After Earnings, Is Broadcom Stock a Buy, a Sell, or Fairly Valued?

Broadcom AVGO released its fiscal first-quarter earnings report on March 4. Here’s Morningstar’s take on Broadcom’s earnings and stock.

Key Morningstar Metrics for Broadcom

• Fair Value Estimate

  : $500.00

• Morningstar Rating

  : ★★★★

• Morningstar Economic Moat Rating

  : Wide

• Morningstar Uncertainty Rating

  : High

What We Thought of Broadcom’s Fiscal Q1 Earnings

Broadcom’s January-quarter sales beat guidance, led by artificial intelligence chip sales of $8.4 billion. April-quarter guidance implies near-30% sequential AI chip growth, to $10.7 billion. Management further guided to at least $100 billion in AI chip revenue in fiscal 2027.

Why it matters: Broadcom is a dominant force in AI compute chips, second only to Nvidia. It controls the custom AI chip market with the largest customer (Google) and the most customers overall. Upcoming ramps for Anthropic and OpenAI portend enormous growth in the next two years.

• Broadcom expects to ship AI chips supporting 10 gigawatts of capacity in fiscal 2027, which is massive. We think the $100 billion figure is conservative, with upside coming from Broadcom’s rack shipments to Anthropic. Still, this implies AI sales doubling in 2027 after nearly tripling in 2026.
• We’re skeptical of management’s claim that AI chips won’t dilute gross margin. By our work, these chips dilute gross margin but expand operating margin. If Broadcom raises prices to maintain gross margin, there’s upside to our forecast. Either way, we see AI chips as earnings-accretive.

The bottom line: We raise our fair value estimate for wide-moat Broadcom to $500 per share from $480, as 2027 guidance exceeded our expectations and implies rapid ramps for Anthropic and OpenAI. Shares remain about 25% below recent highs in December 2025, and we see immense upside for investors.

• Shares have flagged on lower AI sentiment and concerns over AI chip margins. We’re confident in AI spending holding up over the next three years, and believe these chips are earnings-accretive regardless of debates over gross margin. We see Anthropic’s first revenue in late 2026 as a catalyst.
• Shares currently trade closer to our bear case, which would value the stock at $300. To justify our bear-case assumptions, one would have to assume a significant correction in AI spending after 2028, with little AI growth thereafter. To us, this seems overly bearish.

Fair Value Estimate for Broadcom Stock

With its 4-star rating, we believe Broadcom’s stock is moderately undervalued compared with our long-term fair value estimate of $500 per share. Our valuation implies a fiscal 2026 (ending October 2026) adjusted price/earnings multiple of 45 times and a fiscal 2027 multiple of 30 times, as well as a fiscal 2026 enterprise value/sales multiple of 23 times. In our view, Broadcom’s primary valuation driver going forward is the rapid growth of its AI chip business, which supports such high multiples.

We model 38% revenue growth for Broadcom through fiscal 2030, driven predominantly by the growth of its semiconductor revenue and primarily its AI chip business. Broadcom’s non-AI chip businesses are increasingly negligible to results. AI revenue crossed over to the majority of total chip sales in fiscal 2025, and we expect them to make up the majority of total firm sales in fiscal 2026.

Read more about Broadcom’s fair value estimate.

Economic Moat Rating

We believe Broadcom holds a wide economic moat, stemming from intangible assets in chip design and switching costs for its software products. Strength in both chips and software allows the company to earn terrific accounting and economic profits, and we believe its competitive positioning will allow it to do so, more likely than not, for the next 20 years.

While we see most of Broadcom’s businesses as moaty in isolation, we believe its ability to aggregate disparate businesses via acquisitions and run them with terrific efficiency reinforces its wide moat. We see this wide moat evidenced in impressive operating and economic profit margins.

Read more about Broadcom’s economic moat.

Financial Strength

We anticipate Broadcom will focus on strong cash generation. Over the short term, we expect the firm to focus on paying down debt taken out to acquire VMware. Over the long term, we expect the focus to be on increasing the dividend and bolting on more acquisitions by which to add to cash flow. As of October 2025, Broadcom held $16 billion in cash and equivalents versus $65 billion in gross debt, with approximately half of that taken on to finance the 2023 acquisition of VMware.

We don’t worry about the firm’s debt load, given the long-dated nature of its outstanding notes and its robust cash generation. After the gross debt/adjusted EBITDA ratio rose to 3.5 times after closing on VMware, the firm exited fiscal 2025 with that figure down to 1.5 times. We see it as appropriately deleveraged exiting fiscal 2025 to begin considering further acquisitions, but anticipate a focus on debt reduction and share buybacks in fiscal 2026.

Broadcom consistently generates free cash flow margins above 40%, which we expect to continue. Over the last five years, it’s averaged nearly $20 billion in cash flow annually. We project free cash flow rising past $50 billion annually by fiscal 2027.

Read more about Broadcom’s financial strength.

Risk and Uncertainty

We assign a High Uncertainty Rating to Broadcom. We see its primary risk arising from customer concentration and AI. Broadcom is increasingly concentrated in its AI accelerator business, which is made up of a handful of high-spending customers like Google and Anthropic. Changes in spending patterns from these customers and overall AI demand can create fluctuations in Broadcom’s results and affect market sentiment on its stock. Broadcom’s results and valuation are highly sensitive to the rate of AI investment over the next five years, and within that spending, the secular trend toward custom silicon. Slowdowns in spending, or higher competition from Nvidia and others, are the primary downside risks to results and our valuation.

Broadcom also operates with a high reliance on TSMC for its chip supply, and supply constraints could hamper its ability to ship to customers. Nonetheless, we believe Broadcom is a preferred customer of TSMC and would earn high priority in such a scenario—both for its scale and lengthy relationship.

Read more about Broadcom’s risk and uncertainty.

AVGO Bulls Say

• Broadcom is best of breed in custom AI accelerators, boasting the largest customer in Google and layering new customers in like Anthropic and OpenAI. Rising AI spending portends immense growth.
• Broadcom is an exemplar of operating efficiency. It earns excellent operating margins and generates enormous cash flow. It is particularly strong at acquiring companies and trimming excess expenses.
• While smaller relative to the size of its rising AI chip business, Broadcom’s traditional networking chips and VMware software are moaty businesses in their own right that generate good cash flow.

AVGO Bears Say

• Broadcom’s chip business bears significant customer concentration, with a small handful of large AI customers driving the bulk of revenue and future growth.
• Broadcom’s software portfolio holds legacy and mature businesses, like virtualization and mainframes, which we think will exhibit moderating growth.
• Broadcom relies heavily on acquisitions to expand its portfolio and may struggle to find deals large enough to move the needle that can pass antitrust scrutiny.

This article was compiled by Rachel Schlueter.