Chuck Robbins, CEO of Cisco Technologies Inc. , indicates as he speaks during a panel discussion on the second day of the World Economic Forum (WEF) in Davos, Switzerland, on January 22, 2020.
Jason Eldin | Bloomberg | Getty Images
Cisco Shares fell as much as 17% in extended trading on Wednesday after the networking company said it generated lower quarterly revenue than analysts had expected and called for an unexpected drop in sales in the current period.
Here’s how the company did:
- gains: 87 cents a share, adjusted, versus 86 cents a share, as expected by analysts, according to Refinitiv.
- Revenues: $12.84 billion, versus $13.34 billion as analysts had expected, according to Refinitiv.
Cisco’s revenue was nearly flat year-over-year in the quarter that ended April 30, according to statment. Last year’s quarter included an extra week. Net income, at $3.04 billion, was up 6%. at previous quarterRevenue grew 6%.
CEO Chuck Robbins said in the statement that the Chinese Covid shutdown and the war between Russia and Ukraine weakened Cisco’s revenue in the quarter. The war reduced revenue by about $200 million, added $5 million to Cisco’s cost of sales in the quarter and $62 million in operating expenses, according to the statement.
At the same time, Robbins said on a conference call with analysts, the shutdown has exacerbated component shortages.
For the fiscal fourth quarter, Cisco called for 76 cents for 84 cents in adjusted earnings per share and a 1% to 5.5% annualized decline in revenue. Analysts polled by Refinitiv were looking for earnings of 92 cents per share on $13.87 billion in revenue, or about 6% growth. Robbins said the scope of guidance is wider than usual due to the increasingly complex environment.
“We believe our revenue performance in the coming quarters will be less dependent on demand and more dependent on availability of supplies in this increasingly complex environment,” he said.
Other network vendors stumbled after Cisco’s results. Arista Networks decreased by 6%, juniper decreased by 10%, sina decreased about 9% and F5 Slip more than 3% after the close of normal trading.
“To give an idea of the scale of the shortfall, we currently see limitations in the fourth quarter on approximately 350 critical components out of a total of 41,000 unique component part numbers,” said Scott Herren, Cisco’s chief financial officer on the call. “Our supply chain team is aggressively pursuing multiple options to fill this shortfall.”
But the effect was not limited to hardware. Software revenue was $3.7 billion, down 3% year over year. Herren said growth could have been five points higher had it not been for the war in Ukraine and the effect of the extra week in last year’s quarter.
Cisco said its secure and agile networking segment, which includes data center networking switches, contributed $5.87 billion in revenue. That’s 4% growth, below the $6.09 billion consensus of analysts polled by StreetAccount.
Cisco’s Internet for the Future unit, which contains the routed optical networking hardware the company acquired through its 2021 acquisition of Acacia Communications, contributed $1.32 billion, up 6% and less than the StreetAccount consensus of $1.44 billion.
The collaboration segment that includes the Webex collaborative program generated revenue of $1.13 billion, down 7% and in line with the StreetAccount consensus of $1.13 billion.
As of the close, Cisco shares are 23% year-to-date, while the S&P 500 is down about 18% over the same period. If the stock fell more than 16.2% on Thursday, it would be the biggest one-day drop since the 17.7% drop in July 1994 and the third biggest drop ever.
CNBC’s Ari Levy contributed to this report.
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