Cisco gives tepid annual forecast, stoking fears of slowdown

CISCO Systems, the largest maker of computer networking equipment, gave a lukewarm revenue forecast for the coming fiscal year, adding to concern that spending on tech infrastructure is slowing.

Sales will be US$57 billion to US$58.2 billion in fiscal 2024, the company said on Wednesday (Aug 16) in a statement. That’s just shy of the US$58.3 billion analysts had estimated on average, according to a Bloomberg survey.

The outlook signals that Cisco’s growth will decelerate sharply from the 11 per cent jump it experienced in the just-ended fiscal year. The company had seen orders stack up during a prolonged period of component shortages. With those parts now available, the company has been able to ship hardware – and sell associated software – to meet pent-up demand. But that surge is fading.

Cisco shares fell about 2 per cent in extended trading following the announcement. The stock closed at US$52.96 on Wednesday, leaving it up 11 per cent this year.

In the period ending in October, sales will rise to about US$14.6 billion, That’s in line with analysts’ estimates of US$14.57 billion. Excluding certain items, profit will be roughly US$1.03 a share, compared with an average estimate of 99 US cents.

Cisco’s gross margin has been a bright spot. It’s expected to be 65 per cent to 66 per cent this quarter on an adjusted basis, the company said. Analysts estimated 64.7 per cent.

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Chief executive officer Chuck Robbins has been working for years to remake his company as a provider of networking services and software. His management team points to the amount of recurring revenue that it’s building up as an indication that the transition is succeeding.

But Cisco still mostly relies on selling expensive pieces of network equipment – with proprietary software – and that makes it hard to avoid the swings in demand from corporate customers.

In Cisco’s fiscal fourth quarter, which ended Jul 29, revenue rose 16 per cent to US$15.2 billion. Profit, minus some items, was US$1.14 a share. That compares with estimates of about US$15.1 billion in revenue and US$1.06 a share in earnings. BLOOMBERG