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Cisco Falls as Supply Chain Woes Weigh on Outlook

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  • CSCO

By Dhirendra Tripathi

Investing.com – Cisco stock (NASDAQ:CSCO) fell 6% in Thursday’s premarket as the company’s forecast of no more than 6.5% revenue growth in the current quarter disappointed.

Consensus forecasts had been for guidance of around 7%, according to Bloomberg, but the maker of networking gear warned that it could be as little as 4.5%.

Cisco has had a constant battle with components shortages and supply chain disruptions in recent months as Delta variant Covid-19 created sporadic but sometimes lengthy lockdowns in major manufacturing hubs in China and southeast Asia. Production schedules have gone awry due to labor crunches and rising wages. Congestion at ports has delayed deliveries.

“There’s no question that the Q2 guide is impacted by the supply chain, the component supply issues that are putting a headwind on what we can get out the door,” Chief Financial Officer R. Scott Herren said during a conference call.

Cisco hiked product prices in September to protect its margins as the company has also had to pay more upfront to secure supplies and meet demand for its networking gear

On an adjusted basis, gross margin in the product business contracted by 150 basis points to 63.8% (one basis point is a hundredth of a percent). While the company has been trying to build a subscription-led services business, products still contribute around three-fourths to its top line.

According to Bloomberg, the company’s management expects greater supply-chain predictability by the end of its financial year in July.

Total revenue rose 8% to $13 billion. Adjusted profit per share of 82 cents beat estimates.

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