UBS Raises Broadcom PT to $345, Maintains Buy Rating

UBS Raises Broadcom PT to $345, Maintains Buy Rating

UBS Group AG has recently upgraded Broadcom (AVGO) to a "Buy" rating and raised its price target to $345, reflecting a bullish outlook on the company's prospects. The upgrade comes amidst strong financial performance and growth prospects in the AI and infrastructure software sectors [1].

In the second quarter of 2025, Broadcom reported a 20% year-over-year increase in revenue, hitting $15 billion, with AI-related revenue surging to $4.4 billion, a 46% jump [1]. The company's gross margin remained robust at 64%, providing flexibility for buybacks and dividends. CEO Hock Tan's guidance for $5.1 billion in AI revenue for Q3 2025 further highlights the company's leadership in AI and infrastructure software [1].

The upgrade by UBS follows a series of positive developments, including the integration of VMware, which has been a standout performer with a 25% YoY revenue increase in Q2 2025 [1]. This synergy between Broadcom's semiconductor expertise and VMware's software leadership creates a dual-engine growth model, insulating the company from sector-specific headwinds.

Despite the premium valuation, with a forward P/E of 44.87 and a PEG ratio of 1.8, UBS's positive outlook is supported by the company's strong fundamentals and long-term growth prospects in the AI semiconductor market [1]. The company is positioned to capture a growing share of the $150 billion AI semiconductor market by 2029 [1].

Key catalysts for Broadcom include its upcoming earnings report on September 4, 2025, and the $7 billion in shareholder returns planned for Q2 2025 [1]. The company's strategic partnerships with major cloud providers and hyperscalers for custom AI accelerators further bolster its growth prospects.

In conclusion, UBS's upgrade and raised price target reflect a balanced view of Broadcom's prospects, acknowledging both its growth potential and the risks associated with the sector. For investors with a multi-year horizon, the current volatility presents an opportunity to enter ahead of key catalysts, including the September earnings report and continued AI infrastructure adoption.

References:
[1] https://www.ainvest.com/news/broadcom-avgo-outperformed-broader-market-means-future-earnings-growth-2508/