Broadcom (AVGO) stock has plunged nearly 16% following its Q2 earnings. This is a surprising reaction for a company that just reported solid revenue growth, record AI semiconductor sales, and one of the strongest outlooks in the semiconductor industry. Investors were expecting another blockbuster report, and Broadcom delivered, so what went wrong?
The answer may have more to do with Wall Street’s expectations rather than the actual numbers. While investors focused on what Broadcom didn't do, they may have overlooked the most important number from the quarter. Broadcom’s massive backlog could be a compelling reason investors should pay attention to AVGO today.
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www.barchart.com Broadcom's AI Backlog Is Becoming Too Big to Ignore
In the second quarter of fiscal 2026, Broadcom’s revenue increased 48% year-over-year (YoY) to $22.2 billion, thanks to continued strength in AI semiconductors. Notably, the semiconductor segment generated $15 billion in revenue, an increase of 79% YoY. Within that segment, AI semiconductor revenue reached $10.8 billion, a staggering 143% increase from the prior-year period. But the most interesting fact was that Broadcom generated more than $30 billion in AI semiconductor bookings while shipping just $10.8 billion worth of AI products. That gap reveals that demand for Broadcom's AI solutions is arriving much faster than the company can currently deliver them. These bookings reflect that future growth remains firmly intact, presenting a compelling long-term bull case for AVGO stock.
One reason Broadcom's backlog continues to expand is due to its strong ties with some of the world's leading AI developers and cloud providers, including Alphabet's (GOOG) (GOOGL) Google, OpenAI, Anthropic, and Meta (META). It has recently signed a long-term partnership with Google to develop and deliver multiple generations of TPUs and AI networking solutions. Anthropic has already been granted access to more than 1 gigawatt of Broadcom TPU-based processing capacity until 2026.
Broadcom's relationship with Anthropic deepened in April when the two sides signed an agreement granting the AI startup another 5 gigawatts of next-generation TPU-based compute capacity starting in 2027. Broadcom also remains committed to delivering 1.3 gigawatts of compute capacity to OpenAI in 2027 under a larger 10-gigawatt arrangement that extends through 2029.
Meanwhile, under the agreement with Meta, Broadcom plans to deploy 3 gigawatts by the end of 2028. The company's remaining two AI customers are slated to begin shipments in late 2026 and ramp up throughout 2027. Broadcom has already received purchase orders worth $6 billion from these customers.
Is AVGO Stock a Buy Now?
Despite the market's reaction to the earnings, AVGO is up 16% year-to-date (YTD), outperforming the tech-heavy Nasdaq Composite’s ($NASX) gain of 13.5%. The recent selloff appears to be a disconnect between Wall Street's expectations and reality.
Investors expected management to release an even higher AI revenue prediction for the current quarter, potentially raising its already aggressive target of more than $100 billion in AI semiconductor revenue by fiscal 2027. Instead, Broadcom reiterated that target, predicting $16 billion in Q3 AI semiconductor revenue. This is still an exceptional forecast as it represents growth of more than 200% YoY.
Management even said that AI semiconductor revenue growth should continue into fiscal 2028. Very few companies can project that far into the future, and even fewer can justify it with signed contracts and multibillion-dollar purchase orders. But the market seems to have overlooked it. Furthermore, its massive backlog and deepening partnerships with Google, OpenAI, Anthropic, and Meta suggest demand remains significantly ahead of supply. All in all, Broadcom's long-term AI opportunity may be much larger than the current revenue numbers alone indicate.
Overall, analysts have a consensus "Strong Buy" rating on AVGO stock. Of the 42 analysts with coverage, 33 analysts have a “Strong Buy,” three have a “Moderate Buy” rating, and six recommend a “Hold.” Based on the average target price of $482.89, the stock has potential upside of 21% from current levels. Plus, the high price target of $630 suggests shares could climb by 58% over the next 12 months.
www.barchart.com On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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