Cramer Calls Broadcom Undervalued Despite Recent Declines

"This is an undervalued stock versus where people thought it was going to be. Broadcom just posted Q1 FY2026 revenue of $19.31 billion, up 29.5% year-over-year, beating estimates. The real story is AI: AI semiconductor revenue hit $8.4 billion, more than doubling year-over-year at 106% growth. That number exceeded even Broadcom's own forecast."

"Our AI revenue growth is accelerating, and we expect AI semiconductor revenue to be $10.7 billion in Q2. Cramer highlighted the scale of what Broadcom is actually shipping: ten gigawatts going to customers including Meta, Anthropic, and OpenAI. These are not speculative future clients. They are live, paying hyperscalers with growing appetites for custom AI accelerators."

"One analyst raised his Broadcom 2027 estimates by 24% following the results, a revision Cramer compared to the kind of upward surprise seen after Nvidia's blowout quarters. Morningstar went further, raising its fair value estimate to $500 and noting that shares currently trade closer to its bear-case valuation despite AI chip sales exceeding expectations. The consensus analyst target sits at $453."

"Broadcom announced a new $10 billion share repurchase program, but Cramer's more pointed observation was this: the company bought back over $7 billion in shares in the most recent quarter alone. When management repurchases that aggressively, they are signaling they think the stock is cheap."

Broadcom reported Q1 FY2026 revenue of $19.31 billion, up 29.5% year-over-year, with AI semiconductor revenue reaching $8.4 billion and growing 106% annually, surpassing company guidance. CEO Hock Tan projected Q2 AI semiconductor revenue of $10.7 billion. The company is shipping ten gigawatts to major hyperscalers including Meta, Anthropic, and OpenAI. Analysts responded with significant estimate revisions, with one raising 2027 estimates by 24%. Morningstar raised its fair value estimate to $500, while consensus analyst targets sit at $453 versus the current stock price of $331.98. Management repurchased over $7 billion in shares in the recent quarter and announced a new $10 billion buyback program, signaling management confidence in the stock's undervaluation.

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