All NewsJune 7, 2026

Bank of America resets Broadcom stock price target after earnings

Broadcom (AVGO) stock closed the June 4 trading session down 12.59% at $418.91. The stock took a tumble following the release of the second-quarter (Q2) fiscal year 2026 (FY26) earnings report on June 3, and lost about $280 billion in market value, according to Yahoo Finance.

The stock is up 21.04% year to date, as of Friday morning, June 5. Meanwhile, the SPDR S&P 500 index (SPY) is up about 11.02% in the same period.

The fabless semiconductor giant and enterprise software infrastructure vendor has outpaced the S&P 500, thanks to its participation in the broader semiconductor rally driven by the AI boom.

Positive news driving Broadcom’s stock includes:

Analysts have been resetting their price targets just before earnings, as the expectations were high. Now that the earnings have dropped, Bank of America has raised its price target.

Broadcom reported revenue of $22.2 billion, up 48% year over year.

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Key facts from Broadcom’s Q2 earnings report

Broadcom reported revenue of $22.2 billion, up 48% year over year (YoY). GAAP net income increased 88% to $9.3 billion.

Adjusted EBITDA was $15.2 billion or 69% of revenue.

During the earnings call, Broadcom CEO Hock Tan addressed the issue of declining gross margins: “As the proportion of AI revenue significantly grows in Q3, we expect Q3 consolidated gross margin to be down to approximately 74%. This decline in gross margin does not represent a structural change in semiconductor margin. Rather, it reflects product mix between semiconductors and infrastructure software.”

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What Tan was saying here is that AI revenue is growing much faster than that of infrastructure software. Infrastructure software is the revenue source with the higher margins, which is why margins are declining. Tan concluded that the company expects Q3 Non-GAAP operating margin to be 67%, flat quarter over quarter, thanks to its “strong operating leverage”.

Broadcom provided guidance for Q3:

  • Revenue of approximately $29.4 billion
  • Adjusted EBITDA of approximately 68% of revenue

On top of the expected decline in margins and a somewhat disappointing revenue outlook, some investors may have been spooked by something Tan admitted during the earnings call.

What he said was that, despite Broadcom’s strong partnership with Google, the company also accepts that Google might diversify its chip designs.

On the positive side, the company approved a quarterly cash dividend of $0.65 per share.

Bank of America raises Broadcom stock price target

In a research note shared with me, Bank of America analyst Vivek Arya and his team updated their opinion on Broadcom stock.

Analysts noted that while Broadcom’s Q2 FY26 results and Q3 outlook were only slightly above Wall Street expectations, the absolute AI growth is still expected to hit 180% YoY in FY26 and almost 100% YoY in FY27.

The team expects that Broadcom will achieve EPS of $30 or more by calendar-year 2030, with an approximately 40% compound annual EPS growth rate between 2025 and 2030.

Analysts raised EPS estimates for 2026, 2027, and 2028 to $11.60, $17.93, and $23.56, from $10.94, $17.05, and $23.21, respectively.

They noted that continued gross margin pressure will likely lead to a decrease beyond the Q3 outlook of 74.0%, toward the 72% to 73% range.

Arya reiterated a buy rating for Broadcom stock and raised the target price to $530 from $450, based on a 30x multiple of his calendar-year 2027 price-to-earnings estimate (which includes stock-based compensation).

Analysts noted downside risks for Broadcom:

  • Semiconductor cycle risks
  • High exposure to Apple and Google with potential design-out risks
  • Competitive risks in networking, smartphone, storage, and enterprise software markets
  • Frequent acquirer of assets, which increases financial and integration risks
  • Large $60 billion net debt

Related: 5-star analyst revamps Broadcom stock price target after earnings