Broadcom warns on impact of trade uncertainty, Huawei restrictions

US chip maker Broadcom turned cautious on the outlook for the back half of 2019 on Thursday, citing the "continued geopolitical uncertainties" and the impact of export restrictions on one of its largest customers, presumably Chinese telecoms equipment manufacturer Huawei.

"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," Broadcom chief Hock Tan said in a statement released overnight.

"As a result, our customers are actively reducing their inventory levels, and we are taking a conservative stance for the rest of the year."

"Despite the challenging market backdrop and updated revenue outlook, we still expect to grow free cash flow by a double-digit percentage for the year," he added.

For its second fiscal quarter, and on a GAAP basis, Broadcom reported a 10.0% rise in sales versus a year ago to reach $5.52bn, alongside a 510 basis point improvement in its gross margins, despite which its net profits fell by 82% to $691m.

The company's free cash flow, which the company defined as cash from operations minus capital expenditures, was 20% stronger than a year ago, reaching $2.5bn.

On a non-GAAP basis, sales at its infrastructure software arm soared by 216% in comparison to a year go to reach $1.41bn, while those from its semiconductor solutions division fell by 10% to $4.01bn.

For the full fiscal year 2019, Broadcom guided towards sales of $22.5bn and an operating margin (GAAP) of 14.75%.

As of 1403 BST, shares of Broadcom were trading down by 7.78% to $259.71.