Morningstar

Broadcom Earnings: Bullish 2028 Outlook

We think Broadcom stock is significantly undervalued.

Broadcom Inc. signage outside the company headquarters.
Aaron M. Sprecher via AP
Securities in This Article
Broadcom Inc
(AVGO)

Key Morningstar Metrics for Broadcom

  • Fair Value Estimate
    : $650
  • Morningstar Rating
    : ★★★★★
  • Morningstar Economic Moat Rating
    : Wide
  • Morningstar Uncertainty Rating
    : High

What We Thought of Broadcom’s Earnings

Broadcom’s AVGO solid August-quarter results and October-quarter guidance were strong, implying 86% and 93% year-on-year growth, respectively. Management provided bullish guidance through 2028, including artificial intelligence revenue quadrupling from 2026 and non-GAAP EPS nearly tripling to $30.

Why it matters: 2028 guidance beat our model and matches our view that Broadcom’s immense AI chip demand is enduring, if not accelerating, over the next two years. We believe stronger, long-term guidance should help assuage concerns over competitive position and the durability of AI spending.

  • Broadcom supplies Google’s eighth-generation inference TPU, which is higher in volume and complexity than the training chip MediaTek won. A multiyear agreement with Google and emphatic guidance match our view that Broadcom’s TPU business isn’t going anywhere soon.
  • We expect most of this growth to come from massive ramps to OpenAI and Anthropic, helping diversify Broadcom from Google. Investors may worry about the risk of this frontier-model spending, but we see it supported by improving underlying AI model economics.

The bottom line: We maintain our $650 fair value estimate for wide-moat Broadcom, which remains one of our top picks in semis. Our thesis for massive revenue ramps to OpenAI and Anthropic through 2028 is on track, and shares look like a bargain against this huge impending growth.

  • Broadcom shares have fallen nearly 30% since the previous quarter, suggesting the firm may miss its 2028 guidance or that growth will slow thereafter. We see the guidance as credible and believe underlying AI infrastructure demand will continue rising through 2030.
  • Management confirmed our expectations that OpenAI and Anthropic will be Broadcom’s largest two customers, starting in 2027. Our call is based primarily on massive expected revenue from these customers, which also drives management’s bullish 2028 outlook.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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