Broadcom's stock has surged over 66% year-to-date, nearing a remarkable $2 trillion market valuation — a testament to its resilient momentum in the market.

Yet, such success comes with heightened scrutiny. Goldman Sachs analyst James Schneider has raised his price target for Broadcom’s stock, reaffirming his buy rating and underlining the company’s pivotal role as a key “arms dealer” in the AI revolution.

However, Schneider emphasized that expectations for Broadcom’s fourth-quarter results are extraordinarily high. Investors are anticipating not only a strong earnings beat but also upward revisions for future guidance, bolstered by fiscal 2026 AI revenue projections that exceed $11 billion.

Schneider acknowledged that while Broadcom is emerging as a leader in the AI hardware race, the stock faces significant challenges. With such a high level of performance already priced in, even impressive results may underwhelm investor expectations.

A Strategic Bet on Broadcom’s AI Potential

Goldman Sachs increased Broadcom’s price target by 14.5%, from $380 to $435, as it heads into the fourth quarter with a strong operational setup. Schneider’s analysis highlights three key factors investors are closely monitoring: AI revenue guidance for FY 2026, the contributions of sales to major players like Google and OpenAI, and the company's ability to sustain its robust profit margins as its custom XPU business expands rapidly.

Additionally, the analyst noted the elevated expectations built upon Broadcom's strong performance relative to peers, including Google’s recent launch of Gemini 3, which relies heavily on Broadcom-designed TPUs. Despite its substantial climb, the stock now trades at over 28-times forward sales and 55-times forward cash flows, reflecting its high valuation.

Goldman Sachs views Broadcom not merely as a beneficiary of AI investment sentiment but as a critical enabler of the technological infrastructure supporting the wider AI ecosystem.

Broadcom’s High-Stakes Q4 Earnings Outlook

Broadcom is entering the fourth quarter with analyst consensus suggesting earnings per share (EPS) of approximately $1.87 on expected revenue of $17.0–$17.4 billion. The company’s own guidance of $17.4 billion places it at the higher end of estimates. A standout performer remains the company’s burgeoning AI semiconductor division, projected to generate $6.2 billion in Q4 revenues — a 66% annual growth — now accounting for more than one-third of Broadcom’s total sales.

Infrastructure software, led by VMware, is expected to contribute $6.7 billion, reflecting a steady 15% growth year-on-year. Meanwhile, with a record $110 billion order backlog and a new “fourth major AI customer” placing over $10 billion in orders, Broadcom's solid foundation extends well beyond 2023.

Google & OpenAI: Broadcom’s Unseen Advantage in XPU/TPU Development

Broadcom's leadership in AI lies in its role as the engineering backbone for hyperscalers, enabling technological advancements at companies like Google and OpenAI. Broadcom serves as Google’s preferred design partner for custom AI accelerators, known as XPUs, which now represent a staggering 65% of the company’s AI-related revenue.

Google, a major contributor to this growth, collaborates with Broadcom to design and manufacture custom chips powering its Tensor Processing Units (TPUs). These advanced TPUs drive AI workloads, including the new Gemini models, further cementing Broadcom's position in the market. According to a Reuters report, Meta Platforms may begin adopting Google’s TPU designs as early as 2026–27, a development that could further boost Broadcom’s trajectory.

OpenAI provides another growth lever, as it reportedly collaborates with Broadcom on high-performance custom accelerators. By FY26, OpenAI is expected to play a significant role in Broadcom’s revenue stream, making these partnerships crucial for future growth. If Google and OpenAI accelerate the adoption of custom silicon faster than anticipated, Broadcom could quietly gain market share in the AI space, challenging the dominance of NVIDIA in the process.