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Broadcom's Unchanged AI Outlook Likely Disappointed Investors, UBS Says

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Broadcom's Unchanged AI Outlook Likely Disappointed Investors, UBS Says

Broadcom's (AVGO) decision not to upgrade its 2027 artificial intelligence guidance apparently disappointed investors, especially as the chip designer reported strong semiconductor demand, UBS Securities said in a client note sent Thursday.

Broadcom continues to expect AI semiconductor revenue in excess of $100 billion for fiscal 2027, Chief Executive Hock Tan's said during an earnings conference call late Wednesday. For fiscal 2026, Broadcom expects the metric to increase about 180% over the previous year to $56 billion.

The company reported stronger-than-expected fiscal second-quarter results, with AI revenue more than doubling amid increased demand for custom accelerators and networking solutions. Broadcom saw bookings for its AI semiconductors exceeding $30 billion in the quarter, Tan told analysts, according to a FactSet transcript.

But shares of Broadcom plunged nearly 15% intraday Thursday, trimming its year-to-date gain to about 19%.

"Orders were very strong, but (Broadcom) didn't raise AI revenue for either (fiscal) 2026 or 2027, (disappointing especially when compared to peers), with the issue being mostly one of supply," UBS analysts Timothy Arcuri and Natalia Winkler wrote.

Broadcom's 2027 AI semiconductor revenue guidance is short of UBS' about $135 billion estimate, which the brokerage left unchanged.

"Ultimately, there is not a ton here to sway our view materially in either direction as new agreements continue to expand custom (application-specific integrated circuit) engagements," Arcuri and Winkler said.

The brokerage lowered its calendar year 2027 earnings per share estimate to $23.19 from $23.84, though total revenue is now projected at about $213 billion, compared with its prior forecast of $205 billion.

UBS reiterated its buy recommendation on the stock, while lowering the price target to $485 from $490.

Price: $408.43, Change: $-70.80, Percent Change: -14.77%

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