Prediction: Broadcom Stock Will Go Parabolic After Sept. 2
Harsh Chauhan, The Motley Fool
Sun, August 30, 2026 at 9:05 PM GMT+3 4 min read
Broadcom (NASDAQ: AVGO) stock may not have set the market on fire in 2026 with muted gains of 6% as of this writing, but its fortunes could change after Sept. 2.
The chip designer will release its fiscal 2026 third-quarter results after the market closes on Sept. 2. Let's look at the reasons why this semiconductor stock could get a big shot in the arm following its upcoming report.
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Broadcom's results and guidance should beat expectations
Broadcom anticipates $29.4 billion in revenue for fiscal Q3, which would be an 84% spike from the year-ago period. Analysts are forecasting a 92% increase in Broadcom's earnings per share to $3.24. However, a couple of factors suggest Broadcom could clock stronger growth.
The first is the phenomenal growth in the optical networking market, where demand is significantly outpacing supply. According to Goldman Sachs, the optical networking market's revenue could jump from $15 billion in 2026 to a stunning $154 billion in 2028. Broadcom sells multiple optical networking components, including fast-growing co-packaged optics (CPO) products.
Broadcom management notes that 40% of its AI chip revenue comes from networking products. It expects that mix to drop to 30% as sales of custom AI processors increase. The company anticipates $56 billion in AI chip revenue in 2026, which means that its networking business could generate around $17 billion in revenue this year (based on a 30% product mix).
The exponential growth that Goldman Sachs sees in the optical networking market could send Broadcom's networking revenue significantly higher. We have already seen other optical networking companies reporting phenomenal growth and crushing Wall Street's expectations by wide margins. So, don't be surprised to see Broadcom following suit.
The second reason why Broadcom could crush expectations is the growing demand for custom AI processors. OpenAI recently announced its first custom AI chip, called Jalapeño, which it will start deploying in its AI infrastructure this year. The AI lab has developed this chip with Broadcom. Importantly, OpenAI notes that it is already working on the next two generations of its in-house processor, which is good news for Broadcom.
So, Broadcom has solid catalysts that should help it deliver better-than-expected results and guidance, potentially triggering a big rally in the stock given its cheap valuation.
The stock is a no-brainer buy ahead of its earnings
Broadcom trades at just 19 times forward earnings. That's cheaper than the tech-focused Nasdaq-100 index's forward earnings multiple of 24. For a company that's expected to clock 70% earnings growth in the current fiscal year, along with an identical jump in the next one, buying Broadcom at this valuation is a no-brainer.
Broadcom may not be available at such an attractive multiple once it soars following its earnings report, which is why investors looking for a value stock to profit from the AI infrastructure boom should consider buying it right away.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Broadcom and Goldman Sachs Group. The Motley Fool has a disclosure policy.
Prediction: Broadcom Stock Will Go Parabolic After Sept. 2 was originally published by The Motley Fool
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