Broadcom (AVGO) Stock: Should You Buy Ahead of Wednesday's Earnings Report?

Key Takeaways

Table of Contents

Broadcom’s fiscal Q3 FY26 earnings arrive September 2, with analysts projecting EPS of $3.22, representing a 90.5% year-over-year surge
Wall Street forecasts revenue reaching $29.24 billion, marking an 83.3% annual increase
The company partnered with OpenAI to develop the Jalapeño inference chip, which demonstrated superior performance compared to Nvidia’s Blackwell chips during initial testing
Anthropic has committed to $21 billion in TPU orders through Broadcom, secured by a long-term partnership agreement
Analysts maintain a Strong Buy rating on AVGO with a consensus price target of $511, suggesting 37.5% potential upside

As Broadcom approaches its fiscal third-quarter earnings announcement scheduled for September 2, investor sentiment remains decidedly positive. AVGO stock was changing hands near $371.54 in pre-earnings trading, posting a daily gain of 4.49%.

Broadcom Inc., AVGO

Wall Street consensus calls for earnings per share to reach $3.22, representing a remarkable 90.5% increase compared to the same period last year. On the top line, revenue projections stand at $29.24 billion, reflecting 83.3% growth year-over-year.

Susquehanna’s Christopher Rolland maintained his Buy recommendation with a $490 price objective. His outlook anticipates a “generally in-line-to-slightly-positive quarter,” powered primarily by AI networking infrastructure and enterprise software segments.

Rolland noted that supply limitations on cutting-edge process nodes could cap immediate gains in AI processor revenues. Despite this headwind, he maintains an optimistic stance on Broadcom’s custom silicon division.

The consensus among Wall Street analysts supports this bullish perspective. AVGO enjoys a Strong Buy rating based on 24 Buy recommendations and three Hold ratings. The mean price objective of $511 suggests approximately 37.5% appreciation potential from current trading levels.

Custom TPU Business Powers Revenue Expansion

The primary catalyst for Broadcom’s growth trajectory remains its custom artificial intelligence processors built in collaboration with Alphabet, branded as Tensor Processing Units. Alphabet has expanded its capital expenditure allocation to a range of $195 billion to $205 billion, with intentions to increase spending further in the coming year.

Anthropic has committed to $21 billion worth of TPU procurement through Broadcom, formalized through a multi-year partnership framework. Under this arrangement, Broadcom recognizes chip sales revenue while Alphabet earns licensing income.

The company maintains its position as Alphabet’s principal partner for its premier training processors, ensuring a stable revenue stream from this critical relationship.

Expanding beyond TPUs, Broadcom recently collaborated with OpenAI on developing the Jalapeño inference processor. Preliminary benchmarks showed this chip delivering better performance than Nvidia’s Blackwell architecture and existing TPUs. OpenAI intends to integrate Jalapeño into its infrastructure before the current year concludes.

Strategic HBM Partnerships and Optical Networking Strengthen Position

Broadcom has finalized a $200 billion arrangement with Samsung Electronics covering high-bandwidth memory supply, chip fabrication, and sophisticated packaging services extending through 2030. Additionally, the company has guaranteed access to advanced manufacturing nodes through Taiwan Semiconductor Manufacturing.

Securing HBM supply represents a significant strategic moat. Nvidia has allocated substantial SK Hynix production capacity, AMD has partnered with Samsung for its requirements, and Micron’s HBM manufacturing represents approximately one-third of Korean competitors’ output. Market entry barriers for new participants remain substantial.

The company also maintains leadership in optical networking solutions, experiencing rapid adoption within AI-focused data centers. Broadcom dominates in optical digital signal processors and co-packaged optics technology, embedding optical transceivers directly into its custom silicon designs.

Trading at a forward price-to-earnings ratio near 18 based on fiscal 2027 projections, the valuation appears attractive relative to anticipated growth trajectories.

Public institutions and retail investors collectively control 33.13% of AVGO shares. Vanguard represents the largest institutional shareholder with an 8.71% position.

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