA and Marvell Technology. In the trailing 12 months, AVGO shares have appreciated 49.5%, outperforming the broader sector’s return of 27.2% and NVIDIA’s appreciation of 40.2%. Marvell Technology fell 31.6% over the same time frame.

AVGO Stock’s Performance

However, AVGO’s soft gross margin guidance for fiscal 2026 due to a higher AI mix in revenues is expected to remain an overhang on its share price performance. The first-quarter fiscal 2026 guidance also reflects the negative impacts of unfavorable AI mix in revenues, a sequential decline in non-AI semiconductor revenues and modest growth expectations for the Infrastructure Software segment. Higher tax rate attributed to the impacts of global minimum tax and shift in geographic mix of income compared with fiscal 2025 is another concern.

AVGO continues to face stiff competition from NVIDIA and Marvell Technology. NVIDIA is benefiting from strong demand for Hopper and Blackwell architectures. Marvell Technology is gaining from strong demand for custom XPU silicon and electro-optics interconnect products. MRVL’s AI-driven custom silicon business has secured more than 20 multi-generational XPU and XPU-attach socket wins.

Strong Portfolio & Rich Partner Base Drive AVGO’s Top Line

Consolidated backlog hit $162 billion in fiscal 2025, including $73 billion in AI backlog set to be delivered over the next 18 months. AVGO’s networking portfolio is gaining from strong demand for Tomahawk 6 products, as well as the Jericho 4 Ethernet fabric router. Moreover, Broadcom has a rich partner base that includes the likes of OpenAI, Walmart, NVIDIA, Canonical, Arista Networks, Alphabet, Dell Technologies, Meta Platform, Juniper and Supermicro. 

AVGO expanded its portfolio with the launch of the industry’s first Wi-Fi 8 silicon solutions for the broadband wireless edge ecosystem, including residential gateways, enterprise access points and smart mobile clients. Broadcom is expanding its Wireless Device Connectivity solutions portfolio with the launch of its next-generation BCM4918 accelerated processing unit, alongside two new dual-band Wi-Fi 8 devices, the BCM6714 and BCM6719. AVGO’s unified Wi-Fi 8 platform combines higher throughput with built-in intelligence, which will enable operators to deliver secure, power-efficient, real-time agentic applications for residential users.

AVGO’s Earnings Estimate Revision Shows Positive Trend

The Zacks Consensus Estimate for fiscal 2026 earnings is pegged at $9.93 per share, up 2.2% over the past 30 days, indicating 45.6% growth from the fiscal 2025 reported figure. The consensus mark for fiscal 2026 revenues is pegged at $94.03 billion, suggesting 47.2% growth from fiscal 2025’s reported figure.

Broadcom Inc. Price and Consensus

 

Broadcom Inc. price-consensus-chart | Broadcom Inc. Quote

The Zacks Consensus Estimate for the first quarter of fiscal 2026 earnings is pegged at $2.02 per share, up by a penny over the past 30 days, indicating 26.3% growth from the figure reported in the year-ago quarter. The consensus mark for the first quarter of fiscal 2026 revenues is pegged at $19.26 billion, suggesting 29.1% growth from the figure reported in the year-ago quarter.

Here Is Why You Should Hold AVGO Stock Now

Broadcom’s expanding AI portfolio, along with a rich partner base, reflects solid top-line growth potential. This bodes well for investors already holding the stock. However, soft gross margin guidance, intensifying competition in the AI chip space and a challenging macroeconomic condition, including uncertainty over trade policy, do not justify a premium valuation.

Broadcom currently carries a Zacks Rank #3 (Buy), which implies that investors should wait for a more favorable point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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