Broadcom shares closed Nov. 5 at their lowest level since August 2025, nearly 40% below the June record. A Motley Fool analyst argues the business is much bigger than when shares last traded this low, while noting that much of its future rests with a few very big customers and that margins are falling.
Broadcom shares finished Nov. 5 at $291.53, their lowest close since August 2025. That put the chip designer's stock nearly 40% below the $481.57 record close it hit on June 2.
Motley Fool analyst Daniel Sparks says he would buy the stock now rather than wait for the company's December report. His case rests on how much the business has grown since shares last traded this low.
Quarterly revenue has almost doubled since August 2025
Broadcom last closed this low on Aug. 21, 2025. Its latest report then covered the fiscal second quarter of 2025, with revenue of $15.0 billion, around $4.4 billion of it from AI semiconductors.
The fiscal third quarter of 2026, which ended Aug. 2, brought in $29.6 billion, up 86% from a year earlier. AI semiconductor revenue reached $16.7 billion.
Free cash flow also rose to $13.7 billion from $6.4 billion over the same span.
Adjusted earnings per share climbed 96% in the third quarter, after growth of 28% in the first quarter and 54% in the second. Sparks puts the price-to-earnings ratio at around 30 on an adjusted basis, against about 50 in August 2025.
Management targets more AI growth in 2027
For the fiscal fourth quarter, management forecast revenue of around $34.8 billion, a 93% rise year over year. CEO Hock Tan said on the early September earnings call that Broadcom has secured the supply to double AI semiconductor revenue again, to around $115 billion, for fiscal 2027.
However, this leaves much of Broadcom's future with a few very big customers, and their memory-heavy custom chips are cutting Broadcom's margins. Adjusted gross margin fell from 78% to 75% between the fiscal fourth quarter of 2025 and fiscal Q3 2026, and management expects around 73% for fiscal Q4.
December report may settle less than it seems
Broadcom plans to report fiscal fourth-quarter results on Dec. 9 after the market closes. Management said it does not intend to update its AI revenue outlook every quarter, so the key new figure could be a first-quarter forecast for fiscal 2027.
Sparks concedes that a soft first-quarter outlook may send the shares down after the report.
Source: The Motley Fool
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