Cisco beat analyst estimates for the quarter that ended in July as easing supply chain troubles allowed the company to ship more products to customers.
Cisco reported Wednesday that revenue for the fourth quarter of fiscal 2022 was flat at $13.1 billion, topping Wall Street estimates of $12.73 billion. Net income fell 6% to $2.8 billion.
For the current quarter, Cisco forecast revenue growth between 2% and 4% year over year. For fiscal 2023, the company expected revenue to increase from 4% to 6%.
Revenue would be higher except for the difficulty in buying components, executives said during an earnings call with analysts. Cisco has a record backlog of orders.
Without the supply constraints, "we would be growing much more quickly," Cisco CFO Scott Herren said. He expects the component shortage to continue throughout fiscal 2023.
"There was some easing [in fiscal Q4], but it doesn't mean it's over," Herren said.
COVID-19 lockdowns in Chinese manufacturing centers have raised havoc in the tech industry's global supply chain. However, competitors Arista and Juniper Networks have navigated the disruption better than Cisco. As a result, they have taken market share, according to analysts.
Cisco has tackled its product backlog by paying higher-than-average component prices, which have lowered margins, Cisco CEO Chuck Robbins said. The company expects to continue spending more over the next 60 to 90 days.
The company has done hundreds of product redesigns to bypass some component shortages. Those products will ship throughout the fiscal year.
In fiscal Q4, Cisco's supply deficit led to a revenue decline in routing and campus and data center switching, Herren said. Meeting and calling products also suffered revenue drops.
"The teams are really focused on trying to get that back to growth," Robbins said of the meeting platforms, which include the Webex portfolio. "But we've got a lot of work to do."
Security revenue grew 20%. Other products with positive revenue growth included the Meraki wireless portfolio and collaboration hardware, which grew 2%.
The weakest industry sectors for sales included retail, healthcare and financial services. Otherwise, "pretty much strength across most of the rest of the sectors," Herren said.
Cisco has not seen a change in customer demand from the Federal Reserve's decision to raise interest rates to lower inflation. "We haven't seen a material demand signal change as we enter into [fiscal] Q1," Robbins said.
In general, customers' buying behaviors haven't changed, other than looking for a quicker return on investment, he said. "That affects how they think about what products they're buying."
In some cases, customers were planning for 2023, "but other than that, we're not seeing anything significantly different," Robbins said.
Antone Gonsalves is a news director for TechTarget Editorial, focusing on networking, collaboration and end-user computing. He has deep and wide experience in tech journalism. Since the mid-1990s, he has worked for UBM's InformationWeek, TechWeb and Computer Reseller News. He has also written for Ziff Davis' PC Week, IDG's CSOonline and IBTMedia's CruxialCIO, and rounded all of that out by covering startups for Bloomberg News. He started his journalism career at United Press International, working as a reporter and editor in California, Texas, Kansas and Florida.