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Cisco (CSCO) earnings Q3 2022

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Cisco shares plunged by as much as 17% in prolonged trading on Wednesday after the networking company said it generated lower quarterly revenue than analysts predicted and called for an unexpected sales decline in the present period.

Here’s how the corporate did:

  • Earnings: 87 cents per share, adjusted, vs. 86 cents per share as expected by analysts, based on Refinitiv.
  • Revenue: $12.84 billion, vs. $13.34 billion as expected by analysts, based on Refinitiv.

Cisco’s revenue was roughly flat yr over yr within the quarter, which ended on April 30, based on a statement. Within the previous quarter, revenue grew by 6%. The quarter spanned 13 weeks, one fewer than the year-ago quarter. Net income rose 6% to $3.04 billion.

The war between Russia and Ukraine reduced revenue by about $200 million, and it added $5 million to Cisco’s cost of sales within the quarter and $62 million in operating expenses. Covid-19 lockdowns in China also exacerbated component shortages, CEO Chuck Robbins said on a conference call with analysts.

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For the fiscal fourth quarter, Cisco called for 76 cents to 84 cents in adjusted earnings per share and a year-over-year decline in revenue of 1% to five.5%. Analysts polled by Refinitiv had been searching for earnings of 92 cents per share on $13.87 billion in revenue, or growth of about 6%. The guidance range is wider than usual due to the increasingly complex environment, Robbins said.

The “top-line numbers don’t look good,” Robbins said. But employees have been redesigning products to permit for a wider diversity of components, and that might strengthen Cisco’s leads to the primary half of the following fiscal yr, he said.

Other networking vendors tumbled following Cisco’s results. Arista Networks dropped 6%, Juniper plummeted 10%, Ciena fell about 9% and F5 slid greater than 3% after the close of normal trading.

“To offer a way of scale of the shortages we currently see constraints in Q4 on roughly 350 critical components out of a complete of 41,000 unique component part numbers,” Scott Herren, Cisco’s finance chief, said on the decision. “Our supply chain team is aggressively pursuing multiple options to shut those shortages.”

In China, Cisco faces various points of uncertainty, Robbins said.

“Shanghai now’s saying they’re going to open up June 1,” he said. “We do not know exactly what meaning and what meaning to when that means that we might start getting any supply out, and correspondingly, we consider once they open up and once they do allow transportation logistics to begin up, we consider there’s going to be a high degree of congestion.”

Robbins added that the fourth-quarter guidance reflects issues like limited capability at ports and airports and “inbound efforts attempting to get raw materials back into the country.”

The impact wasn’t limited to hardware. Software revenue fell 3% to $3.7 billion. Herren said the expansion would have been five points higher if it hadn’t been for the war in Ukraine and the impact of the additional week within the year-ago quarter.

The guidance doesn’t suggest any change to demand and strictly mirrors supply limitations, Herren said.

Cisco said its Secure, Agile Networks segment, which incorporates data-center networking switches, contributed $5.87 billion in revenue. That represents 4% growth, and it’s lower than the $6.09 billion consensus amongst analysts polled by StreetAccount.

Cisco’s Web for the Future unit, which accommodates routed optical networking hardware the corporate picked up through its 2021 Acacia Communications acquisition, contributed $1.32 billion, up 6% and below the $1.44 billion StreetAccount consensus.

The Collaboration segment that features Webex kicked in revenue of $1.13 billion, down 7% and consistent with the StreetAccount consensus of $1.13 billion.

Through the quarter Cisco modified its policy in order that customers cannot cancel orders inside 45 days of the committed ship date, Herren said.

As of the close of trading, Cisco shares were down 23% for the reason that start of the yr, while the S&P 500 has dropped about 18% over the identical period.

— CNBC’s Ari Levy contributed to this report.

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