Broadcom Slides After Trimming 2019 Revenue Outlook


Broadcom Inc (NASDAQ: AVGO) stock tumbled in after-hours trading Thursday, after the semiconductor company reported downbeat second-quarter revenue and slashed its revenue guidance for the full year.

The company warned that the ongoing trade war between the U.S. and China is slowing demand, thus forcing it to cut its revenue forecast.

Broadcom shares, which have gained 10% this year and rallied 6.8% in the past 12 months, were down $22.71, or 8.06% to $258.90 as of 6:02 p.m. ET.

AVGO Earnings & Outlook

Broadcom had net income of $691 million, or $1.64 per share, down from $3.72 billion, or $8.33 per share, in the second-quarter of the last year. The company’s net income of 2Q2018 included a $2.64 billion benefit from income taxes.

Excluding one-time items, earnings in the second-quarter of 2019 came to $5.21 per share. On average, analysts polled by Refinitiv were expecting the company to post adjusted earnings $5.16 per share.

Broadcom said revenue rose 10% to $5.52 billion from $5.01 billion in the earlier-year period. Analysts had been calling for revenue of $5.68 billion in the second-quarter of fiscal year 2019.

Looking ahead, the company views revenue of $22.5 billion for the full year while analysts expect it to come out with revenue of $24.31 billion. Management has forecast fiscal 2019 revenue of $24.50 billion in the first quarter.

Analysts expect the company to report adjusted earnings of $5.69 per share on revenue of $6.12 billion for the current quarter.

Broadcom CEO Comments

“We executed according to plan in the second quarter with tailwinds from networking offsetting the anticipated headwinds from wireless. We currently see a broad-based slowdown in the demand environment, which we believe is driven by continued geopolitical uncertainties, as well as the effects of export restrictions on one of our largest customers,” commented Hock Tan, President and CEO of Broadcom Inc.

“As a result, our customers are actively reducing their inventory levels, and we are taking a conservative stance for the rest of the year. We remain well-positioned across our various semiconductor and software businesses and are confident this portfolio of franchises will continue to drive sustained long-term revenue growth and increasing free cash flow,” Tan added.

Broadcom Inc Profile

Broadcom–the combined entity of Broadcom and Avago–boasts a highly diverse product portfolio across an array of end markets.

Avago focused primarily on radio frequency filters and amplifiers used in high-end smartphones, such as the Apple iPhone and Samsung Galaxy devices, in addition to an assortment of solutions for wired infrastructure, enterprise storage, and industrial end markets.

Legacy Broadcom targeted networking semiconductors, such as switch and physical layer chips, broadband products (such as television set-top box processors), and connectivity chips that handle standards such as Wi-Fi and Bluetooth.

The company recently acquired Brocade and CA Technologies to bolster its offerings in enterprise storage and mainframe software, respectively.