Cisco Rings a Worrisome Bell

Cisco Systems CSCO -14.07%

is nothing if not reliable. Rare disappointments are often painful.

The tech heavyweight known for its network and security equipment and software said Wednesday that revenue for the fiscal third quarter ended April 30 was stable year over year at $12.8 billion. That was about 4% below Wall Street’s consensus forecast and is only the second time in at least five years that the company’s revenue has missed analysts’ forecasts, according to FactSet. And that wasn’t the only bad news: The midpoint of Cisco’s projection for the current quarter implied revenue of about $12.7 billion, about 8% below Wall Street’s target.

The revelations caused Cisco’s stock price to plummet 12% in Wednesday’s after-hours trading, even after the stock traded more than 4% during the brutal regular session before the report. If the stock continues a similar trajectory on Thursday, it will be the worst one-day drop Cisco has seen since February 2010, when another disappointing report sent shares down 14%.

The difference this time is that the shock seems to have nothing to do with the question. In fact, Cisco’s product portfolio grew about $1 billion as of the second quarter, while reported product sales grew only about $95 million during that time. During the company’s earnings call on Wednesday, Chief Executive Officer Chuck Robbins blamed the disappointing sales and outlook on two factors: the shutdown of operations in Russia after that country’s invasion of Ukraine and the Covid lockdowns in China. The latter limited the availability of key components that were already in short supply. Mr. Robbins noted that the inability to get power alone cost the company about $300 million in revenue for the quarter.

There are signs that China’s strict lockdowns are beginning to ease in regions like Shanghai, but Cisco isn’t counting on a quick recovery. The company says it is experiencing restrictions on about 350 components, and Mr. Robbins predicted “a lot of competition for port and airport capacity” once China’s closed-off regions open. “We just believe it will be impossible for us to catch up with this issue in the fourth quarter, leading to the guidance for the fourth quarter.”

Cisco’s results and forecasts, long considered a measure of demand for business technology, paint a more worrisome picture for supply.

The lockdowns in China didn’t really get started until late March, sparing many tech companies whose fiscal quarters ended then. And the effect may extend beyond hardware companies that rely on China as a manufacturing base.

Bernstein software analyst Mark Moerdler wrote on Wednesday that information technology equipment shortages can affect even software-focused companies, “since a cloud company cannot charge for cloud services until they can provide those services.”

Cisco may not be the only tech giant to fall short.

write to Dan Gallagher at dan.gallagher@wsj.com

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