The year hasn't started on a good note for Broadcom (AVGO 1.04%) investors. Shares of the chip designer have dropped 10% in 2026 as of this writing, well below the 10% jump in the PHLX Semiconductor Sector index this year.
Broadcom's poor performance this year can be attributed to the negative sentiment surrounding artificial intelligence (AI) stocks, as concerns about the viability of the massive spending on AI data centers have once again taken center stage. Additionally, the company's comments that the accelerating sales of its AI-related products will compress margins have been another headwind for the stock price of late.
However, investors seem to be forgetting that Broadcom delivered record revenue in fiscal 2025 (which ended in November last year). Even better, the company is on track to deliver stronger growth this year. That's why it won't be surprising to see Broadcom stock getting a shot in the arm when it releases its first-quarter fiscal 2026 results on March 4.
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Broadcom's huge order book should help it beat expectations
Broadcom's guidance calls for fiscal Q1 revenue of $19.1 billion, a potential increase of 28% from the year-ago period. However, the company finished fiscal 2025 with an impressive backlog of $162 billion, and $73 billion of that backlog was for its AI chips.
Broadcom management added that it expects to clear the AI-related backlog over the next six quarters. That translates into a quarterly revenue run rate of just over $12 billion. So, don't be surprised if Broadcom exceeds its fiscal Q1 AI revenue guidance of $8.2 billion, which could pave the way for the company to deliver a larger increase in overall revenue.
What's more, Wall Street is confident that Broadcom's growth will accelerate as the year progresses. This is evidenced by the company's fiscal 2026 revenue estimate of $97.6 billion, which would be an improvement of 53% over last year. For comparison, Broadcom's revenue in fiscal 2025 increased by 24%, suggesting its growth rate is poised to more than double in the current fiscal year.
Analysts expect it to deliver a similar increase in earnings this fiscal year, well above the 14% growth in the average earnings of companies in the S&P 500 index.
NASDAQ: AVGO
Key Data Points
The stock seems like an attractive investment right now
Broadcom trades at 32 times forward earnings. The valuation represents a premium to the S&P 500's forward earnings multiple of 22, but it can be justified by the much stronger earnings increase it is expected to report this year, as well as the next couple of years.
Data by YCharts.
The strong earnings growth potential suggests why Broadcom's 12-month median price target of $458 points toward a potential jump of 43% from current levels. What's more, 96% of the 55 analysts covering this AI stock rate it as a buy. So, it seems like a good idea to consider buying Broadcom stock while it is beaten down, as it could go on a bull run following its upcoming report.
