Macquarie cuts Broadcom to Neutral, target to $437 on rising Google AI chip insourcing risk

 

Macquarie downgrades Broadcom to Neutral, cuts price target to $437 on rising Google AI chip insourcing risk

• Macquarie cites risk Google reduces reliance on Broadcom AI chips via in-house development and MediaTek partnerships.
• Broadcom reported a record AI-driven Q2 2026, underscoring unprecedented demand for its AI semiconductor products.
• Following Q2 results, several big banks raised Broadcom price targets, reflecting optimism about its expanded AI revenue outlook.
• Key Results: Q2 revenue $22.2B, +48% YoY, driven by AI semiconductors strength.
• AI Semis: Q2 AI semiconductor revenue $10.8B, +143% YoY, above prior company outlook.
• Backlog: Q2 AI semiconductor bookings exceeded $30B versus $10.8B shipped, extending visibility into 2028.
• Guidance: Q3 revenue guided to $29.4B, +84% YoY; operating margin ~67% remains stable.
• AI Outlook: 2026 AI semi revenue now expected at $56B, ~+180% YoY; 2027 still >$100B.
• Software: Infrastructure software revenue $7.2B, +9% YoY; ARR up 17% YoY; Q3 guide +31% YoY.
• Margins: Gross margin 77.1%, down 230 bps YoY; mix shift drives Q3 guide to ~74%.
• Profitability: Operating margin 67.3%, +200 bps YoY, supported by flat opex and operating leverage.
• Risk: Growing dependence on six large AI customers and mix-driven margin compression despite strong demand.
• Main concern: sustainability and concentration of AI demand amid mix-driven gross margin compression.
• Strong quarter, driven by explosive AI semiconductor demand and solid infrastructure software growth.

https://finviz.com/stock?t=AVGO&p=d