Broadcom (NASDAQ: AVGO) Stock: Bernstein Raises Target as AI Revenue Surges
- Bullish Analyst Action: Bernstein maintained its “Outperform” rating on Broadcom (NASDAQ: AVGO) and raised its price target from $550 to $575 following the company’s fiscal third-quarter results.
- Record AI-Driven Growth: Broadcom reported record quarterly net revenue of $29.59 billion, up approximately 86% year over year, while AI semiconductor revenue surged 221% to $16.70 billion.
- Strong Cash Generation: Broadcom recorded non-GAAP operating income of $20.10 billion and generated $13.67 billion in free cash flow, although investors remained concerned about margins, competition, and customer concentration.
Bernstein maintained its “Outperform” rating on Broadcom (NASDAQ: AVGO) following the company’s fiscal third-quarter results. Analyst Stacy Rasgon raised the firm’s price target from $550 to $575, reflecting continued confidence in Broadcom’s position in custom AI accelerators and networking technology.
Broadcom is a global technology company that designs and supplies semiconductor and infrastructure-software solutions. Its products serve data centers, enterprise software, broadband, wireless, storage, networking, and industrial markets.
For its fiscal third quarter of 2026, Broadcom reported record net revenue of $29.59 billion, representing an increase of approximately 86% from the same period last year. Revenue also exceeded Wall Street estimates of approximately $29.24 billion.
Broadcom’s AI semiconductor revenue increased 221% year over year and 54% sequentially to $16.70 billion. This revenue category accounted for approximately 56% of total quarterly revenue. The result reflected strong demand for custom AI accelerators—also known as XPUs—and networking products used in large AI data centers.
The company’s broader semiconductor-solutions business generated $20.84 billion in revenue, up 127% year over year. Infrastructure-software revenue increased 29% to approximately $8.75 billion, supported by continued demand for Broadcom’s enterprise-software portfolio.
Broadcom also delivered substantial profitability growth. GAAP operating income increased 171% to approximately $15.96 billion, while non-GAAP operating income rose 92% to approximately $20.10 billion. The non-GAAP operating margin reached approximately 67.9%.
Free cash flow increased 95% year over year to approximately $13.67 billion, representing about 46% of revenue. Broadcom reported cash generated from operations of approximately $14.20 billion, less roughly $535 million in capital expenditures.
For the fiscal fourth quarter, Broadcom forecast revenue of approximately $34.80 billion, which would represent growth of about 93% year over year. The company also expects AI semiconductor revenue to reach $21.70 billion, an increase of approximately 236%.
Whether the revenue outlook exceeded or missed expectations depends on the consensus source. Reuters reported that analysts expected approximately $35.03 billion, making the guidance a modest shortfall. Other financial publications cited consensus estimates near $34.68 billion, which would place Broadcom’s forecast slightly above expectations.
Broadcom projected a fourth-quarter non-GAAP operating margin of approximately 66%, below the third quarter’s 67.9%. Management explained that the growing contribution from custom AI accelerators, which include substantial memory content, is affecting the company’s overall margin mix.
Despite Broadcom’s earnings and revenue beat, its shares declined following the announcement. The reaction reflected concerns about the expected margin decline, high investor expectations, financial commitments related to AI infrastructure, and the possibility that Google could shift part of its custom-chip business to another supplier.
Bernstein nevertheless maintained its bullish outlook and raised its price target to $575. The firm acknowledged concerns surrounding Google but indicated that growth from customers such as Anthropic and OpenAI could support Broadcom’s longer-term AI semiconductor expansion.
Overall, Broadcom’s fiscal third quarter demonstrated exceptional AI-driven revenue growth, expanding profitability, and strong free-cash-flow generation. However, the stock’s elevated expectations mean that future performance will depend on Broadcom sustaining its AI growth, protecting major customer relationships, and managing pressure on operating margins.
