Why we're raising our price target on Broadcom despite its post-earnings sell-off

Broadcom posted strong quarterly results after the bell on Wednesday, but didn't provide enough upside to its guidance to move the stock higher. Revenue in the fiscal second quarter of 2026, which ended May 3rd, was $22.19 billion, a slight miss versus the $22.27 billion consensus forecast, according to estimates compiled by LSEG. On an annual basis, revenue rose 48%. Adjusted earnings per share (EPS) increased 54% to $2.44, beating expectations of $2.40, LSEG data showed. Adjusted EBITDA grew 52% to $15.24 billion in the quarter, beating the FactSet consensus of $15.06 billion. A measure of operating profitability, EBTIDA is short for earnings before interest, taxes, depreciation, and amortization. Why we own it Broadcom is a high-quality semiconductor and software company run by an incredible CEO, Hock Tan. The company is a major beneficiary of AI through its networking and custom chip businesses. It also has a shareholder-friendly capital allocation strategy with its dividends and buybacks. Competitors : Marvell Technology, Advanced Micro Devices , and Nvidia Last buy : Nov. 21, 2024 Initiation date : Aug. 24, 2023 Bottom line Broadcom delivered a solid quarter, with continued momentum in its AI semiconductor business only partially offset by softness in infrastructure software. And while the company provided a positive outlook for the current quarter, the market was looking for even stronger AI revenue, sinking shares in the after-market. …