VSisco Systems (NasdaqGS:CSCO) comes out with a rare quarterly disappointment, dragging telecom-related exchange-traded funds lower after missing Wall Street expectations.
the iShares US Telecommunications ETF (IYZ) was 2.3% lower on Thursday.
Meanwhile, shares of Cisco fell 13.7% on Thursday, marking its worst single-day drop since February 2010. CSCO represents 15.9% of IYZ’s underlying portfolio.
The tech heavyweight known for its networking and security hardware and software revealed that revenue in its fiscal third quarter ended April 30 was flat year-over-year at $12.8 billion, or 4% below Wall Street consensus projections and marking the second time in at least five years that the company’s revenue has exceeded expectations, reports the Wall Street Journal.
On Thursday, the midpoint of Cisco’s projection for the current quarter suggested revenue of $12.7 billion, 8% below Wall Street analysts’ target.
The decline in revenue has nothing to do with demand since Cisco has a product backlog that increased by about $1 billion from the second quarter. However, reported product revenue only increased by about $95 million during this period.
Chief Executive Chuck Robbins attributed low revenues and the prospect of ceasing business in Russia after the country’s invasion of Ukraine and zero-tolerance COVID-19 lockdowns in China, which further exacerbated supply chain issues and the availability of key components that were already in place. shortage. Therefore, Robbins calculated that the inability to receive timely power supplies cost the company about $300 million in revenue for the quarter.
“In the short term, we think by the time they start shipping, we’re just one company with a product that we’re trying to get out of there,” Robbins told CNBC. “But we think there will be a rush to release the product. We have seen their industrial production numbers drop, and their export numbers drop.
“When they open ports, they open airways, there will be competition for that,” Robbins added. “And so we think there’s probably going to be pressure in the short term, and then once they’re out on the oceans, we might see another problem in Los Angeles or the other ports, as we’ve seen where ships are backed up trying to get in. So this all worked into how we thought about our guide, because we’re just concerned that if they open it won’t result in expeditions as fast as we would like to.” Robbins added.
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