Mizuho reiterates Outperform rating on Broadcom stock as AI mix shifts
Investing.com
Published Jul 09, 2025 07:25AM ET
Investing.com - Mizuho has reiterated an Outperform rating and $315.00 price target on Broadcom Limited (NASDAQ:AVGO), a semiconductor giant with a $1.28 trillion market cap and impressive 77% gross margins, following an investor call with the company's leadership team. According to InvestingPro data, the company is currently trading near its 52-week high with strong revenue growth of 34% over the last twelve months.
The research firm highlighted several key insights from discussions with Broadcom CEO Hock Tan, CFO Kirsten Spears, and IR Ji Yoo, noting that the Custom ASIC/XPU mix of the AI Accelerator market is expected to grow from approximately 40% in calendar year 2025 to 50% in 2026 and 60% in 2027. As an InvestingPro tip indicates, Broadcom maintains a prominent position in the Semiconductors & Semiconductor Equipment industry.
Scale-up deployments, currently representing a small percentage of AI networking mix, are projected to increase to over 20% in calendar year 2026 in GPUs and Custom ASIC, with Tomahawk6 enabling more than 100,000 XPU two-tier AI clusters at 200G/lane.
Mizuho also noted that SUE (Scale-Up Ethernet) is driving similar performance compared to NVLink, while Custom ASIC/XPUs are primarily focused on training, though customers are looking to expand into AI inference and external workloads as XPU deployment increases.
The firm expects Broadcom to achieve industry-leading fiscal 2026 gross margins of approximately 77% and operating margins of 66%, with potential free cash flow growth reaching approximately $39 billion annually by fiscal 2026.
In other recent news, Broadcom Inc. has been assigned a 'BBB' rating by Fitch Ratings for its proposed senior notes issue. The company plans to use the proceeds for various corporate purposes, including potential acquisitions, and Fitch highlighted Broadcom's strengthened financial flexibility due to strong demand for AI and VMware products. Mizuho maintained an Outperform rating for Broadcom, increasing its fiscal 2025 and 2026 revenue and earnings estimates, citing strong AI chip demand as a key driver. The firm also raised its price target to $315.
In product developments, Broadcom announced the release of VMware Cloud Foundation 9.0, which offers a consistent operating model for private cloud environments. Bernstein SocGen raised Broadcom's price target to $295, following a strong earnings report that showed robust performance in both semiconductor and software divisions. Analysts from the firm expressed confidence in Broadcom's AI segment, which is expected to drive significant growth.
Additionally, TD Cowen raised Broadcom's price target to $290, maintaining a Buy rating, and highlighted a projected 60% growth in AI for fiscal year 2026. This series of updates reflects Broadcom's ongoing growth in AI and its strategic integration of VMware products, as the company continues to show strong financial performance and promising future prospects.
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Written By: Investing.com
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