UBS Boosts Broadcom Target to $490 Amid AI Deal Restructuring

UBS analyst Timothy Arcuri lifted his price target for Broadcom (AVGO) to $490 from $475, signalling a nearly 17% upside from current levels while keeping a Buy rating. The upgrade follows a strategic shift in the company’s AI partnership with Anthropic, moving from bespoke, full‑rack systems to a more standardized ASIC architecture.

Under the new structure, Broadcom will deliver fewer units for the Anthropic contract, but each dollar of revenue will be more profitable. For a firm that posted a trailing‑twelve‑month gross‑profit margin of 77%, the trade‑off between top‑line growth and margin expansion clearly favours the bottom line.

Arcuri now projects Anthropic‑related revenue of roughly $8 billion in 2026 and $22 billion in 2027, a steep revision from earlier estimates of $21 billion and $23 billion. The bulk of the cut is concentrated in the early ramp‑up phase of the partnership. Consequently, UBS trimmed its fiscal 2027 total AI‑revenue forecast for Broadcom to $133 billion from $145 billion and slightly lowered its fiscal 2027 EPS estimate to $21.14.

Broadcom’s latest earnings already highlighted its cash‑generation prowess. In fiscal Q1 2026, the company reported $19.31 billion in revenue, up 29% YoY, and AI revenue surged 106% YoY to $8.4 billion, exceeding internal forecasts. Non‑GAAP diluted EPS was $2.05, free cash flow hit $8.01 billion (41% of revenue), and adjusted EBITDA reached $13.13 billion, or 68% of revenue.

CEO Hock Tan set an aggressive tone in March, stating, “Our AI revenue growth is accelerating, and we expect AI semiconductor revenue to be $10.7 billion in Q2.” That guidance pre‑dated the Anthropic restructuring, yet UBS remains confident Broadcom will continue to beat expectations.

The firm expects Broadcom to guide fiscal Q2 revenue well above the consensus estimate of roughly $22 billion and forecasts AI‑related revenue of $13.6 billion for the fiscal Q3.

Broadcom is scheduled to report its fiscal second‑quarter results on June 3 2026.