Broadcom (AVGO), a powerhouse in semiconductors and infrastructure software, has long been a Wall Street favorite. It reignited investor enthusiasm with its strong first-quarter fiscal 2025 earnings results, driven by an aggressive forecast for custom AI chips and solid financials. The company has also announced two new application-specific integrated circuits (ASICs) design wins, expected to enter production in 2027, adding to its already impressive $60 billion to $90 billion total addressable market target. 

While these initiatives, combined with increased spending from cloud hyperscalers on networking, position Broadcom for sustained growth, the company is also working closely with two major hyperscalers to develop customized AI accelerators, further broadening its market reach. Analysts, including those from Mizuho, have responded favorably, calling AVGO a “must-own” stock for 2025, highlighting its key role in the AI revolution.

AVGO has surged over 30% in the past year, but the runway isn’t closing. With analysts eyeing double-digit gains ahead, the momentum is far from over. Let’s break down what’s driving the bullish outlook.

About Broadcom Stock

Headquartered in Palo Alto, California, Broadcom (AVGO) is a leading force in the semiconductor industry, recognized for its extensive range of products that span networking, broadband, and wireless communication. With a market cap of $842 billion, Broadcom also provides infrastructure software solutions that optimize IT operations. 

Recently, the company bolstered its software offerings by acquiring VMware, further solidifying its position in the tech sector. Over the past 52 weeks, AVGO's stock has soared by 30%. Following the company’s stronger-than-expected first-quarter earnings report, AVGO surged 8.6% in the subsequent trading session.

Investors seem confident in AVGO’s long-term potential, as reflected by its premium valuation. The stock trades at 33.4 times forward earnings and 17.2 times sales, well above the sector medians.

Broadcom Surpasses Q1 Earnings Estimates

On March 6, Broadcom reported its stellar fiscal Q1 results, topping analyst estimates. The company’s revenue for the quarter reached $14.92 billion, marking a 24.7% year-over-year surge. Investors were particularly impressed with Broadcom’s artificial intelligence (AI) revenue growth, which surged 77% to $4.1 billion, and a 46.7% increase in infrastructure software revenue, which climbed to $6.7 billion. Additionally, Broadcom’s semiconductor solutions segment saw a solid 11.1% increase in revenue, reaching $8.2 billion.

Broadcom also continued to deliver exceptional profitability, with an adjusted EBITDA of $10.1 billion, reflecting a 67% margin. On the bottom line, the company reported EPS of $1.60, surpassing analysts’ expectations of $1.51 and rising 45.5% annually. 

Looking ahead, Broadcom provided strong guidance for the second quarter of fiscal 2025, projecting consolidated revenue of $14.9 billion. Semiconductor revenue is expected to be around $8.4 billion, a 17% annual increase, while AI revenue is anticipated to rise by 44%, reaching $4.4 billion. Meanwhile infrastructure software revenue is also forecast to grow by 23%, totaling $6.5 billion. Broadcom expects a 66% adjusted EBITDA margin, indicating strong profitability in the upcoming quarter.

Analysts tracking Broadcom share the optimism. Projections indicate that fiscal 2025 second-quarter EPS could surge 52% year-over-year to $1.33. Meanwhile, for the full fiscal year 2025, EPS is expected to climb 52% from the prior year, reaching $5.64. Looking further ahead, fiscal 2026 EPS is anticipated to climb another 21% to $6.82. 

What Do Analysts Expect for Broadcom Stock?

Broadcom’s leadership in networking and custom silicon provides a significant advantage in the rapidly growing AI infrastructure market. Its strong R&D capabilities, solid reputation, and established customer relationships position it to sustain and grow its revenues in these key segments for many years to come.

Thanks to its strong earnings beat, expanding AI revenue, and dominance in crucial semiconductor areas, Mizuho analysts have named Broadcom a "must-own" AI stock. They anticipate the company’s earnings potential could drive its stock into the $240 to $250 range.

Overall, Wall Street appears highly bullish about AVGO stock, with a consensus “Strong Buy” rating. Of the 33 analysts covering the stock, 30 recommend a “Strong Buy,” while three suggest a “Hold.”

The average price target of $251.17 represents potential upside of 46%, while the Street-high target of $300 suggests that the stock can climb as much as 75% from the current price level.