Cisco stock plunges 17% as company forecasts surprising revenue decline

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  • Cisco missed on the top line in the quarter and issued a worse-than-expected revenue forecast for the current quarter.
  • Analysts at Citi said last month that competitors are taking networking switch market share from Cisco.

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Cisco shares plunged 17% in extended 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 current period.

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Here’s how the company did:

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

Cisco’s revenue was roughly flat year over year in the quarter, which ended on April 30, according to a statement, Net income, at $3.04 billion, rose by 6%. In the previous quarter, revenue grew by 6%.

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China’s Covid lockdown and the war between Russia and Ukraine weakened Cisco’s revenue in the quarter, CEO Chuck Robbins said in the statement. The war reduced revenue by about $200 million, and it added $5 million to Cisco’s cost of sales in the quarter and $62 million in operating expenses, according to the statement.

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 5.5%. Analysts polled by Refinitiv had been looking for earnings of 92 cents per share on $13.87 billion in revenue, or growth of about 6%.

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

Cisco’s Internet for the Future unit, which contains routed optical networking hardware the company 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 includes Webex collaboration software kicked in revenue of $1.13 billion, down 7% and in line with the StreetAccount consensus of $1.13 billion.

As of the close, Cisco shares were 23% since the start of the year, while the S&P 500 has dropped about 18% over the same period. Should the stock drop by more than 16.2% on Thursday, it would be the steepest single-day decline since a 17.7% plunge in July 1994 and the third biggest on record.

Executives will discuss the results with analysts at 4:30 pm Eastern time.

— CNBC’s Ari Levy

This is breaking news. Please check back here for updates.

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