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Financial data on TradingView ↗Reported statements, ratios and ownership, alongside this research.
Broadcom designs custom AI accelerators and Ethernet networking chips for hyperscalers including Google, Anthropic, OpenAI, and Meta, and sells VMware infrastructure software to enterprises. It is fabless, with manufacturing outsourced primarily to TSMC. [S2][S3][S7]
Semiconductor solutions (68% of Q2 FY2026 revenue) sells custom XPUs, Ethernet switching silicon, optical components, and wireless chips. Infrastructure software (32%) licenses VMware Cloud Foundation on subscription with 93% gross margins. [S7][S5]
Explore the research to see how business evidence informs assumptions and valuation.
Start with the business evidence, then follow the assumptions through to scenarios and valuation.
Financial data on TradingView ↗Reported statements, ratios and ownership, alongside this research.
Valuation and assumptionsBroadcom's AI revenue is growing 221% year over year with management targeting $230 billion by FY2028, but six customers drive the AI business and the top five account for roughly 50% of net revenue. The tension is between an enormous visible backlog and extreme customer concentration that makes the thesis binary on retention.
A major XPU customer diversifies to a second source. Google's Marvell deal, with warrants implying up to $120 billion in potential purchases, signals this risk. Losing one customer could remove $20-30 billion of annual revenue.
At $344.72, the market implies AI revenue reaching at least $180-200 billion by FY2029 with 60%+ operating margins, sustained customer retention, and no major margin dilution from XPU mix.
A valuation model that works backward from a share price to find combinations of growth, margins, and other assumptions consistent with that price.
In this report: The reverse DCF shows what AI revenue and margins the current $344.72 price implies, helping assess whether expectations are achievable.
AI semiconductor revenue trajectory: $16.7 billion in Q3 FY2026, guided to $21.7 billion in Q4 and $58 billion for FY2026. A 10% shortfall against FY2027 guidance reduces operating income by roughly $6.3 billion.
Gross margin trajectory: 75% in Q3 FY2026, guided to 73% in Q4 as XPU mix increases and memory content dilutes margins. Every 200 basis points is worth approximately $2.8 billion of annual gross profit.
The sensitivity of operating profit to changes in revenue when some operating costs are fixed.
In this report: Broadcom's R&D as a percentage of revenue is falling as AI revenue scales, allowing operating margin to expand even as gross margin compresses from XPU mix.
Management's AI revenue targets are largely achieved through FY2028, software grows mid-teens, gross margin stabilises at 65% as networking and software provide margin support, and operating margin settles at 55%.
Quarterly AI semiconductor revenue versus guidance ($16.7 billion in Q3 FY2026, guided $21.7 billion in Q4). Sequential growth above 10% supports the thesis; two consecutive quarters of sequential decline would weaken it.
Gross margin trajectory (75% in Q3, guided 73% in Q4). Stability above 70% would confirm margin resilience; a decline below 65% for two quarters would signal structural dilution.
The sensitivity of operating profit to changes in revenue when some operating costs are fixed.
In this report: Broadcom's R&D as a percentage of revenue is falling as AI revenue scales, allowing operating margin to expand even as gross margin compresses from XPU mix.
Stock-based compensation was not available in the platform-verified tables; I read it from cash-flow statements and estimated it at 2% of revenue. The precise revenue contribution from each individual XPU customer is not disclosed. The probability and timing of EU antitrust remedies are unknowable.
These model scenarios depend on their inputs. Review the assumptions and supporting evidence alongside the implied values.
earnings multiple v2 · as of 2026-10-18
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