Broadcom Q3 earnings beat; stock falls on revenue miss; confirms FY19 outlook

Defying the slowdown in the semiconductor market, chipmaker Broadcom (NASDAQ: AVGO) reported a sharp increase in third-quarter profit amid strong revenue growth. Earnings topped the Street view while the top-line missed, triggering a stock sell-off on Thursday evening. The company also reaffirmed its full-year 2019 guidance.

In the three-month period, adjusted earnings rose to $5.16 per share from $4.98 per share in the third quarter of last year and exceeded the market’s prediction. Unadjusted profit was $715 million or $1.71 per share, compared to $1.20 billion or $2.71 per share last year.

Infrastructure Leads

At $5.52 billion, revenues were higher by 9% from the prior-year quarter but slightly below Wall Street’s consensus forecast. Infrastructure solutions revenue more than doubled to $1.14 billion, while semiconductor solutions revenue dropped 5% to $4.35 billion.

“Our broad portfolio of mission critical semiconductor and infrastructure software solutions, utilized by the world’s largest enterprises, continued to drive sustained revenues and robust cash flow despite a challenging market backdrop,” said CEO Hock Tan.

Outlook

Meanwhile, the management reaffirmed its full-year 2019 revenue guidance at $22.5 billion, which is expected to generate operating margins of 14.75%. The outlook includes revenues of $17.5 billion from semiconductor solutions and $5 billion from infrastructure software.

During the quarter, the company repurchased 3.5 million shares for $977 million and approved a dividend of $2.65 per share, to be paid on October 1 to stockholders of record on September 23.

Symantec Deal

Last month, Broadcom acquired the struggling enterprise security business of cybersecurity expert Symantec (SYMC)for about $11 billion. The management expects cost synergies of about $1 billion from the combination a year after the completion of the transaction.

Also see: Broadcom Q2 2019 Earnings Conference Call Transcript

After retreating from the recent peak, Broadcom shares witnessed significant volatility in the last few months. The stock, which gained about 16% since the beginning of the year, dropped 2% during Thursday’s after-hours trading session.

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