Broadcom (AVGO): Buy the Post-Q2 Dip
Daily Analysts · Published June 15, 2026 HIGH CONVICTION
The call: A +48% revenue quarter with AI up 143% lost ~$280B in market cap because management refused to raise a target it had already sand-bagged. That is a sentiment reset, not a fundamental crack. Accumulate $360–385, target $475 (6–12 mo), invalidation weekly close below $350.
Where it trades now
- Price ~$382 (Jun 12 close; AH $382.55). 52-week range $243.80–$495.00.
- YTD +10.4%, 1-month -8.9%, 1-year +49%. Market cap ~$1.8–1.9T.
- The stock ran ~15% into its June 3 print to an all-time high near $495, then dropped ~14% (worst earnings-day reaction in over a year) to the $373–397 zone and has chopped back to ~$382. You are buying ~23% off the high — but short-term momentum is broken.
The quarter (Q2 FY2026, reported June 3, 2026) — lead with guidance
| Metric | Result | Consensus |
|---|
| Revenue | $22.19B (+48% YoY) | $22.27B — slight MISS |
| Adj EPS | $2.44 (8th straight beat) | $2.40 |
| AI semiconductor rev | $10.8B (+143% YoY) | — |
| Infrastructure software | $7.18B (+9% YoY) | $7.32B — MISS |
| Net income | $9.31B (+88% YoY) | — |
| Free cash flow | $10.26B (46% of rev) | — |
| Q3 revenue guide | ~$29.4B | $28.53B — BEAT |
| Q3 AI revenue guide | ~$16B (+~200% YoY) | — |
| Q3 gross margin guide | ~74% (from 77.1%) | step-down on AI mix |
FY26 AI semiconductor revenue raised to ~$56B; FY27 reiterated ‘in excess of $100B’ — and crucially not raised.
Why a triple-digit-AI quarter lost ~$280B+ in market cap
(Fact) Despite a record ~$30B of AI bookings in the quarter (~3x shipments), ‘insatiable’ demand language, and visibility now through 2028, management did not raise the $100B FY27 AI target. A stock priced for perfection (~34x forward, ~64x trailing) got punished for an in-line-to-light print, the software miss, and the ~310bp gross-margin step-down. CEO Hock Tan also said Broadcom will sell ‘chips only’ rather than full integrated systems (margin-positive, revenue-per-deployment-negative). Backdrop didn’t help: a June AI-trade derisking (NVDA/AMD also down), US CPI back to 4.2%, and rate/oil pressure.
Three-scenario framework (probability weights = opinion)
Bull (35%): Q3 (early Sept) delivers the guided $16B AI quarter and FY27 is raised toward $60B+. Stock reclaims $475–500 and breaks out. Drivers: Google TPU ramp, Anthropic ($21B+ orders), Meta MTIA (deal extended to 2029), OpenAI XPUs ramping 2027–28, and the new $35B Broadcom/Apollo/Blackstone AI-infrastructure financing vehicle.
Base (50%): AI compounds, gross margin drifts to ~74% but operating leverage holds (XPUs gross-margin-dilutive, operating-margin-accretive via customer co-investment). Stock grinds $360–470 into Q3; re-rates only once FY27 numbers move. 12-mo path to ~$475.
Bear (20%): A hyperscaler capex wobble (Google/Meta/Microsoft) or AI-deployment/power delay hits the ~6-customer concentration. Margin compression plus a ‘great isn’t good enough’ tape sends it to $325 (Dec-2025 low) / 200-day.
Risks, quantified
- Customer concentration: ~6 names (Google, Meta, Anthropic, OpenAI +2) drive AI growth; one capex cut is a guidance event.
- Margin: each quarter of AI-mix shift trims gross margin ~100bp+ (77.1% → ~74% guided); bull case requires operating margin to hold.
- Valuation: forward P/S ~14.95x vs sector ~6.9x; Zacks Value Score D, rates it Hold/overvalued.
- Insider behavior: 108 insider transactions skewed to selling into the $345–399 range (partly pre-scheduled 10b5-1).
Street positioning
Overwhelmingly bullish post-drop: ~44 buys / 0 sells (~7 Strong Buy, 37 Buy, 4 Hold). Targets — Mizuho & BofA $530, Jefferies/Benchmark $500, UBS $475–485, consensus ~$490–523. Morningstar fair value $650 (calls the $100B FY27 target a ‘sandbag’; 4-star/undervalued). Dissent: Louis Navellier cut to Neutral; Zacks #3 Hold.
The suggestion
| Field | Level |
|---|
| Direction | LONG / accumulate |
| Conviction | HIGH (record bookings + Q3 AI guide +200% + ~44 analyst buys + Morningstar FV $650) |
| Entry zone | $360–385 (prefer adds toward $355–365 gap) |
| Target | $475 (6–12 mo); stretch $500+ if FY27 raised |
| Invalidation | Weekly close below $350 (opens $325 / 200-day) |
| Timeframe | 1–3 mo bounce; 6–12 mo target |
| Key catalyst | Q3 FY26 print (early Sept 2026) — must deliver guided $16B AI quarter |
Tactical caveat (opinion): momentum is broken; it needs to reclaim $400 to confirm the bounce. Between ~$355–400 this is accumulation, not a chase.
Sources: Broadcom Q2 FY2026 results · CNBC earnings report · Morningstar (FV $650) · Zacks. Not investment advice. Free readers stay free, always. Support: ko-fi.com/dailyanalysts