Broadcom Limited (AVGO) PT Raised to $475 at UBS

UBS analyst Timothy Arcuri raised the price target on Broadcom Limited (NASDAQ: AVGO) to $475.00 (from $472.00) while maintaining a Buy rating.

The analyst comments "We hosted an in-person investor meeting on Friday (12/12) with AVGO's entire management team. Given the substantial pullback on Friday and the onslaught of investor Qs coming out of the quarter, we are again reminded how much of a consensus long the stock has become. Having said that, we emerged from our meeting with management feeling that Friday was a significant overreaction by the market and we are actually raising estimates given some of the commentary on AI semis revenue for F2026 (which we now think will be >$60B, or up nearly 3x Y/Y). Key takes from our meeting are as follows: 1) on the earnings call the company gave a $73B AI backlog number and indicated this covers a period of 18mos - the company was very clear during our meeting that this is extremely conservative and will actually ship in a period closer to 12mos; 2) total backlog grew ~50% Q/Q in FQ4 (Oct) but AI semis backlog more than doubled, meaning that if we exclude the new $11B from Anthropic, backlog went up $20-25B - this is essentially just Google and META and includes nothing yet for OpenAI; 3) AVGO believes that the $21B rack shipments to Anthropic are likely to spill into F2027 given readiness of the power shell and AVGO reiterated that this is the only rack customer in backlog with OpenAI (once it is added to backlog) being a traditional ASIC customer; 4) AVGO is not specifically guiding gross margin for this $21B of rack shipments, but did not push back on a 45-50% number and again reiterated that because of this, gross margin will be down in F2026 but OpM will be at least flat Y/Y (we model down 30bps in F26 vs F25). AVGO reiterated XPU GM of ~55% and AI Networking of ~80% - and suggesting that AVGO components in an AI rack will have a blended gross margin of ~60%, while pass-through components will likely push it lower to the 45-50% range for this $21B of revenue. Beyond the $21B shipping in F26 and start of F27, we view Anthropic's rack-scale orders as a one-time instance and believe the relationship will morph to more of a standard ASIC/XPU relationship over time; 5) Compared to a year ago, when AVGO estimated a three-customer XPU+Networking TAM of ~$60-90B in C2027 (and primarily based on Training workloads), the company now says these numbers are no longer valid with much larger with XPUs now benefiting from accelerated AI inference demand and the increasing trend of AI LLM labs capturing more of what AVGO expected to be the enterprise market (using GPUs) due to the complexity AI stacks and the pace of innovation. Ultimately, AVGO was confident it can deliver AI revenues above current Street expectations for F2026 and indicated it will beat any number that management has seen on the buy-side or sell-side. Net, we are raising our Revs ests for F27 to $135B (+2% above Consensus) and EPS to $14.15 (+1.7% above Consensus) as our PT increases from $472 to $475."

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