Citi has increased its price target for Broadcom (AVGO, Financial) from $276 to $285 while maintaining a Buy rating. Despite reporting mixed financial outcomes and projections, the company shows robust artificial intelligence growth potential. However, this strength is somewhat balanced by declining margins, attributed to a shift in semiconductor mix and rising options expenses.
Broadcom anticipates that its AI sector will expand by 60% annually in both fiscal years 2025 and 2026, fueled by increasing AI application. Nevertheless, this growth expectation has prompted a revision in margin forecasts due to the heightened presence of semiconductors in its product mix.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 35 analysts, the average target price for Broadcom Inc (AVGO, Financial) is $267.41 with a high estimate of $340.00 and a low estimate of $171.60. The average target implies an upside of 8.29% from the current price of $246.93. More detailed estimate data can be found on the Broadcom Inc (AVGO) Forecast page.
Based on the consensus recommendation from 42 brokerage firms, Broadcom Inc's (AVGO, Financial) average brokerage recommendation is currently 1.8, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Broadcom Inc (AVGO, Financial) in one year is $167.55, suggesting a downside of 32.15% from the current price of $246.93. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Broadcom Inc (AVGO) Summary page.
AVGO Key Business Developments
Release Date: June 05, 2025
- Total Revenue: $15 billion, up 20% year-on-year.
- Adjusted EBITDA: $10 billion, up 35% year-on-year.
- Semiconductor Revenue: $8.4 billion, up 17% year-on-year.
- AI Semiconductor Revenue: Over $4.4 billion, up 46% year-on-year.
- Infrastructure Software Revenue: $6.6 billion, up 25% year-on-year.
- Gross Margin: 79.4% of revenue.
- Operating Income: $9.8 billion, up 37% year-on-year.
- Operating Margin: 65% of revenue.
- Free Cash Flow: $6.4 billion, representing 43% of revenue.
- Capital Expenditures: $144 million.
- Cash and Debt: $9.5 billion in cash and $69.4 billion in gross principal debt.
- Q3 Revenue Guidance: Approximately $15.8 billion, up 21% year-on-year.
- Q3 AI Semiconductor Revenue Guidance: $5.1 billion, up 60% year-on-year.
- Q3 Infrastructure Software Revenue Guidance: Approximately $6.7 billion, up 16% year-on-year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Broadcom Inc (AVGO, Financial) reported a record total revenue of $15 billion for fiscal Q2 2025, marking a 20% year-on-year increase.
- AI semiconductor revenue reached over $4.4 billion, up 46% year-on-year, continuing a trajectory of nine consecutive quarters of strong growth.
- Infrastructure software revenue grew by 25% year-on-year to $6.6 billion, driven by the successful integration of VMware and strong VCF sales.
- The company forecasts AI semiconductor revenue to grow by 60% year-on-year in Q3, marking the tenth consecutive quarter of growth.
- Broadcom Inc (AVGO) achieved a gross margin of 79.4% in Q2, better than originally guided, due to favorable product mix.
Negative Points
- Non-AI semiconductor revenue was down 5% year-on-year, with sectors like industrial and wireless experiencing declines.
- Free cash flow as a percentage of revenue was impacted by increased interest expenses from debt related to the VMware acquisition.
- The company anticipates a sequential decline in consolidated gross margin by approximately 130 basis points in Q3 due to a higher mix of XPUs.
- Broadcom Inc (AVGO) faces uncertainty regarding potential impacts from changing export control regulations.
- The transition of VMware customers to a subscription model is ongoing and expected to take another 1.5 years to complete.
