Broadcom reported higher revenues but lower profit in the second quarter, and reduced its full year revenue outlook by USD 2 billion on “anticipated headwinds from wireless.” CEO Hock Tan said demand is down on the back of continued geopolitical uncertainties and the effects of export restrictions at one of the company’s largest companies. During a call with analysts, Tan noted that 4.3 percent of Broadcom’s revenues for its fiscal year to November came from Huawei, or about USD 900 million, the Wall Street Journal reported.
Broadcom said that customers are actively reducing their inventory levels and that it will be taking a “conservative stance” for the rest of the year. It therefore now sees full-year revenues at USD 22.5 billion, with USD 17.5 billion coming from semiconductor solutions and USD 5 billion from infrastructure software, and an operating margin of USD 14.75 percent. The company had earlier guided for revenues of USD 24.5 billion, an operating margin of 20 percent and capex at USD 550 billion. Tan added that Broadcom remains well-positioned across its various semiconductor and software businesses and that it is confident these operations will continue to drive sustained long-term growth and increasing free cash flow.
Revenues for Q2 rose 10 percent from the year before to USD 5.517 billion, with the gross margin rising to USD 3.089 billion or 56.0 percent of net revenue, from 2.551 million and 50.9 percent. Operating expenses meanwhile rose to USD 2.119 billion from 1.350 billion. The operating profit however fell to USD 970 million from 1.201 million the year earlier, while the net profit, which includes discontinued operations, slid to USD 691 million or USD 1.64 per diluted share from 3.733 billion and 8.33 per share. Taking away the discontinued operations, the net profit from continuing operations advanced to USD 2.334 billion or USD 5.21 per diluted share, from 2.243 billion and 4.88 per share.
Cash from operations lifted to USD 2.667 billion from 2.313 billion. Tan said the company also managed to achieve a record free cash flow of USD 2.5 billion, up 20 percent year-on-year, despite the challenging economic backdrop. The CEO expects Broadcom to grow free cash flow by a double-digit percentage for the year and to complete its USD 8 billion worth of share buybacks in fiscal 2019. Cash and cash equivalents at the end of Q2 amounted to 5.328 billion, from 5.093 billion the year before.
Broadcom said it will be distributing a quarterly cash dividend of USD 2.65 per share.
