UBS Group published a report indicating that it has raised its revenue forecasts for Broadcom (AVGO.US) in the AI Business for 2026 and 2027 by 20% and 40% respectively, to $29 billion and $40 billion. The forecasts for custom computing have also been raised to approximately $20 billion and $28 billion. The bank has also increased its AI network revenue forecasts for the same period to about $8.9 billion and $12.1 billion, reflecting a strong increase in Ethernet content attach rates as AI infrastructure expands.

The bank stated that its new forecasts reflect that custom computing will grow to 30% of total revenue by 2027, compared to 15% in 2024. This puts slightly more pressure on gross margins in the coming years, but this will be offset by the growth in high-margin network revenue. Therefore, the bank has lowered its gross margin forecasts for Broadcom in 2026 and 2027 to 76% and 75%, respectively. The bank raised Broadcom's Target Price from $220 to $270, maintaining a rating of 'Buy.'