Broadcom’s AI Revenue Is Growing 221%. The Stock Is Down 26% From Its High.
A Q3 earnings beat, a $230 billion AI revenue roadmap by 2028, and a forward multiple that collapses quickly make AVGO’s selloff look like a pricing error.
Broadcom reported fiscal Q3 results on September 2, and the numbers were hard to argue with. The stock fell anyway. That gap between what the business is doing and what the market is paying for it is where the opportunity sits.
Why This Stock Now
Broadcom posted record revenue of $29.6 billion, up 86% year-on-year, with GAAP operating income of $16.0 billion. GAAP net income rose to $13.1 billion, while free cash flow rose 95% to $13.7 billion. The surge was driven by AI semiconductor revenue of $16.7 billion, which jumped 221% from a year earlier.
Despite those results, the shares have lagged the broader indexes this year. As of Wednesday’s close following earnings, Broadcom shares had gained about 6% in 2026, while the S&P 500 was up 12% in the same period. From its 52-week high, AVGO is down roughly 26%.
The Business
Broadcom is not a commodity chipmaker chasing Nvidia. Its value is in custom accelerators built to the specific architecture of each hyperscaler client. XPU shipments increased more than 3.5 times year-over-year and accounted for 73% of AI revenues. Broadcom delivered Ironwood TPU v7 in high volume to Anthropic and Google, began shipping Google’s next-generation TPU v8i, and shipped OpenAI’s first-generation Jalapeno custom accelerator. Every chip it delivers is replacing the need for a general-purpose GPU cluster with something optimized for a single customer’s workload, which means higher switching costs and more durable revenue.
Infrastructure Software revenue grew 29% to about $8.8 billion, fueled by VMware private-cloud platform adoption, adding a recurring software layer that stabilizes the top line between hardware cycles.
What’s Driving the Opportunity
Management’s long-range forecast is the detail that changes the valuation math. Broadcom forecasts AI semiconductor revenue to reach $58 billion in fiscal 2026, $115 billion in fiscal 2027, and $230 billion in fiscal 2028, with continually increasing demand driven by major customers including Anthropic and OpenAI.
AVGO trades at 31.8x FY1 earnings, but that multiple falls toward 14x by FY3 as earnings rapidly expand. Management expects free cash flow to reach the mid-$40 billion range in 2027. At that level, AVGO’s current market cap of roughly $1.7 trillion would imply a free cash flow yield approaching 2.5%, which is meaningful for a company growing this fast.
Q4 guidance calls for revenue of $34.8 billion, representing 93% year-over-year growth. Broadcom also guided to Q4 AI semiconductor revenue of $21.7 billion, up 236%. According to 28 analysts, Broadcom has a Buy consensus rating as of September 8, 2026. Citigroup maintained its Buy rating while lifting its price target to $515 on September 4.
What Could Go Wrong
The Q4 revenue guide of $34.8 billion came in just below the $35.03 billion Wall Street had penciled in, which triggered the post-earnings dip. That shortfall matters because at a $1.7 trillion market cap, every fractional guide miss gets punished. Supply constraints, including availability of leading-edge wafers, substrates, HBM memory, land, power, and system components, are acknowledged risks. If any one of those bottlenecks tightens faster than expected, the revenue ramp slows.
Client concentration is the other pressure point. Three or four hyperscalers make up the bulk of AI semiconductor revenue. A spending pause by any of them reverberates through Broadcom’s numbers faster than it would for a more diversified supplier.
The Bottom Line
Broadcom is generating $13.7 billion in free cash flow per quarter, growing earnings at nearly double the rate of its multiple expansion, and has locked in relationships with the AI labs most likely to drive accelerator demand through 2028. The stock is down 26% from its high on a Q4 revenue guide that missed by about $230 million. That reaction looks wrong. AVGO is the most compelling risk-adjusted position in large-cap AI semiconductors right now.
