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Broadcom's stock is currently experiencing a slight decline. Over the past five years, the stock has risen by more than 600%, but if we look at its performance compared to the Standard & Poor's 500 index since the beginning of the year, we find that it is underperforming . It rose by only about 3.2%.

Interestingly, despite the volatility of the Standard & Poor's 500 index this year, Broadcom's stock volatility appears to be very minimal. Broadcom's stock fell by 15% at one point, then rose by 40%, but is now up by approximately 3.2% .

I have held Broadcom shares in my investment portfolio for a long time.

Based on the original purchase price, I made a profit of over 600%, and I continued to add new shares over the years. Even as the purchase price increased with the addition of more shares, I still made a profit of nearly 200% on this deal.

So, this is one of my biggest investments. I have performed exceptionally well with it, but with the heavy selling that followed the recent earnings report , has Broadcom become structurally weaker ?

Has the hypothesis changed? And what does its valuation look like at current prices?

Now let's move on to Broadcom. We have noticed that during the past month, its share price has decreased by 6% at one point this year. The share price at that time was $480.

From a valuation perspective, when looking at the projected earnings multiple for the next 12 months , Broadcom's P/E multiple is now only 20.6, which is significantly lower than what we saw during the last year.

Previously, the expected price-to-earnings ratio was 49 times. Therefore, a price-to-earnings ratio of 20.6 seems very reasonable for Broadcom. That's absolutely true, but it doesn't tell the whole story.

Keep in mind that the price-to-earnings ratio for the past twelve months is approximately 45.59. This is a number that may worry many people at first glance.

So what does this tell us ? It tells us that Broadcom's stock is trading at a price higher than its true value, and the reason is the significant growth in its profits.

For example , go to our sensitivity analysis and take a look at Broadcom and its earnings growth. One of the great features of Ticker Data is the ability to automatically import average earnings per share estimates from analysts up to 2030.

We see that the expected compound annual growth rate of earnings per share up to 2030 is around 32%. This rate is expected to double in 2026 and reach 67% in 2027.

So, the simple fact for Broadcom right now is that if it can achieve this level of earnings growth, its stock is trading at a very reasonable valuation. This is an indisputable fact .

What caused this sharp drop in the stock price? Let's take a look at the latest earnings report. The first thing we notice is that non-GAAP earnings per share in the third quarter were $3.32, exceeding expectations by 8 cents, while revenues reached $29.59 billion, an increase of 85.5% year-over-year, exceeding expectations by $160 million.

Achieving better-than- expected profits in both revenue and earnings is nothing new for Broadcom. In fact, if we look at the earnings history of this stock, we will find that it has exceeded earnings per share expectations for four consecutive quarters, and this is one of the biggest times it has exceeded expectations.

Following this most recent quarter , Broadcom generated $ 31.9 billion in free cash flow during the first nine months of 2026. For comparison, see the dividend details. In 2025, Broadcom generated $26.9 billion in free cash flow.

That is, in just three quarters, Broadcom generated more free cash flow than it did in the whole of 2025, which itself saw tremendous growth compared to 2024.

This, of course, is what allows Broadcom to raise its dividends at such a high rate. The compound annual growth rate of dividends over 10 years is approximately 26%. The value of the dividends increased from 16 cents per share in 2015 to 242 cents in 2025.

So, what caused the stock price to fall? Well, if we continue reading, we will find the reason in one sentence: Fourth quarter revenue forecasts are around $34.8 billion compared to previous forecasts of $35 billion .

So, we are talking about a very slight decrease in the overall outlook for the fourth quarter of 2026. This is the reason for the sell-off.

But there is a paradox in this matter, because if we take into account that they exceeded profit expectations in every quarter of 2026, then they are expected to exceed their expectations for the entire year.

So, there is another paradox: the stock price is falling simply because of a slight decrease in fourth-quarter expectations.

Furthermore, if we delve deeper into the earnings report, we will find that they recorded revenues of $29.6 billion for the third quarter, an increase of 86% over the same period last year.

So, if we look at Broadcom's profitability and income , taking into account that its revenue in 2025 alone was around $63.8 billion, then Broadcom's revenue during the first three quarters alone amounts to $71.1 billion.

Not only that, but look at the expansion of profit margins that the company has experienced over the past decade. In 2016, the gross profit margin was 44.8%, while last year it reached 67.7%.

This leads to huge growth in profits. When revenue grows at a compound annual growth rate of 25%, that is, from about 44% to 67%, you will get amazing results .

