After Earnings, Is Broadcom Stock a Buy, a Sell, or Fairly Valued?

Broadcom released its fiscal fourth-quarter earnings report on Dec. 11. Here’s Morningstar’s take on Broadcom’s earnings and stock.

Key Morningstar Metrics for Broadcom

• Fair Value Estimate: $480.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

What We Thought of Broadcom’s Fiscal Q4 Earnings

Broadcom posted strong fiscal fourth-quarter results above guidance. Guidance for January-quarter artificial intelligence revenue was impressive, as was a new $11 billion AI chip order from Anthropic for the second half of 2026, and the announcement of a new custom AI chip customer in 2026.

Why it matters: Broadcom’s AI chip business is accelerating, and we project even greater astronomic growth over the next two years. We see phenomenal demand for Google’s TPU chip, layering in of new customers, and big incremental orders from existing customers driving immense demand.

• Google is the firm’s lead AI customer, and the latest generation of its TPU chip exhibits superb performance that is driving significant orders. The TPU is no longer exclusively internal to Google—we now expect significant orders from Anthropic and Meta for these chips and systems.
• Anthropic will accrue revenue in the second half of fiscal 2026, with $21 billion in wholly incremental orders. Broadcom’s brand new customer adds $1 billion in incremental revenue in fiscal 2026. In 2027, we expect OpenAI to supplement the firm’s existing five customers.

The bottom line: We raise our fair value estimate for wide-moat Broadcom to $480 per share from $365, behind a significantly stronger AI chip growth forecast. We see a selloff as missing the forest for the trees. Investors now have a terrific opportunity to buy into an AI winner.

• We attribute the selloff to commentary on gross margin dilution from AI chips. We aren’t concerned with this, given that these chips are operating-margin-accretive. The firm’s AI backlog might’ve missed investor targets too, but we see upside to this and view it highly positively.
• We now expect an even larger surge in second-half fiscal 2026 revenue behind the second Anthropic order. We forecast total AI chip revenue to far more than double in fiscal 2026, and see significant momentum continuing into 2027.

Fair Value Estimate for Broadcom Stock

With its 4-star rating, we believe Broadcom’s stock is moderately undervalued compared with our long-term fair value estimate of $480 per share, which implies fiscal 2026 (ending October 2026) and fiscal 2027 adjusted price/earnings multiples of 45 times and 31 times, respectively, and a fiscal 2026 enterprise value/sales multiple of 23 times. In our view, Broadcom’s primary valuation driver is the rapid growth of its AI chip business, which supports such high multiples.

Read more about Broadcom’s fair value estimate.

Economic Moat Rating

We believe Broadcom holds a wide economic moat, stemming from intangible assets in chip design and switching costs for its software products. Strength in both chips and software allows the company to earn terrific accounting and economic profits, and we believe its competitive positioning will allow it to do so, more likely than not, for the next 20 years. While we see most of Broadcom’s businesses as moaty in isolation, we believe its ability to aggregate disparate businesses via acquisitions and run them with terrific efficiency reinforces its wide moat. We see this wide moat evidenced in impressive operating and economic profit margins.

Read more about Broadcom’s economic moat.

Financial Strength

We anticipate Broadcom will focus on strong cash generation. Over the short term, we expect the firm to focus on paying down debt taken out to acquire VMware. Over the long term, we expect the focus to be on increasing the dividend and bolting on more acquisitions by which to add to cash flow. As of October 2025, Broadcom held $16 billion in cash and equivalents versus $65 billion in gross debt, with approximately half of that taken on to finance the 2023 acquisition of VMware.

We don’t worry about the firm’s debt load, given the long-dated nature of its outstanding notes and its robust cash generation. After the gross debt/adjusted EBITDA ratio rose to 3.5 times after closing on VMware, the firm exited fiscal 2025 with that figure down to 1.5 times. We see it as appropriately deleveraged exiting fiscal 2025 to begin considering further acquisitions, but anticipate a focus on debt reduction and share buybacks in fiscal 2026. Broadcom consistently generates free cash flow margins above 40%, which we expect to continue. Over the last five years, it’s averaged nearly $20 billion in cash flow annually. We project free cash flow rising past $50 billion annually by fiscal 2027.

Read more about Broadcom’s financial strength.

Risk and Uncertainty

We assign a High Uncertainty Rating to Broadcom. As a chipmaker, Broadcom is vulnerable to market supply and demand cycles. Though it has been able to offset cyclicality in recent years with its software exposure and networking strength as a buoy, future cycles may not look similar. It also operates with a high reliance on Taiwan Semiconductor Manufacturing for its chip supply, and supply constraints could hamper its ability to ship to customers. Nonetheless, we believe Broadcom is a preferred customer of Taiwan Semiconductor and that it would earn high priority in such a scenario, both for its scale and their lengthy relationship.

Read more about Broadcom’s risk and uncertainty.

AVGO Bulls Say

• Broadcom is an exemplar of operating efficiency. It earns excellent operating margins and generates enormous cash flow. It is particularly strong at acquiring companies and trimming excess expenses.
• Broadcom’s networking and wireless chip businesses boast best-of-breed technologies, in our view, along with marquee customer relationships with Apple, Google, Cisco, Arista, and others.
• We believe Broadcom will be a significant beneficiary of rising AI spending, which we expect to spur significant growth for its networking semiconductor sales.

AVGO Bears Say

• Broadcom’s chip business bears significant customer concentration, with a small handful of large AI customers driving the bulk of revenue and future growth.
• Broadcom’s software portfolio holds legacy and mature businesses, like virtualization and mainframes, which we think will exhibit moderating growth.
• Broadcom relies heavily on acquisitions to expand its portfolio and may struggle to find deals large enough to move the needle that can pass antitrust scrutiny.

This article was compiled by Frank Lee.