Broadcom Stock Price Forecast - AVGO Falls ($405) as $73B AI Backlog Collides With Margin Fears and 61x P/E

Broadcom (NASDAQ:AVGO) – AI Giant With $73B Backlog And Compressed Margins

Earnings, Price Action And Where NASDAQ:AVGO Stands Now

Broadcom Inc. (NASDAQ:AVGO) is trading roughly in the 400–410 USD zone after dropping about 5%–6% post-earnings, even after a rally of roughly 75% year to date and a doubling in market cap over the prior year. The quarter itself was strong on the headline numbers: revenue came in at 18.02 billion USD versus consensus of 17.49 billion USD, and adjusted EPS printed at 1.95 USD versus 1.86 USD expected. Guidance for the current fiscal Q1 calls for revenue of about 19.1 billion USD, implying roughly 28% year-on-year growth and beating the 18.3 billion USD analyst consensus. Net income for the last reported quarter surged to about 8.51 billion USD from 4.32 billion USD a year earlier, a jump of almost 97%, or 1.74 USD per share versus 0.90 USD. The selloff is not about growth; it is about the quality of that growth and the impact of the AI mix on gross margins at a valuation sitting around 60x forward earnings.

AI Engine And The 73 Billion USD NASDAQ:AVGO Backlog

The central growth driver for NASDAQ:AVGO is its AI semiconductor and systems franchise, split between custom ASIC accelerators and full rack-level AI systems on one side, and high-speed networking silicon for datacenters on the other. AI semiconductor revenue accelerated from roughly 5.2 billion USD in the prior quarter to about 6.5 billion USD in the last reported quarter, and management now guides to around 8.2 billion USD for the current quarter – about double the level of a year ago and a roughly 58% increase in just two quarters. Behind this sits a 73 billion USD backlog in custom chips, switches, systems and related components for AI datacenters, scheduled for delivery over the next 18 months. The customer list already includes Google, Meta, ByteDance and OpenAI, and a fifth large customer has been added with an initial order of about 1 billion USD starting in the second half of 2026. In parallel, Anthropic is now using a new TPU generation called Ironwood, built with Broadcom’s custom silicon. That positions NASDAQ:AVGO as a core supplier to almost every tier-one hyperscaler in the AI arms race, with multi-year visibility on volumes. The trade-off is clear: a higher share of lower-margin system and ASIC revenue mechanically pulls the consolidated gross margin down, even as absolute profit grows.

Segment Breakdown: Where NASDAQ:AVGO Actually Makes Its Money

Broadcom’s Semiconductor Solutions segment generated about 11.07 billion USD in revenue in the last quarter, up 22% year on year and ahead of the roughly 10.77 billion USD expected. Within that segment, AI-linked revenue is the dominant growth vector, with AI chip revenue up around 74% year on year to roughly 8.2 billion USD. Legacy franchises such as wired infrastructure, storage controllers and RF components still contribute but are increasingly overshadowed by AI demand. The Infrastructure Software segment delivered about 6.94 billion USD, a 26% annual increase, helped by the integration of VMware and other infrastructure assets. That software stack carries structurally higher margins and creates stickier relationships with the same cloud and enterprise customers that are scaling AI clusters. For NASDAQ:AVGO the combination of AI hardware and infrastructure software is the core of the model: hardware and systems drive explosive top-line growth, while software cushions margin volatility and extends Broadcom’s strategic control inside the datacenter.

Margin Debate Around NASDAQ:AVGO: Growth Versus Profitability

The immediate trigger for the post-earnings selloff was management’s tone around margins, not the revenue line. The CFO guided for gross margin in fiscal Q1 to decline roughly 100 basis points sequentially, largely because AI will take a bigger share of total revenue, with a heavier mix of ASIC and rack-level systems. These system sales inherently earn lower gross margin than high-ASP networking chips or infrastructure software. For investors who already rode a roughly 78% year-to-date rally, any sign that operating leverage may be capped hits sentiment quickly. At the same time, the absolute margin profile remains healthy: the company is still growing revenue close to 30% and nearly doubling net income, with demand for AI capacity running ahead of supply. Right now guidance implies a controlled, gradual margin drift, not a collapse. The key question for 2026 is whether the product mix keeps shifting toward lower-margin systems faster than software and high-margin networking can offset, or whether management can stabilize gross margin while still harvesting the AI backlog.

