Key Points
Broadcom’s stock pulled back nearly 30% from its record high.
It still looks cheap relative to its long-term growth potential.
Broadcom's (NASDAQ: AVGO) stock closed at an all-time high of $479.90 on June 2. But as of this writing, it trades at about $345. Let's see why this tech giant's stock declined nearly 30% over those five months -- and where it might close by the end of this year.
Broadcom's business is still booming
Broadcom's semiconductor business, which accounted for 70% of its revenue in its latest quarter, produces a wide range of mobile, data center, networking, wireless, storage, and industrial chips. But over the past two years, that segment's growth has been driven mainly by its sales of custom AI accelerators (XPUs) for hyperscalers. When deployed at scale, these XPUs can process AI inference tasks more cost-efficiently than stand-alone GPUs.
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Its infrastructure software business, which accounted for the remaining 30% of its revenue, expanded rapidly over the past few years through some massive acquisitions. That segment is more sensitive to macro headwinds, but it also gives the company more ways to lock in its semiconductor customers with bundled infrastructure, security, and cloud-based services.
Broadcom's revenue growth decelerated in fiscal 2025 (which ended last November) as it fully lapped its $69 billion acquisition of VMware, but accelerated again throughout fiscal 2026. The main catalyst was its soaring sales of XPUs and AI networking chips, which easily offset its slower sales of non-AI chips and infrastructure software.
Metric | FY 2024 | FY 2025 | Q1 2026 | Q2 2026 | Q3 2026 |
|---|---|---|---|---|---|
Semiconductor Solutions Revenue Growth (YOY) | 7% | 22% | 52% | 79% | 127% |
Infrastructure Software Revenue Growth (YOY) | 181% | 26% | 1% | 9% | 29% |
Total Revenue Growth (YOY) | 44% | 24% | 29% | 48% | 86% |
Data source: Broadcom. YOY = Year-over-year.
Where will Broadcom's stock be by the end of the year?
For fiscal 2026, Broadcom expects its AI semiconductor revenue to surge 186% year over year to $58 billion, or 55% of its projected revenue. It expects that figure to roughly double to $115 billion in fiscal 2027 and double again to $230 billion in fiscal 2028.
From fiscal 2025 to fiscal 2028, analysts expect its total revenue and EPS to grow at CAGRs of 62% and 78%, respectively, as the AI market continues to expand. Those are jaw-dropping growth rates for a stock that trades at 21 times next year's earnings.
Broadcom's stock pulled back over the past few months as the Fed's September rate hike, rising Treasury yields, and other macro headwinds drove many investors away from higher-growth AI stocks. But with a more generous forward price-to-earnings ratio of 30, its stock could still reach new highs, rising to the mid-$490s by the end of the year.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Broadcom. The Motley Fool has a disclosure policy.
