Cisco Systems 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, boosting shares of the company 5% in extended trading.
The results announced Wednesday suggest that network equipment manufacturers have begun to overcome the component crisis that had prevented them from exploiting a post-pandemic recovery in digital infrastructure spending.
“After a difficult April due to the Covid-related shutdowns in Shanghai…overall supply constraints began to ease slightly in the second half of the fourth quarter and continued into the start of the first quarter,” said general manager Chuck Robbins in a post-earnings call.
The big networking company expects current quarter revenue to grow between 2% and 4%, while analysts expected it to remain flat, according to data from Refinitiv IBES. Annual revenue is expected to jump 4% to 6%.
“The guide was quite good because they start to beat stronger numbers a year ago. So the guide for the year and the quarter is seen as a sign of confidence by the company,” Chaim Siegel said. , analyst at Elazar Advisors.
Still, rising costs are a 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 gross margins fell in the April-June quarter to 61.3% from 63.6%, CEO Robbins said rising costs would continue in the near term.
That was reflected in its adjusted first-quarter earnings forecast of 82 to 84 cents, the midpoint of which was below estimates of 84 cents.
Revenue reached $13.1 billion (A$18.9 billion), beating expectations of $12.73 billion.