Broadcom Q3 Earnings Preview: AI Revenue Growth Is Key, Wall Street's Highest Price Target at $630

TradingKey - AI custom chip giant Broadcom (AVGO) will release its third-quarter fiscal 2026 earnings report after market close on September 2, Eastern Time.

Looking back at its second-quarter fiscal results, Broadcom generated revenue of approximately $22.2 billion, up 48% year-over-year, beating analysts' expectations of $22.1 billion; Non-GAAP EPS came in at $2.44, also above the market expectation range of $2.39-$2.40.

Despite beating expectations, management maintained its original target of "over $100 billion in AI semiconductor revenue for fiscal 2027" rather than raising it above $130 billion as the market had expected, triggering a sell-off due to investor disappointment. On June 3, the stock touched an all-time high of $495 intraday, but after releasing its earnings post-market, it turned sharply downward the next day, closing down 12.6%.

The stock continued to weaken thereafter. As of the close on August 27, Broadcom closed at $371.54, pulling back approximately 23% from its all-time high.

[Source: TradingView]

Wall Street Expectations Match Company Guidance

Wall Street consensus expects revenue for the quarter to be approximately $29.4 billion, in line with the company's previous guidance and up 84% year-over-year. Non-GAAP earnings per share are expected to range from $3.22 to $3.24, up about 91% from $1.69 in the same period last year. Non-GAAP operating margin is projected to remain at 67%.

AI Semiconductor Revenue Growth Is the Key Focus

The most closely watched metric in this earnings report is the growth rate of AI semiconductor revenue. The company had previously guided AI semiconductor revenue for this quarter at approximately $16 billion, representing year-over-year growth of over 200% and accounting for more than half of total revenue. However, this guidance fell short of analysts' average expectation of $17 billion to $17.2 billion, which was one of the reasons for the stock price plunge in June. Whether the growth rate can remain at a high level depends on both supply and demand.

On the supply side, AI orders exceeded $30 billion in the second fiscal quarter, while actual shipments for the quarter were only $10.8 billion, with the order backlog providing support for revenue in subsequent quarters.

On the demand side, OpenAI and Broadcom jointly released a large language model-optimized inference processor in June; in July, Standard Chartered selected Broadcom infrastructure to build its global secure banking service system.

In addition, according to Bloomberg, Broadcom is negotiating a debt financing deal of over $60 billion for AI chips, aimed at providing hyperscale block compute supply to Anthropic, which could further expand its participation in AI infrastructure financing.

Wall Street Sees Up to $630, But Market Fears Shift in Competitive Landscape

According to TipRanks, as of August 27, the average price target among 28 analysts was approximately $508, implying an upside of about 36.74%, with price targets ranging from a low of $390 to a high of $630.

[Source: TipRanks]

Goldman Sachs (GS) maintained its "Buy" rating with a price target of $525, forecasting Broadcom's FY2027 AI revenue to reach $133 billion, 12% above consensus, believing the market has overstated the risks posed by competitors.

Bank of America raised its price target from $450 to $530 while maintaining a "Buy" rating, based on a valuation of 30x 2027 expected P/E.

In March 2026, Robert W. Baird analyst Tristan Gerra raised his price target from $420 to $630 while maintaining an "Outperform" rating, believing the market underappreciates Broadcom's AI growth potential and expecting FY2027 results to significantly beat current consensus expectations.

Notably, on August 19, Google (GOOGL) and Marvell (MRVL) reached a custom chip partnership under which Marvell will develop products such as AI inference accelerators for it. Marvell also issued warrants to Google with a corresponding value of about $12.2 billion, linked to up to $120 billion in procurement. The agreement directly threatens Broadcom's position as a core supplier for Google TPUs, sending Broadcom shares down by nearly 5% intraday that day.

Since then, several institutions, including BMO, have spoken out to alleviate market concerns over Broadcom's share erosion. Morgan Stanley (MS) noted in a report that Broadcom's TPU and networking partnership agreement with Google extends through 2031, suggesting the market underestimates their long-term relationship.

The market is currently focusing on the following risks:

If AI semiconductor revenue for the quarter falls short of the $16 billion guidance, or year-over-year growth drops below 200%, it could trigger another sell-off.

The partnership between Google and Marvell indicates that hyperscalers are seeking additional custom chip suppliers, which could weaken Broadcom's core position in Google's TPU program over the long term.

Summary

Overall, there is a high probability that Broadcom's revenue this quarter will meet or exceed its $29.4 billion guidance. However, the precedent from June shows that beating expectations alone is not enough to support the stock price.

The market's true focus lies in whether management will raise its FY2027 AI semiconductor revenue target beyond the previous phrasing of "over $100 billion," and whether the backlog can consistently translate into actual shipments.

If the company provides a clear signal of an upward revision in its earnings report on September 2, while competitive concerns stemming from the Google-Marvell agreement gradually fade, the stock price is expected to reclaim $400. If guidance maintains its original wording, even if this quarter's results meet targets, the stock price will still face pullback pressure.