Cisco lowers annual forecasts as demand slows
The logo of U.S. networks giant Cisco Systems is seen in front of their headquarters in Issy-les-Moulineaux
Cisco Systems, a technology giant, has revised its full-year revenue and profit forecasts on Wednesday, signalling a slowdown in demand for its networking equipment. The company's shares experienced an approximate 11 per cent drop after the announcement, reflecting concerns about the challenges it faces, Reuters reported.
Cisco attributes the slowdown to a decrease in new product orders in the first quarter, indicating that customers are presently focused on implementing existing products in their environments. CFO Scott Herren expressed optimism about a return to order growth in the second half of the year, emphasising the company's commitment to navigating macro challenges and supply chain constraints.
Cisco's strategic shift into software offerings, particularly in cybersecurity, comes amid a broader effort to diversify its business. The company, acknowledging the post-pandemic slowdown in demand and ongoing supply chain issues, has aimed to capitalise on the growing demand for artificial intelligence.
In September, Cisco announced a $28 billion deal to acquire cybersecurity firm Splunk. This move reflects the company's commitment to adapting to evolving market dynamics and aligning its portfolio with emerging trends in the technology landscape. The acquisition aims to enhance Cisco's capabilities in the cybersecurity space, a sector gaining prominence in the wake of increasing digital threats.
While Cisco faces headwinds, its current challenges stand in contrast to the performance of rivals Juniper Networks and Arista Networks, both of which reported positive results last month, fuelled by strong enterprise spending. Cisco's second-quarter revenue expectations, ranging between $12.6 billion and $12.8 billion, fell short of analysts' estimates of $14.19 billion.
The company's results highlight the competitive landscape and the varying trajectories within the technology sector. Cisco acknowledges macro challenges but notes that many supply chain constraints are now resolved, with shipment lead times and backlog returning to normal levels.
Considering the revised forecasts, Cisco's full-year outlook has been adjusted, with revenue expected between $53.8 billion and $55.0 billion, and adjusted per-share earnings in the range of $3.87 to $3.93. This is a significant shift from the previous guidance, which anticipated annual revenue of $57.0 billion to $58.2 billion, and adjusted per-share earnings of $4.01 to $4.08.
(With inputs from Reuters)
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