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Investing.com - BofA Securities raised its price target on Broadcom Limited (NASDAQ:AVGO) to $400 from $300 while maintaining a Buy rating, citing accelerated growth in the company’s custom AI chip business. The semiconductor giant, currently valued at $1.44 trillion, boasts impressive gross profit margins of 77.19% and has demonstrated strong revenue growth of 28.01% over the last twelve months, according to InvestingPro data.
The firm identified Broadcom as its top pick as the company’s custom AI chip (XPU) business continues to expand, with a reported fourth large customer (likely OpenAI) joining existing customers Google, Meta, and ByteDance. Trading near its 52-week high with a P/E ratio of 108.28x, Broadcom appears to be commanding a premium valuation in the market.
BofA Securities noted that this addition could contribute approximately $10 billion in the second half of fiscal year 2026, pushing AI growth to nearly 110% year-over-year, up from previous estimates of 55-60%.
The firm increased its fiscal year 2026/2027 earnings per share estimates by 21%/35% to $9.62/$13.36, while noting that operating expenses are expected to grow only modestly by 5-8%, driving significant earnings leverage as Broadcom dedicates more cash toward retiring debt.
BofA’s new price target is based on a 37x calendar year 2026 price-to-earnings ratio, up from 35x previously, which the firm states is in line with EPS growth and reflects earnings acceleration.
In other recent news, Broadcom Inc. reported strong earnings for the third quarter of 2025, surpassing analysts’ expectations. The company achieved an earnings per share of $1.69, slightly above the forecasted $1.66. Revenue for the quarter reached $16 billion, exceeding the anticipated $15.82 billion. This performance indicates robust growth and has been positively received by investors. In addition, Barclays has raised its price target for Broadcom to $400 from $265, maintaining an Overweight rating on the stock. The investment firm highlighted a new ASIC customer expected to contribute approximately $5 billion each in the third and fourth fiscal quarters of 2026. These developments reflect Broadcom’s ongoing growth and strategic advancements.
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