Royal Bank of Canada Launches Barrier Digital Notes Linked to Broadcom Stock, Offering 15.40% Fixed Return With 50% Downside Barrier

Structure and Mechanics of the Broadcom-Linked Barrier Digital Notes

Royal Bank of Canada's newly filed preliminary pricing supplement describes a structured note product formally titled "Barrier Digital Notes Linked to the Common Stock of Broadcom Inc., Due August 19, 2027." The notes are issued under Royal Bank of Canada's Senior Global Medium-Term Notes, Series J, program and are distributed by RBC Capital Markets, LLC acting as agent. The CUSIP for the notes is 78017UT34, and the minimum denomination for purchase is $1,000, with additional investments also required in $1,000 increments.

At the core of the product is a binary, or "digital," payoff structure. If the closing price of Broadcom's common stock on the valuation date of August 16, 2027 — referred to in the disclosure as the "Final Underlier Value" — is greater than or equal to the Barrier Value, investors receive their $1,000 principal back plus a fixed Digital Return of 15.40%, equating to $1,154 per $1,000 note. The Barrier Value is defined as 50% of the Initial Underlier Value, which is the closing price of Broadcom's stock on the trade date of July 14, 2026. That specific closing price figure was listed as pending completion in the preliminary supplement.

How the Downside Scenario Works if Broadcom Falls Below the 50% Barrier

The filing is explicit and emphatic about the risk scenario for investors. If the Final Underlier Value — Broadcom's closing stock price on August 16, 2027 — falls below 50% of its price on the trade date, investors do not receive the Digital Return. Instead, they receive a payment equal to $1,000 plus $1,000 multiplied by the Underlier Return, which is calculated as the percentage change in Broadcom's stock price from start to finish. This means that in a barrier-breach scenario, investors suffer a full, dollar-for-dollar loss proportional to how far Broadcom's stock has fallen from its initial level.

The disclosure illustrates this starkly with the hypothetical returns table included in the pricing supplement. For instance, if Broadcom's stock falls by exactly 50.01% from its starting point by the valuation date, the investor would receive approximately $499.90 per $1,000 note — a loss of over 50% of principal. A hypothetical 70% decline in Broadcom's stock would result in a payment of just $300.00, and a 100% decline would result in a payment of $0.00, a complete loss of the invested amount. The disclosure warns investors clearly that they may "lose a substantial portion or all of your principal amount at maturity."

The Digital Return Applies Equally Across a Wide Range of Broadcom Stock Outcomes

One of the key features of the structure that differentiates it from direct equity investment is that the 15.40% Digital Return is fixed and does not increase with Broadcom's stock performance above the barrier. According to the hypothetical return scenarios outlined in the pricing supplement, whether Broadcom's stock rises 2%, 10%, 30%, or 50% from its initial level, the investor receives precisely the same $1,154 per $1,000 note at maturity — representing a 15.40% return. This is a defined cap on upside that investors must weigh against the conditional protection they receive above the barrier level.

Conversely, any decline in Broadcom's stock that stops short of the 50% barrier threshold also delivers the full Digital Return. The hypothetical table confirms that stock declines of 5%, 10%, 20%, 30%, 40%, or even exactly 50% from the initial value all still result in the $1,154 payment per note, provided the Final Underlier Value is at or above the Barrier Value. It is the precise crossing of the 50% decline threshold that triggers the dramatic shift from a 15.40% gain to significant principal loss, making the barrier level the single most important factor for investors to monitor throughout the life of the notes.

Initial Estimated Value Reflects Embedded Costs in the Note Structure

The preliminary pricing supplement discloses that the initial estimated value of the notes, as determined by Royal Bank of Canada as of the trade date, is expected to be between $943.00 and $993.00 per $1,000 principal amount. This estimated value is explicitly stated to be less than the public offering price of $1,000 per note, at which investors purchase the notes at issuance. The final pricing supplement is expected to set forth the precise initial estimated value once the trade date closing price of Broadcom's stock has been established and the final terms are confirmed.

The gap between the $1,000 offering price and the estimated value range of $943.00 to $993.00 reflects costs and charges embedded in the product, including distribution-related costs and the economics of the hedging arrangements that Royal Bank of Canada enters into in connection with issuing the notes. The bank notes in the disclosure that the market value of the notes at any time after issuance will reflect many factors, cannot be predicted with accuracy, and may be less than the initial estimated value. Investors who seek to sell the notes before maturity, if they are able to do so, should be aware that no secondary market is guaranteed.

Notes Will Not Be Listed on Any Securities Exchange

The disclosure makes clear that the Barrier Digital Notes will not be listed on any securities exchange, which has meaningful implications for investors who may need or wish to exit the position before the August 2027 maturity date. Unlisted structured notes of this type typically trade, if at all, in over-the-counter markets, and liquidity can be limited or unavailable, particularly during periods of market stress. Investors should consider whether they are prepared to hold the notes until maturity, as they may not be able to sell at a price close to the value they might expect based on Broadcom's current stock price or the estimated value of the notes.

