Cisco gave a positive forecast for first-quarter sales as a COVID-19 recovery in China eases supply chain shortages and helps it meet demand for networking hardware, sending the company's shares 5 percent higher in extended trading.
The results announced on Wednesday suggest networking
equipment makers have started overcoming the component crunch that had kept
them from tapping a post-pandemic revival in digital infrastructure spending.
"After a challenging April due to the COVID-related
shutdowns in Shanghai ... overall supply constraints began to ease slightly at
the back half of the fourth quarter and continuing into the start of Q1,"
Cisco Chief Executive Chuck Robbins said on a post-earnings call.
The networking major expects current-quarter revenue to rise
between 2 percent and 4 percent, while analysts predicted it would remain flat,
according to Refinitiv IBES data. Annual revenue is forecast to jump 4 percent
to 6 percent.
"The guide was good enough because they start lapping
stronger year-ago numbers. So the guide for the year and quarter are seen as a
sign of confidence by the company," Elazar Advisors analyst Chaim Siegel
said.
Still, rising costs are a cause of concern for the maker of
routers, switches and communication tools as it spends more on freight and
logistics to ensure a steady supply of components.
After a drop in gross margins in the April-June quarter to
61.3 percent from 63.6 percent, CEO Robbins said higher costs would continue in
the short term.
That was reflected in its first-quarter adjusted profit
forecast of 82 to 84 cents, whose midpoint was below estimates of 84 cents.
Fourth-quarter adjusted profit was 83 cents per share, one
cent above estimates. Revenue came in at $13.1 billion, beating expectations of
$12.73 billion
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