Cisco (CSCO) Stock Tanks Following Company’s Forecast of Significant Revenue Decline

| Updated
by Darya Rudz · 3 min read
Cisco (CSCO) Stock Tanks Following Company’s Forecast of Significant Revenue Decline
Photo: Depositphotos

According to the company, Covid-19 lockdowns in China and the war between Russia and Ukraine have been the key factors that affected its financial results.

Cisco Systems Inc (NASDAQ: CSCO), an American technology company best known for its computer networking products, delivered its financial results for the fiscal third quarter of 2022. The company disappointed its shareholders and generated lower quarterly revenue than analysts predicted. Besides, it is expecting a sales decline in the current period. As a result of poor performance, Cisco stock dropped.

Fiscal Q3 2022: Highlights

In the quarter that ended on April 30, Cisco reported revenue of $12.8 billion, net income on a generally accepted accounting principles (GAAP) basis of $3.0 billion or $0.73 per share, and non-GAAP net income of $3.6 billion or $0.87 per share. The revenue has remained flat year-over-year, while analysts were expecting $13.34 billion. Further, GAAP EPS increased 7% year over year, while non-GAAP EPS increased 5% year over year.

According to the company, Covid-19 lockdowns in China and the war between Russia and Ukraine have been the key factors that affected its results. As Cisco has estimated, Russia’s invasion of Ukraine lowered its revenue by $200 million.

Cisco CEO Chuck Robbins stated:

“We continued to see solid demand for our technologies and our business transformation is progressing well. While Covid lockdowns in China and the war in Ukraine impacted our revenue in the quarter, the fundamental drivers across our business are strong and we remain confident in the long term.”

Cisco CFO Scott Herren added:

“We delivered healthy earnings despite unanticipated disruptions through strong pricing and disciplined spend management. Our product backlog is well over $15 billion and product ARR and RPO again grew double digits. The continued progress in our business model transformation reflects the success of our strategy and underpins our long-term confidence.”

Besides, Cisco believes that the issues it is facing are about supply, not demand.

Next Quarter Guidance

The forecast for the fourth fiscal quarter is not really optimistic as well. According to Cisco’s statement, the company is expecting a decline of 1 to 5.5% in revenue year over year. Besides, it calls for $0.60 to $0.70 GAAP and $0.76 to $0.84 Non-GAAP.

As Chuck Robbins has said, these numbers don’t look good. It results from issues like limited capacity at ports and airports as well as “inbound efforts trying to get raw materials back into the country.” However, the Cisco team is currently working on a new design of products to allow for a wider diversity of components. This could strengthen Cisco’s results in the first half of the next fiscal year.

Cisco Stock

Following the company’s Q3 report, CSCO stock plunged by 4.43% to $48.36 at close on Wednesday. After hours, it declined by another 12.84% to $42.15 per share.

Cisco’s market cap has totaled $210.2 billion. Year-to-date, its stock is 23.69% down.

Analysts offering 12-month price forecasts for Cisco Systems stock have a median target of $62.00, with a high estimate of $72.00 and a low estimate of $45.00. At present, the stock has a hold rating.

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Darya Rudz
Author Darya Rudz

Darya is a crypto enthusiast who strongly believes in the future of blockchain. Being a hospitality professional, she is interested in finding the ways blockchain can change different industries and bring our life to a different level.

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