Cisco beats profit estimates as positive sales forecast hints at easing supply chain shortages

Cisco issued a positive outlook for first-quarter sales as a COVID-19 recovery in China eases supply chain shortages and helps it meet demand for networking hardware, boosting the company’s stock by 5% in extended exchanges. The results announced Wednesday suggest that network equipment manufacturers have begun to overcome the component crisis that had prevented them from exploiting a post-pandemic recovery in digital infrastructure spending.

“After a difficult month of April due to the COVID-related closures in Shanghai…overall supply constraints began to ease slightly at the end of the fourth quarter and continued into the beginning of the first quarter,” Cisco said general manager Chuck Robbins on a post-earnings call.

The big networking company expects current quarter revenue to rise between 2% and 4%, while analysts expected it to remain flat, according to data from Refinitiv IBES. Annual revenue is expected to jump 4% to 6%.

“The guide was quite good because they start to beat stronger numbers a year ago. So the guide for the year and the quarter is seen as a sign of confidence by the company,” Chaim Siegel said. , analyst at Elazar Advisors.

Still, rising costs are a concern for the maker of routers, switches and communication tools, as it spends more on freight and logistics to ensure a steady supply of components.

After gross margins fell in the April-June quarter to 61.3% from 63.6%, CEO Robbins said rising costs would continue in the near term.

This was reflected in its adjusted first-quarter earnings forecast of 82 (Rs. 65.40) to 84 cents (Rs. 66.99), the midpoint of which was below estimates of 84 cents.

Fourth quarter adjusted profit was 83 cents (66.20 rupees) per share, one cent above estimates. Revenue came in at $13.1 billion (about Rs. 1,04,500 crore), beating expectations of $12.73 billion (about Rs. 1,01,500 crore).

© Thomson Reuters 2022

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