Broadcom Shares Rise 60% in a Year: Is There More Room for Growth?

Broadcom AVGO shares have jumped 60% in the trailing 12-month period, outperforming the broader Zacks Computer and Technology sector’s and the Zacks Electronics – Semiconductors industry’s return of 25.2% and 53.2%, respectively. The outperformance can be attributed to an innovative product portfolio, growing clientele and an expanding partner base. AVGO’s prospect benefits from rising AI revenues despite growing concerns over overspending on AI-related infrastructure and services by hyperscalers. So, what should investors do with the AVGO stock right now? Let us dig deeper to find out.

AVGO Stock’s Performance

Higher AI Mix & Stiff Competition Hurts AVGO’s Profitability

AVGO’s soft gross margin guidance for fiscal 2026 reflects a higher AI mix in revenues. The first-quarter fiscal 2026 guidance 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 NVDA, Advanced Micro Devices AMD, and Skyworks SWKS. NVIDIA is benefiting from strong demand for Hopper and Blackwell architectures, while AMD’s prospects are benefiting from strong demand for EPYC and Instinct processors. Skyworks is benefiting from growing demand for its solutions across edge IoT, automotive and infrastructure end markets, as well as the pending acquisition of Qorvo.

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. 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 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. The launch of BroadPeak, a highly integrated radio digital front-end (DFE) SoC device, for 5G massive multiple-input multiple-output (MIMO) and remote radio head (RRH) applications, which is expected to boost AVGO’s footprint in next-gen 5G advanced and 6G wireless infrastructure.

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’s Earnings Estimate Revision Shows Positive Trend

The Zacks Consensus Estimate for fiscal 2026 earnings is pegged at $10.25 per share, up a couple of cents over the past 30 days, indicating 50.3% growth from the fiscal 2025 reported figure. The consensus mark for fiscal 2026 revenues is pegged at $95 billion, suggesting 48.7% 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 fiscal 2026 earnings is pegged at $2.03 per share, unchanged over the past 30 days, indicating 26.9% growth from the figure reported in the year-ago quarter. The consensus mark for the first quarter of fiscal 2026 revenues is pegged at $19.27 billion, suggesting 29.2% growth from the figure reported in the year-ago quarter.

Here’s Why You Should Buy AVGO Stock Now

Broadcom shares are trading at a premium, as suggested by the Value Score of D. In terms of the forward 12-month price/sales (P/S), AVGO is trading at 14.71X, higher than the broader sector’s 6.47X and industry’s 8.36X. Broadcom is also trading at a premium against peers, NVIDIA, AMD and Skyworks, shares of which are currently trading at 14.58X, 6.87X and 2.36X, respectively.

AVGO Shares Are Trading at a Premium

However, Broadcom’s expanding AI portfolio, along with a rich partner base, reflects solid top-line growth potential. These factors justify a premium valuation despite gross margin-related headwinds in the near term.

Broadcom currently carries a Zacks Rank #2 (Buy), which implies that investors should start accumulating the stock right now. 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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