Broadcom Inc. (AVGO): what the price requires
At today's price, Broadcom Inc. (AVGO) is priced for today's economics sustained for ~8.5 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-13 · Source: https://boothcheck.com/report/AVGO
Headline
| Field | Value |
|---|---|
| Ticker | AVGO |
| Company | Broadcom Inc. |
| Current price | $385.93/sh |
| Composition | Products 70% / Subscriptions and services 30% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | segment |
| Must persist for | 8.5y |
Solve inputs: computed at a 11.2% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~5 years.
How unusual the bet is: high
| Reference | Value |
|---|---|
| cohort percentile (of 177 peers) | 93 |
| sustained it ~8.5 years at this level | 19% |
| implied end-window share | 0% |
Valuation X-Ray
Every valuation family lands below the price. The price therefore requires assumptions beyond what those standard frames encode.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 5.03x | 4 | expensive |
| Earnings | 6.14x | 5 | expensive |
| Relative | 3.93x | 5 | expensive |
| Growth | 1.29x | 3 | expensive |
Families that call it expensive: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.0%); the inversion above states its own rate.
Per-Model Detail (n=17)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $299.72 | 1.29x | yes | FCF base $37.8B, growth 25% (input: historical growth), terminal g 4.0%, WACC 9.0%, 7yr projection |
| DCF Exit Multiple | Growth | $443.27 | 0.87x | yes | Exit EV/EBITDA: 56.6x / 58.6x / 60.6x (bear / base = today's held flat / bull), 7yr |
| Relative Valuation | Relative | $215.79 | 1.79x | yes | P/E 35.2x (blended: sector 22x + trailing (TTM) 66x), scenarios: 28.2x / 35.2x / 42.2x (bear / base = sector held flat / bull), EV/EBITDA 28.79x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $63.21 | 6.11x | yes | BV/sh $17.98, ROE (TTM) 32.5%, ke 9.3% |
| Two-Stage Excess Return | Asset | $124.32 | 3.10x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $269.48 | 1.43x | yes | Rev $75.5B, growth 30% (input: historical growth; tapered), Terminal P/S: 9.6x / 12.0x / 14.4x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $70.13 | 5.50x | yes | EPS $5.84, growth 1% (input: historical EPS growth), PEG=47.09 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $30.75 | 12.55x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $19.27B × (1−8%) / WACC 9.0% → EPV (no growth) |
| Residual Income | Asset | $97.53 | 3.96x | yes | BV $17.98 + 5yr PV of (ROE (TTM) 32.5% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $48.63 | 7.94x | yes | √(22.5 × EPS $5.84 × BVPS $17.98) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $98.20 | 3.93x | yes | EBITDA $32.90B × sector EV/EBITDA 16.0x |
| FCF Yield | Earnings | $62.89 | 6.14x | yes | FCF $32762.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $43.41 | 8.89x | yes | SBC-adj FCF $23.98B (FCF $32.76B − SBC $8.79B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $188.57 | 2.05x | yes | EPS $5.84 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $14.70 | 26.25x | yes | BV $17.98 × (ROIC 7.3% / WACC 9.0%) (excluded from median) |
| P/Sales Sector | Relative | $77.38 | 4.99x | yes | Revenue $75.47B × sector P/S 5.0x |
| PEG Fair Value | Relative | $219.15 | 1.76x | yes | EPS $5.84 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $63.18 | 6.11x | yes | EPS $5.84 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $47.5b |
| Net debt / NOPAT (after-tax) | 1.66x |
| Net debt / operating income (pre-tax) | 1.53x |
| Interest coverage | 9.9x |
| Share count CAGR (dilution) | 3.6% |
| Burning cash | no |
Bullet Takeaways
At $411.98 (as of June 27, 2026) the semiconductor-solutions segment carries the priced-in premium, and the price implies operating growth held near its self-funding ceiling for about eight years. The multiple sits at the very top of the peer distribution, well beyond the upper quartile.
No valuation family reaches the price. Asset, earnings-power, peer, and even forward-growth frames all land below it, with the most generous applicable method, a DCF on 25% FCF growth, near $299. The price is a bet beyond what any standard frame supports.
The recent results are extraordinary and the guidance is bigger: Q2 fiscal 2026 AI semiconductor revenue of $10.8 billion grew 143% year over year, and management guides full-year 2026 AI revenue to roughly $56 billion and reiterates 2027 above $100 billion. The bet is whether that trajectory holds for the years the price requires.
Bull Case
Start with the bear's strongest claim: no valuation family reaches the price, so the stock is a bet beyond what any standard frame supports. That is true, and it is the right place to begin, because the question is whether the data justifies underwriting it anyway. The answer runs through the AI accelerator business.
The numbers are not subtle. Q2 fiscal 2026 total revenue was $22.2 billion, up 48% year over year, with semiconductor AI revenue of $10.8 billion up 143% and now roughly half of total revenue. Broadcom designs custom AI accelerators, the XPUs, plus the networking around them, for a concentrated set of hyperscaler clients that includes Anthropic, Google, Meta, and OpenAI. The FY2025 10-K describes a portfolio of semiconductor and semiconductor-based solutions incorporated into electronic products, modules, switches, and full racks, the system-level position that lets Broadcom capture the networking spend that travels with every accelerator deployment. Management guides Q3 AI revenue to roughly $16 billion, full-year 2026 to about $56 billion, and reiterates 2027 above $100 billion. The price needs about eight years of ceiling-rate growth, and the company is currently growing the relevant segment far faster than that.
