Broadcom Looks Expensive Until You Price The Order Book

What looks like a valuation argument is really a delivery schedule with named customers attached, plus one assumption about margins.

Broadcom (AVGO) trades near $355.59 a share, about 46.3 times the last twelve months of adjusted earnings. That is the number that gets it called expensive and the least useful one. The bull case rests on earnings that have not arrived and on chips management has already agreed to deliver.

Why The Trailing Multiple Is Not The One To Use

On the earnings analysts expect for fiscal 2026, today’s price is about 29.4 times. On what they expect for fiscal 2027, it is about 17.6 times. Those two share a basis, so that decline is the honest one. The step down from 46.3 times is not: that figure is adjusted differently from the consensus ones, and for a company built by acquisition the difference can be most of the gap.

What Has To Ship For Fiscal 2027 To Look Like That

Revenue grew 32.3% over the past twelve months. The ramp expected from here has dates on it. Management guided fiscal Q3 2026 revenue up 84% year over year, with results due September 2, and expects AI semiconductor revenue of $56 billion in fiscal 2026, rising above $100 billion in fiscal 2027, against $75.47 billion of company revenue over the trailing twelve months.

Those dates sit with a short list of buyers: 1.3 contracted gigawatts for OpenAI in 2027, MTIA X accelerators for Meta, more than a gigawatt of TPU compute for one frontier-model lab in 2026 and five more gigawatts from 2027, and multiple generations of TPUs for another core customer. Fiscal Q2 2026 AI semiconductor bookings ran over $30 billion against $10.8 billion shipped. Owning Broadcom’s customer concentration is a different proposition from the Trefis High Quality Portfolio, which does not depend on the handful of largest technology names to produce its returns.

The Margin Assumption Is The Part Worth Arguing With

Consensus is not assuming margin expansion: earnings and revenue grow at a similar pace between the two forecast years, so margins simply hold. That is the modest assumption, and still the likeliest to break: the mix delivering the revenue is the cheaper one. The CFO has said the ASICs and TPUs behind the ramp carry lower margins, that the pressure grows as TPUs accelerate, and that AI networking’s richer margins offset it somewhat. Management guided fiscal Q3 2026 gross margin down to roughly 74% on a growing AI share of revenue, while holding non-GAAP operating margin near 67%.

Buying The Schedule, Not A Cheap Company

The market has already marked much of this down: the stock is up 21.7% over the past twelve months but has given back 15.6% over the past three months, and sits about 26% below its 52-week high. If margins hold and the multiple settles near 23.5 times fiscal 2027 earnings, halfway between the two consensus multiples, the shares would be worth about $475, some 33% above today’s price. That needs the market to keep paying above 17.6 times; at 17.6 the price merely proves not to have been an overpayment. If the ramp slips, past market shocks have taken as much as 47% off peak to trough, and the twenty-eight estimates behind fiscal 2027 run from $16.6 to $22.87 a share. You are buying a schedule, not a cheap company: the judgment facing other stocks the market has already sold down hard.

What A Stock Is Worth And How Much To Own Are Different Questions

Valuation says what a stock might be worth, it says nothing about how much of your wealth should ride on it. Concentration tends to arrive by accident rather than by decision. What your largest position would do to your net worth is exactly what the Trefis Wealth team computes, with the same rules-based systematic discipline that runs our High Quality Portfolio. Request a free vulnerability audit of your biggest positions.