Cisco Earnings Matched Expectations. Why the Stock Is Falling.

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Updated Aug. 18, 2021 5:31 p.m. ET / Original Aug. 18, 2021 4:58 p.m. ET

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Cisco reported merchandise gross successful the 4th that was 10% higher than past year.

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Shares of Cisco Systems fell successful precocious trading Wednesday aft reporting July 4th results and fiscal twelvemonth 2022 guidance that mostly matched expectations. But the institution warned that it continues to spot unit from constituent shortages, a origin that figured into the company’s October 4th outlook.

The banal was down 1.9% successful after-hours trading astatine $54.

For the quarter, Cisco (ticker: CSCO) posted gross of $13.12 billion, up 8% from a twelvemonth agone and astatine the precocious extremity of the company’s forecast range of 6% to 8% growth. Street statement had been $13.03 billion. Non-GAAP nett were 84 cents a share, toward the precocious extremity of the company’s guidance scope of 81 to 85 cents a share. Street statement called for 82 cents a share. Under mostly accepted accounting principles, the institution earned 71 cents a share, up of the company’s guidance scope of 64 to 69 cents a share.

Product gross was $9.7 billion, up 10% twelvemonth implicit year, portion work gross was $3.4 billion, up 3%. Revenues were up 8% successful the Americas, 6% successful EMEA (Europe, Middle East, and Africa), and 13% successful Asia. Infrastructure platforms gross was up 13%, portion applications gross was disconnected 1% and information gross was up 1%.

For the afloat fiscal year, gross was $49.8 billion, up 1% from a twelvemonth ago. Non-GAAP nett were up a penny from the erstwhile twelvemonth astatine $3.22 a share.

The institution said orders successful the 4th were up double-digits crossed each lawsuit markets and geographies, with merchandise orders up 31%, the strongest maturation successful much than a decade. The institution saw peculiarly beardown maturation from the webscale unreality business, with orders up 160% from a twelvemonth agone and 80% sequentially. Overall orders were up 17% from the 4th fourth of fiscal 2019.

Gross margins connected a non-GAAP ground expanded to 65.6% from 65% a twelvemonth ago, supra expectations, with merchandise gross borderline improving to 65% from 63.2%.

Cisco said it bought backmost $791 cardinal of banal successful the quarter. The institution has $7.9 cardinal remaining connected its existent repurchase authorization.

For the fiscal archetypal 4th ending successful October, Cisco projects gross maturation of 7.5% to 9.5%, with nett of 79 to 81 cents a stock connected a non-GAAP basis. Street statement called for nett of 81 cents. On a GAAP basis, the institution projects nett of 61 to 66 cents a share. Cisco sees non-GAAP gross margins slipping to the 63.5% to 64.5% range, falling arsenic overmuch arsenic 2 percent points from the July quarter, reflecting continued constituent shortages.

Chief Financial Officer Scott Herren said the institution is taking steps to guarantee it tin conscionable lawsuit demand, including buying parts successful the spot marketplace and qualifying 2nd sources for immoderate parts. He noted that Cisco installed terms increases connected immoderate products earlier this month.

Cisco sees full-year fiscal 2022 gross up 5% to 7%, a small higher than the Street statement forecast for 4.4% growth. At the mediate of the range, 6% would connote gross of $52.8 billion, a small supra the Street statement astatine $51.9 billion. Cisco sees full-year nett of $3.38 to $3.45 a share, with the midpoint a small supra the Street statement astatine $3.40. Note that Cisco had not antecedently provided yearly guidance; Herren said Cisco’s determination to connection a full-year presumption reflects increasing visibility arsenic the institution grows the bundle information of its business.

“We proceed to spot large momentum successful our concern arsenic customers are looking to modernize their organizations for agility and resiliency,” Cisco CEO Chuck Robbins said. “The request for Cisco exertion is beardown with our Q4 show marking the highest merchandise bid maturation successful implicit a decade. With the powerfulness of our portfolio, we are good positioned to assistance our customers accelerate their integer translation and thrive successful a hybrid world.”

Write to Eric J. Savitz astatine eric.savitz@barrons.com

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