Broadcom Stock Has Lost Nearly 40% From Its Record. I'd Buy It Now.

Broadcom (NASDAQ:AVGO) shares finished Nov. 5 at $291.53, their lowest close since August 2025. That put the chip designer's stock nearly 40% below the $481.57 record close it hit on June 2.

That day's 10% loss came as chip stocks sold off broadly. The PHLX Semiconductor Index slid around 12%.

But the business behind the stock has grown a lot since it last traded this low. Quarterly revenue has almost doubled, and non-GAAP (adjusted) earnings per share have more than doubled.

In late October, with shares near $342, I said I'd ease into Broadcom stock slowly. In early November, at about $335, I said I'd still consider buying. By the Nov. 5 close, the price was about 13% lower, and nothing the company has said since has cut its outlook. At this price, I'd buy the stock now, without waiting for the December report.

Image source: The Motley Fool.

A bigger business at the same price

When Broadcom shares last closed this low, on Aug. 21, 2025, its latest report covered the fiscal second quarter of 2025 (the period ended May 4, 2025). Revenue that quarter was $15.0 billion, and around $4.4 billion of it came from artificial intelligence (AI) semiconductors.

Broadcom's fiscal third quarter of 2026, which ended Aug. 2, pulled in $29.6 billion of revenue, up 86% from a year earlier and almost twice the fiscal Q2 2025 total. AI semiconductor revenue hit $16.7 billion, nearly four times as much. And free cash flow more than doubled in the same span, to $13.7 billion from $6.4 billion.

Profit growth has sped up, too. Adjusted earnings per share climbed 28% year over year in the first quarter of fiscal 2026. Growth then picked up to 54% in the second quarter and 96% in the third.

In the last four reported quarters, Broadcom's adjusted earnings per share total $9.76. This puts the stock's price-to-earnings ratio at around 30 on an adjusted basis. In August 2025, at almost the same share price, the ratio was about 50, based on the four quarters reported by then.

So today's buyer pays the August 2025 price for around 67% more adjusted earnings per share.

Broadcom's customers have big plans for 2027

For the fiscal fourth quarter, which ended Nov. 1, management forecast revenue of around $34.8 billion, a 93% rise year over year. AI semiconductors are expected to make up $21.7 billion of that.

CEO Hock Tan said on the company's early September earnings call that Broadcom has secured the supply to double AI semiconductor revenue again, to around $115 billion, for fiscal 2027. The fiscal year started Nov. 2.

Tan expects Anthropic to deploy another 5 gigawatts of computing capacity built on tensor processing units (TPUs), the AI chips Broadcom helps design, in 2027. OpenAI is on track to deploy 1.3 gigawatts of its first custom chip made with Broadcom that year.

Under a recent long-term deal with Alphabet's Google, "we are planning to deliver multi-tens of billions of dollars of TPUs annually over the next several years," Tan said.

Granted, this leaves much of Broadcom's future with a few very big customers. And their memory-heavy custom chips are cutting Broadcom's adjusted gross margin, which fell from 78% for the fiscal fourth quarter of 2025 to 75% for fiscal Q3 2026. Management expects around 73% for fiscal Q4. But it still sees its adjusted operating margin staying at about 66%, flat year over year.

Why not wait for December?

Broadcom said on the September call that it plans to report fiscal fourth-quarter results after the market closes on Wednesday, Dec. 9.

That report might settle less than it seems. Management said it doesn't intend to update its AI revenue outlook every quarter, so the key new figure could be a first-quarter forecast for fiscal 2027.

But the price already looks low against management's targets. Based on analysts' consensus estimate for fiscal 2027, the stock's forward price-to-earnings ratio is around 15. What's more, Tan said on that call that Broadcom is "very much on target to exceed $30 in earnings per share in fiscal 2028." At around $292, the shares cost under 10 times those fiscal 2028 earnings.

Still, is it worth waiting for Dec. 9?

Possibly. Sure, a soft first-quarter outlook may send the shares down after the report.

But for a company whose quarterly adjusted earnings per share almost doubled from a year ago, I think today's price is a fair starting point.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Broadcom. The Motley Fool has a disclosure policy.