Goldman Sachs has told clients to be aggressive buyers of Broadcom Inc (NASDAQ:AVGO, XETRA:1YD) on any share price weakness following the US chipmaker's second-quarter results.
In doing so, it argued that the modest near-term disappointment relative to elevated expectations masks an exceptionally strong medium-term AI revenue trajectory.
The bank maintained its buy rating on Broadcom (Nasdaq: AVGO) and raised its 12-month price target to $525 from $500, applying an unchanged multiple of 30 times its normalised earnings per share estimate of $17.50, which it lifted from $17.00.
Broadcom reported second-quarter revenue of $22.2 billion, in line with both Goldman's estimate and the Wall Street consensus. AI semiconductor revenue grew 143% year on year to $10.8 billion. Gross margin of 77.1% and operating margin of 67.3% were both broadly in line with or ahead of expectations.
The near-term friction comes from third-quarter AI semiconductor guidance of $16.0 billion, which fell short of Goldman's $17.4 billion estimate and the Street's $16.4 billion, though total revenue guidance of $29.4 billion came in well ahead of the consensus at $28.2 billion.
Goldman attributed the AI shortfall to a modest delay in the ramp of newer customers rather than any deterioration in demand fundamentals, and said its confidence in Broadcom's 2027 and beyond growth trajectory rests on several concrete developments.
Most significantly, Broadcom maintained its expectation that AI semiconductor revenue in its financial year 2027 will be significantly in excess of $100 billion, spanning up to 10 gigawatts of data centre deployments, with further substantial growth expected in 2028 off that elevated base.
The bank's revised AI semiconductor revenue estimates stand at $57 billion for financial year 2026, $133 billion for 2027, and $193 billion for 2028.
Management also provided expanded detail on its custom silicon customer base, which now comprises six engagements, including Google, Meta, Anthropic, OpenAI, and two further undisclosed customers, with $6 billion of purchase orders already secured.
Anthropic is already ramping its initial gigawatt of capacity, with an additional 5 gigawatts expected to begin deploying in financial year 2027.
Meta's custom accelerator programme is set to deliver 1 gigawatt in the second half of 2027 with 3 gigawatts shipped by end of 2028. OpenAI's programme is expected to deliver initial product in financial year 2026 and 1.3 gigawatts in 2027.
Goldman also highlighted Broadcom's confirmation that it has secured all component supply needed to support its revenue forecast through financial year 2027, spanning memory, lasers and packaging, at a time when supply chain constraints are tightening across the broader semiconductor industry.
Infrastructure software revenue of $7.2 billion was in line with expectations, with the company flagging 31% year-on-year growth in VMware Cloud for Enterprise renewals expected in the third quarter.
The bank described Broadcom's leadership in AI networking and custom silicon as enabling the lowest inference cost for key hyperscaler customers, placing it on a trajectory it sees as comparable to market leader Nvidia, which Goldman also rates as a buy.