TLDR
- Wells Fargo upgraded Broadcom (AVGO) to “Overweight” after a 4.2% drop on January 14, viewing the selloff as a buying opportunity
- The firm boosted 2026 revenue estimates to $100.3 billion and 2027 forecasts to $143.8 billion driven by AI growth
- AI semiconductor revenue is projected to surge 116% in 2026 to $52.6 billion and 78% in 2027 to $93.4 billion
- Broadcom’s Q4 fiscal 2025 earnings topped estimates with 28% revenue growth to $18.02 billion and 74% AI segment growth
- Analysts rate the stock “Strong Buy” with an average price target of $455.22, suggesting 29% potential upside
Broadcom experienced a 4.2% decline on January 14 as several concerns weighed on investor sentiment. Chinese software restrictions, a large debt issuance, and insider selling combined to push shares lower.
Wells Fargo responded with an upgrade. The firm raised Broadcom from “Equal-weight” to “Overweight,” viewing the pullback as an entry point for investors.
Analyst Aaron Rakers cited improving clarity on 2026 growth drivers. Broadcom’s strengthening partnership with Alphabet on tensor processing units factored into the firm’s more optimistic stance.
The upgrade included meaningful estimate revisions. Wells Fargo lifted its 2026 revenue forecast to $100.3 billion from $97 billion while raising EPS projections to $10.80 from $10.36.
Looking further ahead, 2027 estimates jumped to $143.8 billion in revenue. The EPS forecast for that year rose to $15.35 from $13.90.
Artificial Intelligence Drives Projections Higher
AI semiconductor growth forms the foundation of Wells Fargo’s bullish case. The firm now expects this segment to generate $52.6 billion in 2026 revenue.
That would represent 116% year-over-year expansion. The 2027 projection of $93.4 billion implies continued momentum with 78% growth.
Recent quarterly performance supports these aggressive forecasts. Broadcom delivered Q4 fiscal 2025 results on December 11 that exceeded Wall Street’s expectations across key metrics.
Revenue increased 28% year-over-year to $18.02 billion. Analysts had expected $17.5 billion.
Adjusted earnings per share came in at $1.95. The Street consensus was $1.87.
AI semiconductor revenue provided the biggest surprise. Sales jumped 74%, topping even Broadcom’s internal guidance and signaling stronger-than-anticipated demand.
The VMware infrastructure software business also impressed. Revenue grew 19%, accelerating from the prior quarter despite ongoing customer pushback on pricing strategies.
Non-GAAP operating income rose 35% to $11.9 billion. The company finished the quarter with $16.2 billion in cash and equivalents, up from $10.7 billion three months earlier.
Price Targets Climb Across the Street
Wells Fargo increased its price target to $430 from $410. Other major firms share the optimistic view.
Mizuho’s Vijay Rakesh raised his target to $480 from $450. He kept an “Outperform” rating on the shares.
Oppenheimer analyst Rick Schafer maintained a buy rating with a $450 target. Barclays initiated coverage with a buy rating on January 16.
Wall Street consensus remains firmly bullish. Among 42 analysts covering the stock, 36 rate it “Strong Buy,” three recommend “Moderate Buy,” and three suggest “Hold.”
The mean price target of $455.22 implies 29% upside potential. The highest target of $535 represents a possible 52% gain.
Management provided strong forward guidance. First-quarter fiscal 2026 AI semiconductor revenue is expected to double year-over-year to $8.2 billion.
Total Q1 revenue guidance stands at $19.1 billion. The company projects adjusted EBITDA margins of 67%.
Analysts expect full-year fiscal 2026 earnings to jump 49% to $8.39 per share. The fiscal 2027 consensus calls for another 46% increase to $12.23.
Broadcom trades at 40.8 times forward earnings and 25.5 times sales. Both multiples exceed industry averages and the company’s five-year historical range.
The dividend track record remains solid. Broadcom has raised payouts for 15 straight years and currently pays $2.60 annually per share for a 0.76% yield.
Insider selling picked up recently. Chief Legal Officer Mark David Brazeal sold 30,000 shares for $10.4 million earlier this month, contributing to negative insider sentiment over the past quarter.