The software side compounds the cash. Infrastructure software, the VMware franchise, delivered $7.18 billion in the quarter, up 9%, with VMware Cloud Foundation 9.1 driving strong on-premise private-cloud deployment for enterprise AI inferencing. The combined business throws off enormous free cash flow, roughly $33 billion trailing, and the products-plus-subscriptions mix means the AI hardware surge lands on top of a high-margin recurring software base rather than standing alone. If the custom-silicon roadmap and the hyperscaler relationships hold through the back half of the decade, the durability the price assumes is exactly what the order book is currently pointing at.
Bear Case
Begin with the balance sheet, because the AI growth story sits on top of $67.2 billion of gross debt. Net debt is roughly $47.5 billion against $19.6 billion of liquid assets, net-debt-to-operating-income runs about 1.5x, and interest coverage is around 10x. That is serviceable while AI revenue compounds at triple digits, but it is real leverage carried into a business whose growth is concentrated in a handful of customers. The VMware acquisition built much of that debt load, and the price assumes years of flawless execution to carry it.
The valuation is the second structural problem, and it is severe. No family reaches the price. Earnings power value lands near $31 against $412, the simple excess-return and FCF-yield marks sit in the $40s to $60s, the relative P/E mark is near $224, and even the most generous forward-growth method reaches only into the high $290s to high $460s. The price-to-fair-value multiples are extreme: earnings power at more than 13x, ROIC-justified book at 28x, FCF yield at more than 6x. When asset, earnings, peer, and forward-growth frames all fall below the quote, the premium is not leaning on one demanding methodology, it is beyond all of them at once.
Then there is concentration and cycle risk made concrete. The custom-accelerator revenue depends on a small group of hyperscalers, and the software segment already missed the quarter, coming in at $7.18 billion against the roughly $7.32 billion analysts expected. The priced-in assumption needs the lead segment to hold near its self-funding ceiling for about eight years, and history says only about 19% of comparable fast-growers sustained that pace that long. The multiple sits at the very top of the peer distribution, well beyond the upper quartile. If hyperscaler capital spending normalizes, if one large customer in-sources its silicon, or if AI accelerator pricing compresses as competition arrives, the segment carrying the entire premium re-rates, and a leveraged balance sheet leaves less room to absorb it.
Valuation
The cleanest read comes from inverting the price onto the segment that carries the premium. At $411.98 the semiconductor-solutions segment implies operating growth held near its 25% self-funding ceiling for about eight years, solved at an 11.3% cost of capital, where each one-point change in the assumed growth rate moves the implied horizon by roughly five years. That sensitivity is enormous: the price is almost entirely a wager on duration of growth. Against the sector the multiple sits at the very top of the peer distribution, well beyond the upper quartile, and against history only about 19% of comparable fast-growers sustained that pace for eight years.
The model X-ray confirms a uniformly demanding picture. Across roughly 18 applicable methods, every family lands below the price. The forward-growth methods are most generous, a perpetual-growth DCF near $299 on 25% FCF growth and a discounted future market cap near $269, but neither clears $412. Relative valuation lands near $224 on a blended P/E. The asset and earnings frames are far lower: earnings power value near $31, FCF yield near $63, SBC-adjusted FCF yield near $43 once the roughly $8.8 billion of stock-based compensation is netted out. No family of methods reaches the price: the friendliest, forward growth, defends a value about a quarter below the quote, and the earnings and asset lenses sit at four to seven times their standalone values.
The spread is the information. This is not a stock where the methods cluster and one is too conservative. Every standard frame is below the price, and the gap is widest on the earnings and asset floors. The price is not a judgment on whether Broadcom is an exceptional business, the cash flow and the AI franchise say it is. It is a measure of how much future has already been booked: most of a decade of ceiling-rate growth in the AI segment, on a balance sheet carrying VMware-scale debt.
Catalysts
The dominant catalyst is the AI semiconductor ramp and its guidance trajectory. Q2 fiscal 2026 AI semiconductor revenue hit $10.8 billion, up 143% year over year, and management guided Q3 AI revenue to roughly $16 billion (over 200% growth), full-year 2026 to about $56 billion, and reiterated 2027 above $100 billion. Each quarterly print against that steep curve is the single largest mover for the segment carrying the entire valuation premium.
Custom-silicon customer wins are the structural catalyst. Broadcom designs custom XPUs and networking for a concentrated group of hyperscalers including Anthropic, Google, Meta, and OpenAI, and the count and scale of those engagements drive the multi-year AI revenue path. Any new core customer, expansion of an existing one, or signal of in-sourcing is material.
The software side is the offsetting watch item. Infrastructure software came in at $7.18 billion, up 9%, but missed the roughly $7.32 billion analysts expected, even as VMware Cloud Foundation 9.1 drives strong on-premise private-cloud deployment. Watch the AI revenue prints against the guided curve, hyperscaler capital-spending commentary, VMware conversion and renewal economics, and any change in the competitive or pricing environment for custom accelerators.
Sources: PRNewswire and Broadcom investor relations (Q2 FY2026 results, $22.2B revenue up 48%, $10.8B AI revenue up 143%, dividend), CNBC and Motley Fool (Q2 FY2026 call: six core custom customers including Anthropic/Google/Meta/OpenAI, Q3 AI guide ~$16B, 2026 ~$56B, 2027 >$100B), heygotrade (software segment $7.18B vs $7.32B expected).
Peer Cohorts (Per Segment, With Filing Citations)
Semiconductor solutions (reported)
- NVDA (NVIDIA CORP)
- (no filing in the citation store)
- AMD (ADVANCED MICRO DEVICES INC)
- (no filing in the citation store)
- QCOM (QUALCOMM INC/DE)
- (no filing in the citation store)
Infrastructure software (reported)
- MSFT (MICROSOFT CORPORATION)
- (no filing in the citation store)
- ORCL (Oracle Corp)
- (no filing in the citation store)
- CRM (Salesforce, Inc.)
- (no filing in the citation store)
- ADBE (ADOBE INC.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.