On Friday, Mizuho (NYSE:MFG) Securities adjusted its outlook on Broadcom Limited (NASDAQ:AVGO), increasing the price target to $245 from the previous $220 while maintaining an Outperform rating on the stock. The semiconductor giant, now valued at over $843 billion, has seen its stock surge 68% over the past year and currently trades near its 52-week high. The adjustment follows Broadcom's reports for the October and January quarters, which were in line with expectations at $14.6 billion.
The company's strong revenue outlook for Artificial Intelligence (AI) by Fiscal Year 2027 is projected to reach a serviceable available market (SAM) of $60-90 billion, compared to the current $17.5 billion.
This represents a compound annual growth rate (CAGR) of over 60% from Fiscal Year 2024 to Fiscal Year 2027, with further potential upside as the company qualifies two additional cloud service providers (CSPs). According to InvestingPro data, Broadcom's robust growth trajectory is already evident in its 32% year-over-year revenue growth.
Broadcom's AI revenue is expected to continue its strong performance, with the January quarter's guidance at approximately $3.8 billion, a roughly 4% increase quarter over quarter. This growth trajectory suggests the possibility of exceeding $50 billion in revenue by Fiscal Year 2027.
Additionally, the January quarter guidance for the company's Storage, Broadband, and Networking segments indicates an upward trend, while the Wireless segment is projected to decrease by about 9% quarter over quarter due to iPhone seasonality.
The company is also making strides in technology advancements with its 3nm XPU expected to begin ramping up in the second half of Fiscal Year 2025, positioning Broadcom as the first to market with strong traction for its Jericho3AI fabric. In the software infrastructure sector, the January quarter is guided to increase by approximately 11% quarter over quarter to around $6.5 billion, with the VMware (NYSE:VMW) integration progressing ahead of schedule and the Annualized Recurring Revenue (ARR) increasing by 11% to more than $3 billion.
Broadcom's financial outlook is equally robust, with industry-leading gross margins (GM) and operating margins (OM) forecasted at 77% and 64% respectively for Fiscal Year 2025. The company's free cash flow (FCF) per year is anticipated to grow to approximately $30 billion by Fiscal Year 2025.
In light of these developments, Mizuho reaffirmed its Outperform rating and raised its estimates and price target for Broadcom Limited.
In other recent news, Broadcom Limited has seen significant upward revisions in their share target from several financial firms. Morgan Stanley (NYSE:MS) maintained its Overweight rating on Broadcom, increasing the stock's price target to $233.00, emphasizing the company's solid results and exposure to artificial intelligence (AI).
Similarly, BofA Securities, Deutsche Bank (ETR:DBKGn), and UBS have also increased their price targets, highlighting the company's growth in the custom-chip AI sector and the acquisition of two additional hyperscale customers for its XPU business. Evercore ISI has increased its price target from $201.00 to $250.00, underlining Broadcom's strong position in the custom AI chip market.
These recent developments reflect the company's strong performance and potential growth in the AI sector. The company's AI business, catering to three current hyperscale customers, estimates a serviceable available market (SAM) of approximately $60-90 billion by fiscal year 2027.
Analysts' outlook suggests a trajectory of approximately 15% sales growth and 20% EPS growth over the next three years for Broadcom, supported by a diversified base across both silicon and infrastructure software sectors.
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