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Cisco (CSCO) Tanks 12% on Dismal Q3 & Return of Lockdowns

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Updated 19 May 2022

Key points:

  • CSCO shares dropped 13% as the company pointed to an extension of supply constraints
  • EPS marginally beat expectations; posting $0.87 over projections of $0.86
  • Cisco also lowered Q4 guidance to decline between 1% and 5.5% – allowing for uncertainty

Shares of multinational IT giant Cisco (NASDAQ: CSCO) plummeted as much as 13% in early hours trading on Thursday, with the company’s third-quarter report shining a somewhat harrowing light on current issues of supply. Shortages and delays were expected to continue throughout this year, but recent lockdowns in China means that delays could continue to affect normative product flows for some time. 

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The company reported Q3 revenue of $12.84B, missing the expected $13.34B. The bottom line saw a marginal beat, pegged at $0.87 against projections of $0.86.

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Cisco announced after the bell on Wednesday that it expects fourth-quarter revenue to decline by 1% to 5.5% year over year, quite the opposite of the 6% growth expected by analysts. Such a wide guidance range is reflective of the complex uncertainty that looms over global industry. 

The dismal outlook was enough to welcome sellers to shares this morning, with fears that China’s new Covid lockdowns are worsening existing supply chain constraints. Cisco finance chief Scott Herren also warned that component shortages will continue over the course of the coming quarters – something that investors have feared for the last few months. 

The future doesn’t look all that great either. Although Shanghai officials are aiming at June 1st for reopening, severe congestion is likely to follow as company’s jump to snap up delayed goods. Pressure will continue across global ports as ships find themselves backed up, trying to offload. This means that despite an opening date within touching distance, delays will remain in the near-term.