On Wednesday, Cisco Systems (CSCO:US) announced a revision of its full-year revenue and profit projections, signaling a deceleration in the demand for its networking equipment. This development led to an almost 11% decline in the company's shares during after-hours trading.
In a strategic move to diversify and tap into the growing field of artificial intelligence, Cisco had previously agreed in September to acquire cybersecurity firm Splunk (SPLK:US) for around $28 billion.
The company has grappled with supply chain challenges and experienced a post-pandemic slowdown in demand in recent years. This has prompted Cisco to intensify its focus on software offerings, particularly in the field of cybersecurity.
Cisco attributed the first-quarter slowdown in new product orders for fiscal year 2024 to customer priorities centered around the installation and implementation of products in their environments. The company estimated that one to two-quarters of shipped product orders are still pending implementation by customers.
Initially forecasting annual revenue between $57.0 billion and $58.2 billion, with adjusted per-share earnings ranging from $4.01 to $4.08, Cisco revised its outlook. The updated projections for the full year now anticipate revenue in the range of $53.8 billion to $55.0 billion and adjusted per-share earnings between $3.87 and $3.93.
For the upcoming second quarter, Cisco anticipates revenue between $12.6 billion and $12.8 billion, falling short of analysts' estimates of $14.19 billion, according to LSEG data.
Despite the challenging market conditions, Cisco's adjusted earnings for the first quarter exceeded expectations at $1.11 per share, compared to estimates of $1.03. The reported revenue for the quarter stood at $14.67 billion, slightly surpassing analysts' expectations of $14.62 billion.