UBS Reiterates Buy on Broadcom, $472 Price Target

UBS analyst Timothy Arcuri reiterated a Buy rating and $472 price target on Broadcom Limited (NASDAQ: AVGO).

“Amid very crowded investor positioning, AVGO put up solid results and guidance but some of the commentary on backlog and margins was muddled enough to potentially drive a “sell the news” dynamic in the near-term.

The biggest new developments this Q were follow on rack orders from Anthropic (using Google TPU) and new orders from a 5th customer (we think Softbank based on our channel checks), but still small, but there was not a whole lot here to drive big upward revisions to EPS given a new higher tax rate and how much Street numbers have risen in recent Qs.

Gross margin is becoming the biggest debate here as Anthropic is essentially doubling its rack shipment commitment (all of which is at lower margin because it includes some AVGO networking but otherwise a bunch of pass through revenue to Google, HBM, and other rack component suppliers).

The net of this is dilutive to both gross and operating margin, but should add margin dollars and we think still good business for AVGO as it helps Google expand its TPU platform.

Putting it all together, we still see AI revenue growing significantly in excess of 100% next year and getting close to this level again in 2027 and OpenAI is still on the come and not included in any of AVGO’s backlog numbers.

Net, we slightly increase estimates and PT remains $472 though the Street has broadly caught up to our view.”

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