Cisco Shares Fall After Hours Despite Returning to Growth

Shares of Cisco returned to growth in the last quarter but a disappointing guidance on earnings sent shares of the company tumbling in after-hours trading on Wednesday.

The stock saw a drop of 6% in extended trading after the data center networking hardware company forecast earnings for this quarter to be lower than what analysts had been waiting for.

Cisco reported third quarter financial results this week that ended on May 1st.

For the quarter, the company saw earnings of 83 cents adjusted. This was a penny higher than what analysts had anticipated, per Refinitiv.
Revenue at $12.8 billion was also higher than the $12.56 billion that was called for by analysts, per Refinitiv.

This was the first time the copany had seen growth after a five-quarter streak of declines. Cisco had posted almost 7% growth YOY, though the quarter had 14 weeks instead of 13 in the year ago period.

Looking ahead, Cisco said it sees 81 cents to 83 cents in adjusted earnings per share and 6% to 8% revenue growth for the fiscal fourth quarter. Analysts had expected 85 cents in adjusted earnings per share and $12.82 billion in revenue. This indicates only 5.5% growth.

Cisco has had supply chain challenges but remains optimistic.

“The good news, and this is reflected in our guidance, is that we are confident we will work through this as we have already put in place revised arrangements with several of our key suppliers,” Cisco CEO Chuck Robbins said on the earnings call. “We believe these actions will enable us to optimize our access to critical components including semiconductors and take care of our customers by fulfilling their demand as quickly as possible.”

The supply conditions impacted the adjusted gross margin for the company’s fiscal fourth quarter. Cisco has had to include higher freight and unit costs for chips and memory to make sure it gets products to customers, said CFO Scott Herren.

“I think the supply chain issues will stay with us at least through from what I can see at least through the end of this calendar year,” Herren added.

“You can extrapolate with the growth rate we saw on the product side and then with the corresponding guide that our backlog is certainly increasing, so if we had the capacity to ship, we would, but we just don’t have it,” Robbins said.

It was also in this quarter that Cisco closed its $4.5 billion acquisition of networking hardware maker Acacia Communications and the $730 million acquisition of cloud communications software company IMImobile.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.