Broadcom Shares Fall After Slashing Guidance

Broadcom Inc. (NASDAQ: AVGO) reported its second quarter financial results and topped analysts’ earnings estimates. However, the chipmaker reported weaker-than-expected revenue and lowered its guidance, causing shares to tumble by 7% shortly after the opening bell on Friday.

For the second quarter, Broadcom reported earnings of USD 5.21 per share on revenue of USD 5.52 Billion. Refinitiv analysts expected earnings of USD 5.16 per share on revenue of USD 5.68 Billion.

Broadcom’s revenue slipped by 4.7% sequentially largely due to the decline in its semiconductor solutions unit. Broadcom’s semiconductor solutions unit reported revenue of USD 4.08 Billion, which fell by 7% quarter-over-quarter and 10% year-over-year. FactSet analysts expected revenue of USD 4.18 Billion.

Despite Broadcom’s sequential revenue decline, the Company was still able to maintain strong year-over-year revenue growth due to its infrastructure software unit. The segment reported revenue of USD 1.41 Billion, a 216% increase year-over-year. FactSet analysts estimated revenue of USD 1.37 Billion.

Broadcom lowered its full-year guidance due to weakness ongoing within the chip sector. For the rest of the year, Broadcom said it expects revenue of USD 22.50 Billion compared to its previous forecast of USD 24.50 Billion. Refinitiv analysts are projecting revenue of USD 24.31 Billion.

“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. As a result, our customers are actively reducing their inventory levels, and we are taking a conservative stance for the rest of the year,” Broadcom Chief Executive Officer Hock Tan was quoted as saying in Thursday’s statement.

Following Broadcom’s quarterly report, the overall chip sector witnessed weakness. Other chip makers such as Micron (NASDAQ: MU), AMD (NASDAQ: AMD), Nvidia (NASDAQ: NVDA), Qualcomm (NASDAQ: QCOM), and Intel (NASDAQ: INTL) all fell by as much as 2%.

“Growing headwinds across Broadcom’s key markets (networking, storage, smartphones) finally caught up to them, triggered by the latest negative developments over trade in the past month,” Morgan Stanley analyst Craig Hettenbach wrote in a note. “A broad-based slowdown and the impact from Huawei are weighing heavily on the 2H outlook, which is further compounded by customer inventory reductions – a dynamic that has kept us Cautious on the Semi industry.”

2 Comments
  1. Haumin Lum 4 months ago
    Reply

    $QCOM lets go 55 is calling.

  2. Jeff Ferry 4 months ago
    Reply

    $AVGO CEO doused his investors in liquid nitrogen.

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