Shares of Cisco fell as much as 13% on Thursday after the company reported mixed earnings results and projected an unexpected sales decline in the current quarter.
Cisco said Wednesday it expects fourth-quarter revenue to decline by 1% to 5.5% year-over-year, while analysts had been looking for revenue growth of roughly 6%. Cisco CEO Chuck Robbins said the guidance range is wider than usual because of the increasingly complex environment.
The company blamed the disappointing outlook on Covid-19 lockdowns in China, which have worsened existing supply chain constraints, as well as rising inflation. Scott Herren, Cisco’s finance chief, also warned that component shortages would persist over the coming quarters.
Robbins told CNBC Thursday that it’s not clear when supply will return to normal, even as Shanghai officials have indicated they plan to open up on June 1. Robbins expects there will be severe congestion at Shanghai ports after they reopen, as companies race to snap up transportation capacity.
“In the near term, we believe that as they begin to ship, we’re but one company with one product we’re trying to get out of there,” Robbins told CNBC in an interview on “Squawk on the Street.” “But we do believe there will be a rush to get product out. We saw their industrial production numbers way down, and their export numbers way down.
“When they open up ports, they open up airways, there’s going to be some competition for it,” Robbins continued. “And so we believe there’ll probably be some short-term pressure and then once they get it out onto the oceans, we could see another issue in LA or in the other ports like we’ve seen where ships are backed up trying to get in. So that was all built into how we thought about our guide, because we’re just concerned that if they open, it’s not going to result in shipments as fast as we would like for it to be.”
Robbins said he believes some of these issues will start to wane by the company’s fiscal first or second quarter.
Cisco reported third-quarter revenue of $12.84 billion, which was roughly flat year over year and lower than Wall Street’s estimated $13.34 billion. Adjusted earnings per share were 87 cents, compared with analysts’ projected 86 cents per share.
Third-quarter revenue took a roughly $200 million hit from the war between Russia and Ukraine, and it added $5 million to Cisco’s cost of sales and $62 million in operating expenses in the quarter.
— CNBC’s Jordan Novet contributed to this article.
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