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On Friday, Deutsche Bank (ETR:DBKGn) analysts increased the price target for Broadcom Limited (NASDAQ: NASDAQ:AVGO) stock to $270 from $205, while maintaining a Buy rating. The decision comes after Broadcom’s recent report and guidance, which aligned with expectations. According to InvestingPro data, the stock is currently trading near its 52-week high of $265.43, with impressive year-to-date returns of 12.46%.
The analysts highlighted that Broadcom’s artificial intelligence (AI) segment provided upside, with a steady performance in software and a slower recovery in non-AI semiconductors. The lack of a cyclical recovery in non-AI areas is expected to remain a challenge into the fourth fiscal quarter. However, analysts believe investors will focus on the growth trajectory of Broadcom’s AI business, which accounts for approximately 30% of its revenue. With a market capitalization of $1.22 trillion and impressive gross profit margins of 76.26%, Broadcom demonstrates strong financial fundamentals.
Broadcom’s guidance for the third fiscal quarter indicates a 16% quarter-over-quarter growth in its AI segment. Furthermore, the company now expects its fiscal year 2026 growth to match that of fiscal year 2025, suggesting a growth rate in the 60% range, compared to Deutsche Bank’s previous estimate of 30%.
The analysts attribute this confidence to increased demand from Broadcom’s three primary XPU customers, who are ramping up both training and inference activities. Although four other prospects are unlikely to contribute until fiscal year 2027, Broadcom’s management remains confident in its dominance in ethernet connectivity and its ability to address scale-up challenges, despite market concerns about competition from NVIDIA (NASDAQ:NVDA) in the connectivity business.
In other recent news, Broadcom Inc. has reported strong financial results for the second quarter of 2025, with earnings per share (EPS) of $1.58, surpassing the forecast of $1.57. The company achieved a record revenue of $15 billion, slightly above the anticipated $14.95 billion, marking a 20% year-on-year increase. Looking ahead, Broadcom projects third-quarter revenue of $15.8 billion, with AI Semiconductor revenue expected to grow by 60% year-on-year. Additionally, HSBC analysts have raised Broadcom’s stock price target to $240 from $225, maintaining a Hold rating. This adjustment follows Broadcom’s third-quarter fiscal year 2025 revenue guidance of $15.8 billion, which aligns with consensus estimates. Broadcom’s AI revenue guidance for the third quarter stands at $5.1 billion, exceeding HSBC’s estimate of $4.6 billion and the consensus estimate of $4.7 billion. The company’s gross margin guidance for the third quarter is set at 78.1%, slightly above HSBC’s and consensus estimates.
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