Cisco’s profit forecast disappoints on supply chain overhang

Cisco Systems Inc’s (CSCO.O) first-quarter profit forecast fell short of estimates on Wednesday, with the network gear maker warning that supply chain issues would continue to drive up component costs and delivery backlogs.

Businesses across the globe have been facing an unprecedented semiconductor shortage that has inflated costs of even the cheapest parts, hurting companies like Cisco which use those chips in their routers.

“Looking ahead, we expect the supply challenges and cost impacts to continue through at least the first half of our fiscal year and potentially into the second half,” Chief Executive Officer Chuck Robbins said on a call with analysts.

Shares of the company were down 1.8% in extended trading, after rising about 23% this year.

The shortage has also held back Cisco from fully cashing in on a rise in demand for chips from telecom companies swiftly upgrading their networks to 5G.

The San Jose, California-based company said it expects first-quarter profit per share between 79 cents and 81 cents, with the midpoint narrowly missing Refinitiv IBES estimates of 81 cents.

However, Cisco edged past fourth-quarter revenue and profit estimates, helped by more people using its videoconferencing platform Webex, virtual private network AnyConnect and cybersecurity products as offices adapt to hybrid work.

CEO Robbins also said the company was monitoring the COVID-19 Delta variant, and had not seen any impact on customer spending yet.

It expects first-quarter revenue to grow 7.5% to 9.5% year-over-year, while Wall Street expects it to rise about 7.6%.