Earlier this month, Broadcom reported full-year 2025 results with sales of US$63.89 billion and net income of US$23.13 billion, issued guidance for first-quarter 2026 revenue of about US$19.10 billion, and approved a 10% increase in its quarterly dividend to US$0.65 per share for fiscal 2026.
Yet despite strong AI-driven growth and a fifteenth consecutive year of higher dividends, investors are increasingly focused on lower-margin AI hardware mix, customer concentration, and uncertainty around future AI demand, which has weighed on sentiment.
We’ll now examine how concerns over AI-related margin compression may reshape Broadcom’s existing investment narrative built around accelerating AI and software growth.
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To own Broadcom, you really need to believe that its AI-centric chip and software franchises can offset margin pressure from a heavier AI hardware mix and a handful of hyperscale customers. The latest results and Q1 2026 guidance support that revenue story, but they have sharpened attention on lower-margin AI systems as the key short term catalyst and on AI-driven margin compression and customer concentration as the main risk; the earnings news makes both more visible, but not fundamentally different.
The 10% dividend increase to US$0.65 per share for fiscal 2026 ties directly into that debate, because it signals management’s confidence in Broadcom’s cash generation despite near term margin headwinds from AI. For investors, that higher payout sits alongside strong AI semiconductor demand and the growing VMware Cloud Foundation footprint as core parts of the equity narrative, even as concerns over lower-margin AI revenue and a concentrated AI backlog remain in focus.
But behind the headline growth, AI demand that relies heavily on just a few hyperscale customers is something investors should be aware of…
Read the full narrative on Broadcom (it’s free!)
Broadcom’s narrative projects $119.6 billion revenue and $50.8 billion earnings by 2028.
Uncover how Broadcom’s forecasts yield a $403.66 fair value, a 19% upside to its current price.
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Forty two members of the Simply Wall St Community currently peg Broadcom’s fair value between US$253 and US$480, reflecting a wide spread in expectations. Against that backdrop, the tension between booming AI revenue and pressure on gross margins gives you a concrete reason to compare several of those viewpoints before deciding how Broadcom might fit into your portfolio.
Explore 42 other fair value estimates on Broadcom – why the stock might be worth as much as 41% more than the current price!
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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