Broadcom’s AI-related revenue is on track to improve this year, and analysts expect an even stronger 2026.
The chip designer has a strong order book and the potential customers in its pipeline could exceed expectations.
A large majority of analysts covering Broadcom recommend buying the stock and expect it to rise further.
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Semiconductor stocks have been booming in 2025, evident from the fantastic 40% gain in the PHLX Semiconductor Sector index this year. Those impressive returns are not surprising, as the sector continues to benefit from aggressive spending on artificial intelligence (AI) applications.
Whether they are intended to be installed in data centers or smartphones, personal computers or factories, there is massive demand for high-end types of chips capable of handling heavy processing workloads, such as training large language models (LLMs) and running artificial intelligence applications such as chatbots, text and image generation tools, video creation tools and coding applications, among others. This explains why semiconductor market revenue is expected to increase by 10% in 2026 to $800 billion.
In particular, sales of AI chips are expected to grow at a much faster rate. Not surprisingly, analysts expect more profits from Broadcom(NASDAQ:AVGO) (one of the leading names in the AI ​​chip niche) next year. In fact, even after its 105% surge last year, most Wall Street analysts covering it recommend buying this semiconductor stock.
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Broadcom designs custom processors known as application-specific integrated circuits (ASICs) that are deployed in data centers, broadband networks, storage servers, and wireless devices. As the name suggests, these chips are designed to perform specific tasks. That specialization allows them to be more efficient in their tasks than general-purpose chips.
This nature of Broadcom’s custom processors has made them ideal for deployment in AI servers, where both computing power and energy efficiency are highly desired features. As a result, the company has witnessed notable growth in AI chip sales. In its fiscal year 2024 (which ended in November 2024), AI revenue grew a whopping 220% to $12.2 billion.
Broadcom has already generated $13.7 billion in AI revenue in the first three quarters of fiscal 2025. Its forecast for the current quarter suggests it will close fiscal 2025 with just under $20 billion in AI revenue. However, analysts project even greater growth on that front over the next few years. Morningstar expects Broadcom to double its AI revenue in fiscal 2026, followed by nearly identical growth in fiscal 2027.
The chipmaker has the potential to meet or even exceed those expectations, because its AI revenue pipeline is growing nicely. Broadcom has a three-year deal to ship 10 gigawatts (GW) of custom AI chips to OpenAI, and this deal could add a whopping $100 billion to the chip designer’s revenue.
Broadcom’s AI revenue could therefore grow at a much stronger pace once it begins rolling out those chips for OpenAI in the second half of 2026. What’s worth noting is that this isn’t the only major contract Broadcom has announced lately. It received a $10 billion order from a different client in September that it has not yet publicly named. These deals should boost Broadcom’s already impressive order book, which was worth a whopping $110 billion at the end of the last reported quarter.
Additionally, investors should note that Broadcom said it was developing custom chips for four potential customers earlier this year, in addition to the three customers it already had. It appears that the company has converted two of those potential customers into actual customers. Therefore, there is a chance that the company will post stronger growth next year if it can bring in the other two as well.
Broadcom shares have more than doubled in the last year. Still, 90% of the 50 analysts covering the stock rate it a buy. Its 12-month average price target of $400 points to a 13% jump from current levels.
This is impressive for a stock trading at 27 times sales, as Wall Street’s price target suggests Broadcom is able to justify its valuation. In fact, consensus estimates project a 35% increase in Broadcom’s revenue in fiscal 2026 to $85 billion, versus the 23% growth it is expected to post in fiscal 2025.
But the company could do better than that, as it has a strong revenue pipeline that has potential to expand further. Therefore, Broadcom could beat Wall Street’s price target in 2026 and deliver bigger gains to investors, which is why it’s not too late to buy this AI stock right now.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
1 Super Semiconductor Stock That Will Be Buyable in 2026, According to Wall Street was originally published by The Motley Fool
