The semiconductor sector cooled in early 2026 after fueling 2025’s rally on AI demand. Investors rotated out of high-valuation tech names amid economic questions, and Broadcom (AVGO) felt the pinch. Shares have fallen nearly 30% from their peak of $411.32 per share.
What if that drop isn’t a warning, but an invitation? Investors who missed the earlier run now face a clearer entry. Broadcom’s latest results show AI growth accelerating, cash flow pouring in, and capital returning to shareholders at record pace.
Why the Drop Creates a Buying Window
Granted, the 30% decline from the all-time high stings. Sector rotation and valuation compression explain most of it. Yet the business itself delivered record results. Broadcom’s fiscal first-quarter 2026 earnings release reported revenue of $19.3 billion, up 29% year-over-year. Adjusted EBITDA reached $13.128 billion, or 68% of revenue. That operating leverage came from scale, not one-off gains.
The company generated $8 billion in free cash flow for the quarter – 41% of revenue – and returned $10.9 billion to shareholders through $3.1 billion in dividends plus $7.8 billion in buybacks. It also authorized another $10 billion repurchase program through the end of calendar 2026. In plain English, Broadcom converts growth into cash and hands it back while the stock trades at a discount to its recent high.
Broadcom’s Growth Engine Revs Higher
AI remains the driver. Q1 AI semiconductor revenue hit $8.4 billion, up 106% year-over-year. The company guided Q2 fiscal 2026 revenue to $22 billion, up 47% from the year ago period, with AI revenue expected at $10.7 billion, up 140%. That marks eleven straight quarters of AI growth.
The VMware software side adds stability. Enterprise demand for private-cloud and cybersecurity solutions offsets any cyclical softness elsewhere. No matter how you slice it, Broadcom’s revenue mix now tilts heavily toward high-margin AI networking and custom accelerators for hyperscalers.
How Broadcom Stacks Up Against Peers
- Forward P/E: Broadcom at 26x versus Nvidia‘s (NVDA) forward multiple in the low-20s to mid-30s range depending on estimates. Broadcom trades cheaper on expected earnings while delivering comparable AI exposure.
- Dividend yield: Broadcom offers 0.89% (annualized $2.60 per share) versus Nvidia’s 0.02%. Yield hunters get paid while they wait.
- Q1 revenue growth: Broadcom’s 29% trailed Nvidia’s steeper data-center surge but beat Qualcomm‘s (QCOM) results and most legacy chipmakers.
Broadcom also carries less single-customer risk than pure-play GPU leaders because its custom AI chips and networking solutions serve multiple hyperscalers plus the diversified VMware base.
Bottom Line
Broadcom has fallen 30%, yet its Q1 results, Q2 guidance, and $8 billion quarterly free-cash-flow machine say the business is stronger than ever. For patient investors, this pullback hands you a data-backed entry at a 26x forward P/E with a growing 0.89% yield and aggressive buybacks. Buy on weakness, as the numbers support holding long term.
— Rich Duprey
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Source: Money Morning
