On Monday, Goldman Sachs confirmed its Buy rating on Broadcom Limited (NASDAQ:AVGO), with a revised 12-month price target of $240, up from the previous $190. This adjustment follows a recent earnings report and an optimistic outlook for the company's growth prospects, particularly in the artificial intelligence (AI) semiconductor market. According to InvestingPro data, Broadcom's stock has surged over 100% year-to-date, trading near its 52-week high of $228.70, with 20 analysts recently revising their earnings estimates upward.
The firm's increased confidence in Broadcom stems from the company's recent performance and strategic positioning, supported by impressive revenue growth of 44% in the last twelve months to $51.6 billion. Broadcom's AI semiconductor serviceable available market (SAM) forecast for fiscal year 2027 is projected to be between $60 billion and $90 billion. This forecast is based on specific projects with its three leading AI Custom Compute customers and suggests a much sharper growth trajectory than earlier estimates.
Goldman Sachs' updated financial projections for Broadcom include a 4% increase in the non-GAAP earnings per share (EPS), excluding stock-based compensation (SBC), to $7.94 for fiscal year 2026. Additionally, the firm has introduced a forecast for fiscal year 2027, with a non-GAAP EPS expectation of $10.13, marking a year-over-year increase of 28%.
The analyst's optimism is further bolstered by Broadcom's recent business developments. The company has secured two additional Custom Compute customers and maintained its leadership in AI Ethernet connectivity.
Moreover, management's execution in Infrastructure Software (ETR:SOWGn) is noted with approval, highlighted by the expansion of VMware (NYSE:VMW)'s non-GAAP operating margins from around 30% before the acquisition to 70% in the most recent quarter.
Goldman Sachs' reiterated Buy rating and the raised price target reflect the firm's enhanced conviction in Broadcom's revenue and earnings growth potential. The analyst sees Broadcom as a key player in enabling the next generation of AI technology.
In other recent news, Broadcom has been the subject of positive attention from financial firms due to its robust growth in the artificial intelligence (AI) sector. The company's AI revenue experienced a 220% annual increase, driving several firms including TD Cowen, Piper Sandler, Cantor Fitzgerald, Baird, and Bernstein SocGen Group to raise their price targets. The growth is largely attributed to Broadcom's custom silicon business, anticipated to expand three to four times in the next three years.
Moreover, Broadcom's financial health is rated as great, supported by strong profitability and momentum metrics. CFRA views the company's recent 11% dividend increase favorably and anticipates a focus on reducing debt, with a $2.5 billion reduction noted in the October quarter. The firm foresees over $30 billion in free cash flow for Broadcom in fiscal year 2025.
In addition, the company's serviceable available market (SAM) for its three existing AI customers is projected to grow from $15-20 billion to $60-90 billion by fiscal year 2027. This forecast does not account for potential business with two new customers that have not been announced yet.
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