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Shares in networking giant Cisco fell 13% this week, despite better-than-expected earnings, as the cold, hard realities of the 2023 computer hardware business set in.
Hardware sales fell, due in large part to supply chain issues getting resolved and a slowdown in purchasing. Cisco forecast that its revenue for the year would slip to $53.8 billion–$55 billion, from an estimated $57 billion–$58.2 billion.
“Customers are now focused on installing and implementing these unprecedented levels of products,” CEO Chuck Robbins told investors during a Nov. 15 earnings call. “The bottleneck that we previously saw in the supply chain has now shifted downstream to implementation by our customers and partners.”
Robbins added that Cisco believes the drop in demand is only temporary, and noted that “there is an additional one to two quarters’ worth of shipped orders in customers’ hands still waiting to be deployed.” While it will result in a short-term revenue hit, he said he remains optimistic about the long term.
Cisco posted numbers for the first fiscal quarter, ending Oct. 28, that were “driven by our customers’ investments in generative AI, cloud, security, and full-stack observability,” Robbins said. The company anticipates filling $1 billion in orders related to AI in fiscal year 2025, a sign of confidence in the growing strength of the market for the tech.
Cisco’s September acquisition of software data-security company Splunk “will create an end-to-end data platform to enhance our customers’ digital resiliency with our complementary capabilities in AI, security, and observability,” Robbins said. But Forrester analyst Allie Mellen told IT Brew that “acquisitions that Cisco has made in the past, particularly on the security side—for the most part, they just don’t live up to the expectation.”
It’s part and parcel of an up-and-down calendar year for Cisco. Good news on the software development and AI technology front at June’s Cisco Live! was followed in July by news of layoffs that took some workers by surprise, as IT Brew reported at the time.