Key insights
- Macquarie downgraded Broadcom to Neutral, citing Google's shift to insourcing chip development and potential market share loss in 2027-28. While Broadcom's AI revenue and overall growth remain strong, this news introduces a bearish element for the semiconductor sector, suggesting potential headwinds for key players due to evolving customer strategies and competition.
Investing.com - Macquarie downgraded Broadcom Limited (NASDAQ:AVGO) to Neutral from Outperform on Tuesday with a price target of $437.00, citing concerns over Google’s shift toward insourcing chip development.
Analyst Arthur Lai said Google is now working with MediaTek and developing in-house capabilities after previously relying solely on Broadcom in its supply chain. The firm expects Broadcom’s market share to decline meaningfully in 2027-28.
Macquarie said both upside and downside appear limited for the stock. Upside is constrained by concerns over market share loss and potential margin pressure from increasing competition, while downside risk is supported by valuation. Despite trading at a P/E ratio of 95, the company’s PEG ratio of 0.63 suggests reasonable valuation relative to growth. Still, InvestingPro analysis indicates the stock is currently overvalued, placing it among companies on the Most Overvalued list.
Broadcom reported second-quarter fiscal 2026 revenue of $22.1 billion, up 48% year-over-year, with AI revenue of $10.8 billion. The company guided AI revenue to increase more than 200% year-over-year to $16.0 billion in the third fiscal quarter.
For the third fiscal quarter of 2026, management guided revenue to be approximately $29.4 billion, indicating 33% quarter-over-quarter and 84% year-over-year growth. The company added $30 billion in AI bookings during the second fiscal quarter, higher than revenue recognized during the period. With a market capitalization of $2.27 trillion and gross profit margins of 76%, Broadcom remains a dominant force in semiconductors. For deeper analysis, investors can access the comprehensive Pro Research Report on Broadcom, available on InvestingPro alongside reports for 1,400+ other US equities.
In other recent news, Broadcom has seen several updates from analysts following its latest earnings report. The company reported second-quarter results that exceeded earnings per share estimates by $0.04, with revenue guidance for the third quarter surpassing consensus by $1.15 billion. KeyBanc raised its price target to $575, highlighting Broadcom’s strong infrastructure software revenue. Benchmark also increased its price target to $545, despite noting a 13% drop in after-hours trading due to unmet investor expectations for AI semiconductor revenue.
Cantor Fitzgerald maintained its Overweight rating and a $525 price target, noting the AI revenue outlook for the July quarter at $16 billion, below its $17.1 billion estimate. Mizuho raised its price target to $530, citing July quarter guidance of $29.4 billion, a 33% increase quarter-over-quarter, exceeding consensus estimates. Wolfe Research reiterated an Outperform rating with a $500 price target, emphasizing Broadcom’s success in beating revenue expectations for the fiscal second and third quarters. These developments reflect Broadcom’s ongoing performance and the varied expectations from different analyst firms.
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