RBC Capital Markets, LLC is identified as the distributor of the notes but the filing states that RBCCM will not receive a commission in connection with the sales. The disclosure notes that any potential conflicts of interest related to RBCCM's role — including as calculation agent responsible for determining the Final Underlier Value and making other determinations under the notes — are addressed under the heading "Supplemental Plan of Distribution (Conflicts of Interest)" in the pricing supplement. Investors are urged to review this section carefully as part of their due diligence before investing.

Credit Risk of Royal Bank of Canada Applies to All Payments

An important structural feature disclosed in the pricing supplement is that all payments on the notes — including both the return of principal and the Digital Return — are subject to the credit risk of Royal Bank of Canada as issuer. The notes are senior unsecured obligations of the bank, and investors are effectively also taking on the risk that Royal Bank of Canada could fail to meet its payment obligations at maturity. This is a risk that does not exist with direct investment in Broadcom stock, and it represents an additional layer of risk that investors must evaluate independently of Broadcom's stock performance.

The filing further clarifies that the notes will not constitute deposits insured by the Canada Deposit Insurance Corporation, the U.S. Federal Deposit Insurance Corporation, or any other Canadian or U.S. governmental agency or instrumentality. They are also explicitly stated to not be bail-inable notes and are not subject to conversion into Royal Bank of Canada's common shares under Canadian banking legislation. These clarifications are intended to help investors understand the precise nature of the obligation they are acquiring and the protections, or lack thereof, that apply to it.

Broadcom Inc. as the Underlying Equity Reference

The performance reference for these notes is the common stock of Broadcom Inc., which trades on NASDAQ under the Bloomberg ticker AVGO UW. Broadcom is a major global technology company engaged in designing, developing, and supplying a broad range of semiconductor and infrastructure software solutions. As of the preliminary pricing supplement, the Initial Underlier Value — defined as the closing price of Broadcom's stock on July 14, 2026 — was listed as pending, consistent with the preliminary nature of the document. The exact barrier level, representing 50% of that closing price, will be confirmed in the final pricing supplement.

The performance of Broadcom's stock over the approximately 13-month period from issuance on July 17, 2026 to the valuation date of August 16, 2027 will ultimately determine the investor's outcome. Broadcom's stock has historically exhibited significant volatility, and the filing includes risk considerations noting that the market value of the notes will be influenced by factors including changes in the level of Broadcom's stock, interest rates, volatility, time remaining to maturity, and other market conditions. Investors are not entitled to dividends paid by Broadcom or any other rights as stockholders of Broadcom by virtue of holding these notes.

Hypothetical Return Scenarios Illustrate the Binary Nature of the Payoff

The pricing supplement contains a detailed hypothetical return table that maps a range of Broadcom stock outcomes to the corresponding payment at maturity per $1,000 note. For every scenario in which Broadcom's hypothetical return is at or above negative 50% — ranging from a 50% gain all the way down to an exactly flat 0% return and even to a 50% decline — the payment is uniformly $1,154.00 per note, or 115.40% of the principal amount. The table underscores how the 50% barrier creates a stark, cliff-edge divide in investor outcomes.

Below the barrier, the hypothetical figures illustrate the severity of potential loss. The supplement presents a scenario in which Broadcom declines 60%, resulting in a payment of $400.00, or 40% of principal, representing a 60% loss. An 80% decline in Broadcom's stock translates to a $200.00 payment per note, and a full 100% decline — in which Broadcom's stock becomes worthless — results in a zero payment. These scenarios are described as hypothetical and illustrative only and are not predictions of actual outcomes, but they serve to demonstrate the magnitude of risk investors take on if the barrier is breached.

Key Dates and Terms Summary for Investors Evaluating the Notes

For investors evaluating the Barrier Digital Notes, the disclosure sets out a clear timeline. The trade date is July 14, 2026, and the issue date — when the notes are expected to be delivered and settlement occurs — is July 17, 2026. The valuation date, on which Broadcom's closing stock price will be observed to determine whether the barrier has been breached, is August 16, 2027, subject to postponement in accordance with the terms described in the accompanying product supplement. The maturity date, on which investors receive their payment, is August 19, 2027, also subject to potential postponement.

The notes are issued pursuant to a prospectus dated December 20, 2023, a prospectus supplement dated December 20, 2023, and a product supplement dated July 22, 2025, all of which are incorporated by reference into the pricing supplement. The disclosure states that the pricing supplement supersedes all prior or contemporaneous oral statements and other written materials, including any preliminary pricing terms or indicative terms that may have been provided. Investors are urged to read all documents in the series together to obtain a full understanding of the terms, risks, and conditions of the notes prior to making any investment decision.