Cisco beat profit estimates as positive sales forecast signals easing supply chain bottlenecks

Cisco Beats Profit Estimates as Positive Sales Forecast Hints at Easing Supply Chain Shortages

Cisco gave a positive forecast for first-quarter sales as the COVID-19 recovery in China eases supply chain shortages and helps meet demand for networking hardware, sending the company’s shares up 5 percent in extended trade. The results released on Wednesday indicated that networking equipment makers have begun to overcome the component crunch that had prevented them from capitalizing on the post-pandemic revival at the expense of digital infrastructure.

“After a challenging April due to the Covid-related shutdown in Shanghai … overall supply disruptions began to ease slightly from the back half of the fourth quarter and the start of Q1,” Cisco Chief Executive Chuck Robbins said in a post. – Earnings call.

The networking major expects current-quarter revenue to grow between 2 percent and 4 percent, while analysts predicted it would remain flat, according to Refinitiv IBES data. Annual revenue is estimated to grow from 4 percent to 6 percent.

“The guidance was good enough because they started to strengthen the numbers a year ago. So the guidance for the year and the quarter is seen as a sign of the company’s confidence,” said Elzar Consulting analyst Chaim Siegel.

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

After gross margins fell to 61.3 percent from 63.6 percent in the April-June quarter, CEO Robbins said higher costs would continue in the short term.

That reflected first-quarter adjusted profit estimates of 82 (Rs 65.40) to 84 cents (Rs 66.99), with a midpoint of 84 cents below estimates.

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

© Thomson Reuters 2022


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