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
