Broadcom delivered one of its strongest quarterly results on record on Thursday, yet the market response was negative. Shares of AVGO fell close to 3% following the earnings announcement and have dropped roughly 15% over the past month, recently trading around $358 per share. That leaves the stock more than 25% below the all-time high it reached in June. The pullback despite record numbers illustrates how demanding expectations have become for AI-linked chipmakers, where results are increasingly judged against forward guidance rather than reported performance.

Record Third-Quarter Results

Third-quarter revenue totaled $29.59 billion, an all-time high that marked an 85% increase from the same period a year earlier and exceeded the Street's projection of $29.4 billion. Adjusted EPS came in at $3.32, beating the consensus estimate of $3.24. Free cash flow surged 95% to $13.7 billion.

AI semiconductor sales were the standout, jumping 221% to $16.7 billion. Custom XPU products grew 3.5-fold year over year and now account for 73% of total AI-related revenue. That mix matters because custom accelerators are a market in which Broadcom designs application-specific silicon for large cloud and AI companies, competing alongside — rather than within — the merchant GPU business dominated by Nvidia. The growth of custom XPUs reflects major AI developers seeking purpose-built chips for their specific workloads.

Guidance Slightly Below Expectations

For the fourth quarter, Broadcom guided to revenue of approximately $34.8 billion, representing 93% year-over-year growth. However, several Wall Street analysts had set estimates between $35 billion and $35.4 billion, and the modest shortfall was enough to unsettle investor confidence.

Company Raises Multi-Year AI Revenue Projections

Broadcom raised its fiscal 2027 AI semiconductor revenue expectation to approximately $115 billion, up from its prior forecast of more than $100 billion. It also introduced a fiscal 2028 projection of $230 billion, implying another doubling from the 2027 figure.

Major customers including Anthropic and OpenAI underpin much of this outlook. Anthropic signed an agreement with Broadcom in April for multiple gigawatts of next-generation TPU infrastructure beginning in 2027, while OpenAI is working with Broadcom on 10 gigawatts of custom AI processing chips through 2029. These multi-gigawatt commitments tie Broadcom's projected AI revenue to the capital-spending plans of a small number of hyperscale AI customers, a concentration that is central to both the bull and bear cases analysts laid out after the report.

BMO Capital raised its price objective to $575 from $455, citing Broadcom's six primary AI customers and describing Anthropic as among the most aggressive in scaling computing infrastructure. Macquarie upgraded AVGO to Outperform with a $490 target, estimating that Anthropic alone could purchase more than $40 billion of products from Broadcom in fiscal 2028.

Wall Street Divided

The bullish view is not universal. DA Davidson cut its price objective to $350 from $400 while keeping a Neutral rating, pointing to concerns around the guidance figures. RBC Capital maintained its $400 target with a Sector Perform rating, flagging component availability and infrastructure readiness as potential headwinds. RBC also noted that Broadcom trades at roughly 18.5 times projected 2027 earnings, a premium of more than 30% versus Nvidia after adjusting for stock-based compensation.

Evercore ISI trimmed its target to $578 from $582 while keeping an Outperform rating. TD Cowen lowered its target to $475 from $500 but retained a Buy recommendation. Morgan Stanley raised its target to $505 from $502, and Cantor Fitzgerald lifted its objective to $600 from $525.

At current levels, AVGO trades at around 34 times forward earnings — slightly below semiconductor sector peers but well above the S&P 500's 21 times multiple.

Truist Securities reduced its target to $520, citing a modest shortfall in software performance and an AI revenue forecast it viewed as slightly conservative relative to consensus. KeyBanc maintained its Overweight rating and $575 target, pointing to the raised fiscal 2027 AI revenue guidance.

Analyst price targets on the stock currently span from $350 (DA Davidson, Neutral) to $600 (Cantor Fitzgerald, Overweight). The wide dispersion — roughly a 70% gap between the low and high targets — underscores how much disagreement centers on whether Broadcom's multi-year AI projections are achievable, making the pace of custom XPU shipments and customer capacity buildouts the key metric to monitor in upcoming quarters.