Cash Generation, Dividend Policy And Balance Sheet Strength At NASDAQ:AVGO

With quarterly net income around 8.51 billion USD and almost 97% year-over-year growth, NASDAQ:AVGO remains a cash machine. Even after the VMware acquisition and heavy AI capex and R&D, the company has enough capacity to lift the quarterly dividend from 0.59 USD per share to 0.65 USD per share and still retain substantial cash for deleveraging or opportunistic buybacks if the share price corrects. The dividend yield is modest relative to the growth rate, but it signals confidence in multi-year free-cash-flow durability. Leverage is higher than pre-deal levels because of VMware and ongoing investment, yet the 73 billion USD AI order book scheduled over 18 months gives strong support for forward cash flows. The balance sheet only becomes problematic if there is a sharp, sustained slowdown in AI orders or material delivery delays with one of the hyperscale anchors; under base-case assumptions, the combination of backlog and margin profile keeps the capital structure in a comfortable zone.

Valuation Premium Of NASDAQ:AVGO Versus Other AI Flagships

On valuation, NASDAQ:AVGO clearly sits at the expensive end of the AI spectrum. The stock trades on a forward P/E of around 61x compared with a sector average near 25x, while Nvidia trades closer to 39x forward earnings. On forward EV/Sales, Broadcom is around 31.6x versus roughly 3.5x for the broader group and about 20.7x for Nvidia. The market is therefore paying a substantial premium for the specific combination of AI ASIC leadership, end-to-end networking and infrastructure software. That premium is supported by the current fundamentals: revenue guided to grow around 28% year over year next quarter, net income almost doubling, AI revenue roughly doubling year on year and a 73 billion USD backlog. The problem is that this price already assumes a near-flawless execution path: sustained double-digit growth, only modest margin erosion, no major customer disruption and continued capex aggression from hyperscalers. Sell-side targets reflect that tension. Morgan Stanley has lifted its target to 443 USD from 409 USD with an Overweight stance, UBS to 472 USD from 415 USD with a Buy, and Bank of America to 460 USD from 400 USD, also with a Buy. All three targets sit above spot but not by a margin that suggests low risk. In simple terms, NASDAQ:AVGO is priced as a champion, not as a turnaround or a value play.

Technical Picture For NASDAQ:AVGO After The Post-Earnings Drop

Technically, the stock came into earnings extended after a powerful rally, with price having already advanced roughly 75% since the start of the year. The post-print drop of about 5%–6% is meaningful but not catastrophic; it looks more like the first proper shake-out after a one-way move than the start of a structural downtrend. Key technical levels now center around prior breakout zones and moving averages. Short term, the area just below 400 USD is the first support band to watch, followed by deeper support closer to the prior consolidation range lower in the 360–380 USD area. As long as NASDAQ:AVGO holds above that prior base on a closing basis, the broader uptrend remains intact and pullbacks look more like position resets than long-term distribution. Only a decisive break back into the old range with rising volume and relative-strength deterioration against other AI names would suggest that the AI premium is being repriced rather than merely digested.

Is NASDAQ:AVGO A Buy, Sell Or Hold After The Pullback?

Putting the pieces together, the investment case in NASDAQ:AVGO is a tension between scale and price. On the positive side, you have 18.02 billion USD in quarterly revenue already, guidance for 19.1 billion USD next quarter, net income of 8.51 billion USD growing at nearly 97% year on year, AI semiconductor revenue set to reach 8.2 billion USD this quarter, and a 73 billion USD AI-driven backlog across chips, systems and networking to be delivered over 18 months. You also have a software pillar growing 26% year on year to 6.94 billion USD that stabilizes margins and moats. On the negative side, you have explicit guidance for gross-margin compression as AI system mix rises, a forward multiple of about 61x earnings and over 31x sales, and a market narrative already heavily crowded around AI leaders. In that context, the roughly 5%–6% post-earnings pullback is not enough by itself to reset risk-reward, but it does improve the entry point versus the recent peak. Based strictly on the current numbers, growth visibility and back-log, NASDAQ:AVGO still screens as a Buy on a multi-year AI thesis, but only for investors who accept valuation risk and are prepared for higher volatility if margins compress faster than expected or if AI capex slows. For investors with lower risk tolerance or a shorter horizon, the stock is closer to an expensive Hold than a comfortable core position.

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