Amid a slowdown in demand for its networking equipment, Cisco Systems has revised its full-year revenue and profit forecasts, leading to a more than 10% drop in its shares after market.
The company has been grappling with supply chain issues and a post-pandemic demand slowdown, prompting a strategic shift towards software offerings such as cybersecurity to navigate the changing market.
To further diversify and take advantage of the growing artificial intelligence trend, Cisco announced its plan to acquire cybersecurity firm Splunk in its largest-ever deal totaling approximately $28 billion.
Cisco attributes the slowdown in new product orders to customers’ focus on implementing products in their environments, estimating that one to two quarters of shipped product orders are still pending implementation by customers.
Revising its full-year outlook, Cisco now expects revenue to fall between $53.8 billion and $55.0 billion, with adjusted per-share earnings projected to be in the range of $3.87 to $3.93, down from its previous forecast of $57.0 billion to $58.2 billion in revenue and adjusted per-share earnings of $4.01 to $4.08.
However, Cisco’s performance contrasts with its rivals Juniper Networks and Arista Networks, both of which reported positive results fueled by strong enterprise spending last month.
For the second quarter, Cisco anticipates revenue to be between $12.6 billion and $12.8 billion, falling short of analysts’ estimates of $14.19 billion, according to LSEG data. Despite this, the company’s adjusted earnings of $1.11 per share in the first quarter exceeded estimates of $1.03, with reported revenue of $14.67 billion, surpassing analysts’ expectations of $14.62 billion.
Reporting by Samrhitha Arunasalam in Bengaluru; Editing by Shounak Dasgupta
