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UBS drops aggressive Broadcom stock price forecast

By Mwangi Enos TheStreet

Updated May 18, 2026 7:45 PM

Sometimes the most interesting analyst moves aren't the regular clean upgrades but the ones that look different. A good example is what we see in Broadcom. The analyst firm cut a number, raised a target, and somehow made the bull case stronger in the process.

UBS raised its price target on Broadcom (AVGO) to $490 from $475 while maintaining its Buy rating. That happened even after significantly reducing its Anthropic-related revenue estimates. The reason? The deal structure changed. And in doing so, it may have quietly improved the quality of Broadcom's AI revenue, not just the quantity.

Broadcom CEO Hock Tan had already set an aggressive tone in March. "Our AI revenue growth is accelerating," he said in a company statement, "and we expect AI semiconductor revenue to be $10.7 billion in Q2." That was before the Anthropic arrangement was restructured, and UBS still came away bullish.

The broader Wall Street consensus agrees. Analysts currently maintain a Strong Buy rating on AVGO with an average upside of 12% from current levels.

Why UBS cut Broadcom's Anthropic estimates but still raised the price target

The headline revision sounds alarming at first. UBS reduced its Anthropic contribution estimate to approximately $8 billion for calendar 2026 and $22 billion for calendar 2027, down from $21 billion and $23 billion, respectively, Investing.com confirms.

But here's the critical detail in my review of the data surfaces: the Anthropic order converted from full racks to a more standard application-specific integrated circuit (ASIC) arrangement. That new structure represents roughly 25% of the originally expected revenue, but carries significantly higher margins.

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In other words, Broadcom is doing less volume on the Anthropic deal and making more money per dollar of revenue it does recognize. For a company that already posted a gross profit margin of 77% over the last twelve months, according to UBS data, that's not a bad trade.

UBS also lowered its fiscal 2027 AI revenue estimate to $133 billion from $145 billion and trimmed fiscal 2027 earnings per share (EPS) slightly to $21.14. The price target still moved higher. That's a reflection of multiple expansion across the semiconductor peer group that UBS says supports a higher valuation despite the lower revenue numbers.

Broadcom is scheduled to report Q2 fiscal 2026 results on June 3, 2026, and expects AI semiconductor revenue to be $10.7 billion in Q2 2026.

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Broadcom's Q1 2026 results and what the Q2 guidance signals

Before the Anthropic restructuring became the story, Broadcom was already putting up remarkable numbers.

Q1 fiscal 2026 results, according to a company statement:

Revenue: $19.311 billion, up 29% year-over-year (YoY)
AI revenue: $8.4 billion, up 106% YoY, above the company's own forecast
Non-GAAP diluted EPS: $2.05
Free cash flow: $8.010 billion, or 41% of revenue
Adjusted EBITDA: $13.128 billion, or 68% of revenue

Source: Broadcom Inc. First Quarter Fiscal Year 2026 Financial Results

For Q2 fiscal 2026, Broadcom guided revenue of approximately $22.0 billion, up 47% YoY, with adjusted EBITDA again at approximately 68% of revenue, according to a company statement. AI semiconductor revenue alone is expected to reach $10.7 billion in Q2, according to Tan.

UBS models AI revenue of $13.6 billion for Q3, and expects Broadcom to guide Q2 revenue well ahead of Street estimates of approximately $22 billion. Broadcom is scheduled to report Q2 fiscal 2026 results on June 3, 2026, and expects AI semiconductor revenue to be $10.7 billion in Q2, according to their recent earnings statement.

The custom ASIC advantage that keeps Broadcom ahead of the competition

Broadcom's position in the AI chip market isn't accidental. The company is the leading supplier of custom ASICs - chips designed specifically for a single customer's workload rather than sold as general-purpose accelerators.

That matters because hyperscalers like Alphabet are building proprietary AI infrastructure at a scale that justifies custom silicon. Broadcom sits at the center of that buildout, combining customer intellectual property with its own to create highly integrated solutions on leading-edge process technology, according to company materials.

Recent developments further reinforce the competitive moat:

Broadcom partnered with AMD, Intel, Microsoft, Nvidia, and OpenAI to introduce the Multipath Reliable Connection protocol. That's an open standard aimed at eliminating network bottlenecks in AI training clusters.
TD Cowen raised its price target to $500 from $405, maintaining a Buy rating, citing potential for 30% or more quarter-over-quarter growth in the July quarter, driven by TPU and networking demand, according to TheStreet
Citi raised its target to $500 from $475, maintaining a Buy rating, according to TipRanks data

The free cash flow story adds another dimension. Broadcom generated more than $8 billion in free cash flow in Q1 alone. That was 41% of revenue. The company also announced a new $10 billion buyback alongside Q1 results and pays a quarterly dividend of $0.65 per share, according to Broadcom.

What the AVGO stock performance tells us about market conviction

As of writing, AVGO shares have returned 83.32% over the past year and 538.15% over three years, according to Yahoo Finance data as of May 18, 2026. The S&P 500 returned 23.54% and 75.34% over those same periods. Year-to-date, AVGO is up a solid 20.37%, though more measured than some of its semiconductor peers.

I also did the math on valuation. UBS's revised $490 target implies a price-to-earnings (P/E) multiple that remains reasonable relative to Broadcom's growth profile. The company's PEG ratio sits at 0.88, according to Nasdaq data. That figure suggests the market hasn't fully priced in the earnings growth trajectory even after a nearly 960% five-year return.

The Anthropic deal restructuring removed some headline revenue. But what it revealed about Broadcom's margin power and pricing discipline in the custom silicon market may matter more than the number that got cut. UBS, at least, seems to think so.

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This story was originally published May 18, 2026 at 7:37 PM.