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Barclays analyst Tim Long says order growth at Cisco is likely to slow down.
Josep Lago/AFP via Getty Images
Dealing another serious blow to the technology sector,
Cisco
Systems posted disappointing results late Wednesday, and provided weaker-than-expected forward guidance The networking hardware provider’s stock is trading sharply lower in after-hours trading.
The company blamed Covid-19 lockdowns in China and the war in Ukraine for its disappointing guidance.
For the fiscal third quarter ended April 30, Cisco (ticker: CSCO) posted revenue of $12.8 billion, flat with a year ago, falling short of its own forecast for growth of 3% to 5%. The Wall Street consensus had been for revenue of $13.4 billion, which would have been up 4.4%. Non-GAAP profits were 87 cents a share, which are actually at the top of the company’s guidance range of 85 to 87 cents, and a penny ahead of analysts’ forecast.
But the company’s guidance for its July quarter was a huge miss. Cisco sees revenue for the quarter down between 1% and 5.5%, while Wall Street had been projecting an increase of nearly 6%. Cisco sees non-GAAP profits of between 76 cents and 84 cents a share, below the Wall Street consensus of 92 cents. Cisco sees non-GAAP gross margins in the quarter of between 64% and 65%.
Cisco now sees full fiscal year revenue growth of 2% to 3%, down from a previous forecast of 5.5% to 6.5%; full year non-GAAP earnings are now projected at $3.29 to $3.37 a share, down from previous guidance of $3.31 to $3.56 a share.
“We continued to see solid demand for our technologies and our business transformation is progressing well,” Cisco CEO Chuck Robbins said in a statement. “While Covid lockdowns in China and the war in Ukraine impacted our revenue in the quarter, the fundamental drivers across our business are strong and we remain confident in the long term.”
Cisco noted that product revenue was up 3% in the quarter, while service revenue was off 8%. While revenue was up 5% in the Americas, it was down 6% in EMEA (Europe, Middle East and Africa) and 6% lower in the Asia-Pacific region.
The company said that the recent decision to stop operations in Russia and Belarus in response to the war in Ukraine reduced revenue by about $200 million in the quarter. Cisco said that Russia, Belarus, and Ukraine have together historically accounted for about 1% of its revenue.
Gross margin in the quarter was 63.3%, down slightly from 63.9% a year ago under generally accepted accounting principles, while non-GAAP gross margin was 65.3%, down from 66.0%. Operating expenses were down 5% on a non-GAAP basis in the quarter.
Cisco said it repurchased about $252 million of common stock in the quarter. The company has $17.6 billon remaining on its current buyback authorization.
In late trading, Cisco shares are down 15%.
Write to Eric J. Savitz at [email protected]
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