Cisco Systems
shares are heading decrease in late buying and selling Wednesday after the networking infrastructure firm posted results that have been in step with steering, however shy of some investor expectations.
January quarter income steering was wanting Street estimates. The firm mentioned provide points are restraining its means to satisfy buyer demand.
In an interview with Barron’s, Cisco CEO Chuck Robbins conceded that one query the corporate wrestles with is whether or not sooner or later deferred demand leads to misplaced enterprise.
“At some point you lose something to someone who can deliver faster,” he says, whereas including that “we are getting our share the other way as well.” Robbins notes that some rivals have deferred shipments to present clients so as to provide new clients. But he additionally says that cancelation charges are operating beneath historic norms.
CFO Scott Herren says that the corporate’s provide chain points transcend chips—there are additionally shortages of energy provides and substates used to construct units. And he says that logistics struggles proceed, with air, ocean and trucking all nonetheless “snarled.”
For the fiscal first quarter ended October 30, the corporate posted income of $12.9 billion, up 8% from a yr earlier, which was towards the decrease finish of the company’s forecast growth vary of seven.5% to 9.5%, and barely beneath the Street consensus forecast of $13 billion.
On a non-GAAP foundation, the corporate earned 82 cents a share, a penny above the excessive finish of the steering vary of 79 cents to 81 cents a share. Under typically accepted accounting rules, the corporate earned 70 cents a share.
Cisco
(ticker: CSCO) mentioned that order development was up 33% from a yr in the past, greater than the 31% order development within the July quarter. Annual recurring income was $21.6 billion, up 10% from a yr in the past.
Cisco is projecting quarter income development for the January 2022 fiscal second quarter of between 4.5% and 6.5%, which means $12.6 billion on the midpoint, beneath the Street consensus at $12.9 billion. Cisco sees earnings for the quarter on a non-GAAP foundation of 80 cents to 82 cents a share; Street consensus was 82 cents.
For the July 2022 fiscal yr, Cisco sees income up 5% to 7%, according to the Street consensus forecast for six.1% development. The firm sees full yr non-GAAP earnings of between $3.38 and $3.45 a share, bracketing the Street consensus at $3.42 a share.
“In Q1, we had robust growth and continued strong demand despite the very dynamic supply environment,” CEO Robbins mentioned in an announcement.
This is the primary quarter of a brand new section reporting construction. Cisco reported income from “secure, agile networks,” which incorporates campus, knowledge middle and enterprise routing, compute and switching, of $5.97 billion, up 10%.
“Hybrid work,” together with collaboration and phone middle merchandise, had income of $1.1 billion, down 7%. The “end to end security” section had income of $895 million, up 4%.
“Internet for the Future,” together with optical networking and 5G merchandise, had income of $1.37 billion, up 46%. Revenue from “optimized application experiences,” together with observability and cloud software program, was $181 million, up 3%. Services income was $3.37 billion, up 1%.
On a convention name with buyers, Robbins mentioned that Cisco noticed the strongest demand in over a decade, however that offer points constrained what the corporate might construct and ship to clients, placing strain on gross margins. The firm sees non-GAAP January quarter gross margin of between 63.5% and 64.5%, versus 64.5% within the October quarter.
Without giving a particular quantity, Cisco mentioned it completed the quarter with the most important backlog in its historical past. CFO Herren mentioned the corporate is “working night and day” to resolve the element points.
As for a way a lot quicker the corporate may very well be rising if it might get elements to satisfy demand, Robbins declined to supply a particular quantity, whereas including that with extra elements, “we can ship a lot more growth out the door.”
Cisco additionally mentioned it purchased again $256 million inventory within the quarter.
Cisco shares fell 6.3% in after-hours buying and selling. The
S&P 500
closed the day down 0.3% and the
Dow Jones Industrial Average
closed down 0.6%.
Write to Eric J. Savitz at eric.savitz@barrons.com