However, it should be noted that a large part of Broadcom’s growth over the past decade, and indeed over the past twenty years, has been achieved through acquisitions. The feasibility assessment depends on several factors, the most important of which is the success of these acquisitions.

In short, things went well for Broadcom. Now, it has two main revenue segments: semiconductor solutions and infrastructure software. Each has its own potential advantages and disadvantages.

However, infrastructure software makes up a much smaller part of the company's overall business. However, this sector adds a recurring revenue layer to the company’s business, which I find very attractive.

Everyone prefers predictable cash flows, and that is precisely what this sector provides.

Currently, attention is focused on semiconductor solutions due to their enormous growth rates . AI semiconductor revenues rose 221% year-on-year in the last quarter. Looking at the overall growth in semiconductor solutions on an annual basis, it has reached 127%.

At the same time, infrastructure software rose by 29% year-on-year, which is also strong growth.

Therefore, after reviewing this earnings report, I found nothing in it that caused concern. On the contrary, it contained something that suggested a completely different feeling.

It's interesting how Wall Street seems to be slightly downgrading Broadcom shares due to the slight reduction in its fourth-quarter outlook, but take a good look at CEO Hock Tan's statement.

Perhaps this is the most important point that can be drawn from the entire earnings report.

During the earnings call, Hock Tan made several points, talking about strong demand from companies like Anthropic and Google, and outlining their collaboration with OpenAI. He pointed to their expectations for the fourth quarter of a triple-year increase in revenue from parallel processing units ( XPUs) and artificial intelligence networks .

He emphasized that their collaboration with Google is at its strongest point ever. He also stated that he believes they have the strongest intellectual property portfolio in semiconductor design .

All of this is promising, but I prefer to focus on the basics. What does this mean for the fundamentals? Okay, here's the main statement that everyone seems to be ignoring. As Tan reviews all these developments at the company, he says, "As a result, I can say that we are steadily moving towards exceeding $30 in earnings per share in fiscal year 2028."

And now, here's the interesting part. Returning to the sensitivity analysis model , we find that the average analyst estimate for earnings per share for 2028 is currently around $28.27.

At the same time, the CEO states his strong confidence that earnings per share could reach $30 by 2028.

What would the valuation be if either of these possibilities were true? Well, we can find that out relatively easily. Instead of the usual method, which is to apply the earnings per share growth rate and enter the price-to- earnings multiple, let's enter the value of $28.27, which is the average analyst estimate for earnings per share, in the 2028 column.

So, this is the only column we will focus on. Therefore, we will enter the value 28.27.

Now, what is the price-to-earnings ratio at which we expect the company's shares to trade? Again, let's not be overly optimistic . Their profits are expected to grow at a high rate for a period of time, but this growth will not last forever.

Even if the stock price is at a price-to- earnings ratio of only 20, that would mean a total return of 58.3%, or a compound return of 16.5 %, plus a good initial return of 0.7% that can be added over the years.

That is, the expected compound return exceeds 17% until 2028.

But what if earnings per share reach $30? Then we are talking about a compound return of approximately 19%. This assumes a very conservative price-to-earnings ratio, or even a price-to- earnings ratio lower than the current share price .

Therefore, even assuming the price-to-earnings ratio continues to decline, investors are willing to pay less for each dollar of Broadcom's earnings. Expected returns will remain, at least until 2028, very attractive if the price-to-earnings multiple gets closer to its historical average, which is currently around 24.

Perhaps closer to 22. Suddenly, you will find yourself with compound returns exceeding 22%.

That's why I'm still keen to keep Broadcom shares in my portfolio, and that's also why, over the past year, as the share price has declined, I've, for example , added some shares in March.

This is why I'm so enthusiastic about continuing to add shares whenever opportunities arise in Broadcom stock.

I believe it is currently trading at a very reasonable valuation multiple. But again, what you need to understand is that you will experience significant fluctuations with this type of investment.

In December, the stock price dropped from about $410 per share to $326 in just a few days. This year, the stock price reached $480 at one point , then quickly dropped to $372, and is now at $357.

It takes a great deal of patience to maintain such investments. Interestingly, when looking at the graph for the past five years, we find that the growth has been impressive, but fluctuations have been present all the time.

You need to have a long- term perspective when you see a stock fluctuating in price from $250 to $150, or from $400 to $300.

Therefore, if you decide to increase your stake in this stock, do so with the intention of holding it for at least 3 to 5 years, unless there is a substantial change in your investment strategy.

And of course , you will see exceptional growth in dividend payouts, which is a great addition.