Cisco revenue falls amid supply shortages, stock dips

Yahoo Finance Live anchors discuss third-quarter earnings for Cisco.

Video transcript

- Let's focus on some individual companies. Let's start with Cisco. I would say a squishy quarter from Cisco and squishy earnings call, even though the stock reaction wouldn't indicate squishy. It would indicate bad. A couple of things of note, they did talk at length about, on the earnings call, CEO Chuck Robbins, about how demand is not falling off a cliff. That was not a recessionary earnings call by Chuck Robbins over at Cisco by any means.

But where they are getting tripped up, and it's a case with a lot of tech companies right now, it's just supply shortages coming out of China. And that is impacting the ability for Cisco to get its products into the hands of consumers. But Cisco had strong backlog. The commentary on demand was, I would say, a little bit better than expected. Now, where they are also getting clipped here, I'll note, is the slowdown in order growth. So here, Cisco is growing double digits their product orders, I believe, over the past seven quarters, so double-digit growth.

That growth rate slowed down to 8% in this most recent quarter, in part because of these supply chain challenges. Whatever the case might be, the market doesn't like to see it.

- No, the market doesn't like to see it, but I had a similar read as you, where Robbins was really just emphasizing that it's not a demand problem, that it is just a supply problem. In addition to what's going on in China, the company also talked about what's going on in Russia and Ukraine, that stopping business in Russia and Belarus cost it about $200 million in revenue during the quarter. So that region, including Ukraine, as well, has accounted for about 1% of total sales.

So it's not huge, but nonetheless, that was a more minor factor, in addition to the much more major factor of the China shutdowns here and the company trying to react to it. By the way, we've got the other networking companies that also have been taking a hit on this Cisco news. The likes of Juniper, Ciena, and Broadcom or trading down.

- And you think about some of the companies that are representative of what that stay at home, or that connectivity heavily reliable on the web, and particularly what that interface of consumers, the customers, looks like and actually moving up either their subscriptions or the amount of reliance that they have on services that Cisco provides here. And that's where it really comes in flat. That's what we saw in this most recent quarter, revenue flat versus last year, $12.8 billion versus the same last year.

You also saw them provide revenue of only about 2% to 3% growth year over year for the full fiscal year. And then additionally, for Q4, what they're projecting is actually a decline year over year, 1% to 5 1/2%. And so that is exactly this stall that we've looked at, not only in the cloud space, but more largely in this collaboration and connectivity space, if you will, too, especially for companies that are heavily reliant on a lot of those to B2B sales. Cisco certainly one of those and getting hit on an outsized fashion here.

On the day, we saw shares moving lower by a little more than 9% here close to the opening.

- Also, let's quickly mention here, too, is the work from home business for Cisco, which is Webex. They noted it was down 7%. In this environment, you always have to be connecting the dots. So when you see a metric like that, you probably have to be worried about how the quarter shaped up for Zoom. Zoom shares have fallen off a cliff. But you have to wonder when they report in a few weeks, how good is their quarter if a Webex at Cisco was under pressure?

- Other people not making that connection, [? Sauce, ?] because those shares are up.

- That's why I get paid the big bucks, Julie.

- Indeed, indeed.