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Broadcom shares soar on earnings beat

Heidi Chung
A Broadcom processor (Flickr/Florian Knodt)

Broadcom (AVGO) reported better-than-expected fourth-quarter financial results on Thursday.

Shares of the chipmaker soared 6% in after-hours trade after beating on both the top and bottom lines.

Broadcom earned $5.85 per share versus the $5.56 per share analysts polled by Bloomberg were anticipating.

Revenue also beat expectations at $5.45 billion. Analysts were expecting revenue of $5.40 billion.

President and CEO Hock Tan expressed optimism going into 2019. “Looking forward to fiscal year 2019, we expect another year of double digit revenue growth. Sustained demand within our semiconductor segment will be augmented by the newly acquired mainframe and enterprise software businesses to our infrastructure software segment. We also expect operating margin to hit another record in fiscal year 2019 driven by improved operating leverage,” he said in a statement.

Tech has been in focus as the trade tensions between the U.S. and China continue to heat up. Preventing intellectual property theft has remained a key part of the U.S.-China trade negotiations.

U.S. President Trump and China’s President Xi Jinping met on December 1 to discuss trade, and according to the White House, it was a “highly successful meeting.” However on Wednesday, the U.S.-China trade war hit yet another road bump when it was revealed that Huawei CFO Meng Wanzhou had been arrested in Canada on December 1 for allegedly violating U.S. sanctions on Iran. Meng’s arrest for extradition to the U.S. has infuriated the Chinese and will likely escalate the trade war.

Huawei is one of China’s most successful tech companies and is also the world’s number two smartphone supplier. Furthermore, Broadcom ranks number 8 on the list of Huawei’s key suppliers and about 6% of the company’s revenue comes from business with Huawei, according to research from Goldman Sachs.

Broadcom shares have been under pressure as trade war uncertainties continue to rock the semiconductor stocks. The stock has fallen nearly 10% so far in 2018.

When asked about the trade war and tariffs on the conference call, Tan said, “At the end of the day, it’s not that clear yet how [the tariffs] will affect the business that we are in, which is largely enterprises and operators. Our exposure to consumers are limited to a couple of high end phones.”

Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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