Cisco stock drops 13% after company forecasts lower revenue
Cisco CEO Chuck Robbins speaks at the VivaTech (Viva Technology) trade show in Paris on May 24, 2018.
Gerard Julien | AFP | Getty Images
Shares of Cisco fell 13% on Thursday after the company reported mixed results and forecast an unexpected drop in sales in the current quarter.
Cisco said Wednesday it expects fourth-quarter revenue to decline 1% to 5.5% year-over-year, while analysts had forecast revenue growth of around 6%. %. Cisco CEO Chuck Robbins said the guidance range is wider than usual due to the increasingly complex environment.
The company blamed the disappointing outlook for China’s Covid-19 lockdowns, which worsened existing supply chain constraints, as well as rising inflation. Scott Herren, Cisco’s chief financial officer, also warned that component shortages will persist over the next several quarters.
Robbins told CNBC on Thursday it was unclear when supply would return to normal, although Shanghai officials said they planned to open on June 1. Robbins expects there will be severe congestion at Shanghai’s ports after they reopen, as businesses rush carrying capacity.
“In the short term, we think by the time they start shipping, we’re just one company with a product that we’re trying to get out of there,” Robbins told CNBC in an interview on “Squawk on the Street”. “But we think there will be a rush to get the products out. We’ve seen their industrial production numbers drop and their export numbers drop.
“When they open ports, they open airways, there will be competition for that,” Robbins continued. “And so we think there’s probably going to be pressure in the short term, and then once they’re out on the oceans, we might see another problem in Los Angeles or the other ports, as we’ve seen where ships are backed up trying to get in. So this all worked into how we thought about our guide, because we’re just concerned that if they open it won’t result in expeditions as fast as we would like it.
Robbins said he believes some of these issues will begin to subside by the company’s first or second fiscal quarters.
Cisco posted third-quarter revenue of $12.84 billion, which was roughly flat year-over-year and lower than Wall Street’s estimate of $13.34 billion. Adjusted earnings per share were 87 cents, versus 86 cents per share forecast by analysts.
Third-quarter revenue took a roughly $200 million hit from the Russia-Ukraine war, and it added $5 million to Cisco’s cost of sales and $62 million to dollars to operating expenses during the quarter.
—CNBC Jordan Novet contributed to this article.
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