Cisco slumps 4% as weak profit guidance overshadows 3rd-quarter earnings beat

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Cisco slumps 4% as weak profit guidance overshadows 3rd-quarter earnings beat
Cisco CEO Chuck Robbins.David Zorrakino/Europa Press via Getty Images
  • Cisco shares fell as much as 4% on Thursday after the networking equipment maker's fourth-quarter guidance fell short of expectations.
  • The company forecast per-share adjusted earnings of $0.81 to $0.83, which fell short of the Refinitiv estimate of $0.85.
  • Third-quarter adjusted earnings of $0.83 per share were ahead of the $0.82 per share that was anticipated.

Cisco shares slid as much as 4% on Thursday after the networking equipment maker issued quarterly guidance that fell short of Wall Street's targets as the company anticipates higher costs stemming from the worldwide computer chip shortage.

A global shortage of chips has hit a range of companies including smartphone and auto makers and experts say it could last another two years.

Cisco on Wednesday forecast for fiscal fourth-quarter adjusted earnings of $0.81 to $0.83 per share and analysts polled by Refinitiv had expected $0.85 per share.

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"We are also seeing similar component shortage supply issues as our peers. The good news, and this is reflected in our guidance, is that we are confident we will work through this as we have already put in place revised arrangements with several of our key suppliers," said Cisco CEO Chuck Robbins during the company's conference call Wednesday.

"On the supply chain front, we continue to manage through the constraints seeing industrywide and continue to incur additional costs," Scott Herren, Cisco's chief financial officer, said on the earnings call. "We are partnering with our key suppliers, leveraging our volume purchasing and extending supply commitments as we address the supply chain challenges, which we expect will continue."

Cisco's fiscal third-quarter adjusted earnings were $0.83 per share compared with the estimate of $0.82 per share. Revenue rose 7% to $12.8 billion, higher than expectations of $12.56.

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Cisco shares have gained about 17% over the past year, advancing as investors saw growth potential as the COVID-19 pandemic pushed millions of people to work and study from home.

The company said the fiscal third quarter was a record one for its WebEx video conferencing business and it has added more than 400 new features and devices to that portfolio over the last six months. It said it's extending devices as more people return to work at offices.

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