Cisco Is Down By 13%, Here Is Why

Key Insights

• Cisco reported weaker-than-expected fiscal Q3 results and offered disappointing guidance for fiscal Q4. 
• The company noted that problems in Russia and lockdowns in China were the key drivers for weak performance. 
• The market is worried that the slowdown of the global economy will hurt Cisco’s profits in the upcoming quarters. 

Cisco Stock Falls As Guidance Disappoints

Shares of Cisco gained strong downside momentum after the company released its fiscal Q3 report. Cisco reported revenue of $12.84 billion and adjusted earnings of $0.87 per share, missing analyst estimates on revenue and beating them on earnings.

In the next quarter, Cisco expects to report adjusted earnings of $0.76 – $0.84 per share. Revenue is expected to decline by 1% – 5.5% on a year-over-year basis. For the full fiscal year 2022, the company expects to report adjusted earnings of $3.29 – $3.37 per share.

Cisco said that it continued to see solid demand for its technologies and that its business transformation was progressing well. However, the market focused on the weak guidance, and the stock found itself under significant pressure.

What’s Next For Cisco Stock?

Analysts expected that Cisco will report earnings of $3.44 per share in the current fiscal year, so the company’s guidance was disappointing. In the next year, Cisco was expected to report earnings of $3.71 per share, and this estimate will be revised in the upcoming weeks.

The company said that demand was not a problem and added that lockdowns in China and problems in Russia were the key drivers for disappointing results and guidance.

However, the market is seriously worried about the slowdown of the global economy, so traders are extremely sensitive to bad news. As a result, Cisco stock declined to levels that were last seen back in November 2020.

It is not clear whether speculative traders will see this pullback as a buying opportunity. Cisco is trading at 11 forward P/E, but analyst estimates will move lower, and the broad pullback in the markets may add to pressure in the upcoming trading session.

To keep up with the latest earnings updates, visit our earnings calendar.