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Cisco's Profit Warning: Chip Costs Hit Hard
12 Feb
Summary
- Cisco forecasts lower profitability due to rising memory chip prices.
- AI revenue growth supports strong sales outlook, but margins concern investors.
- Company is negotiating with suppliers and raising prices to manage chip shortage.
Cisco Systems Inc. has issued a profit forecast that has raised concerns among investors, indicating that escalating memory chip prices are impacting its bottom line. The company projected an adjusted gross margin of 65.5% to 66.5% for the current quarter, falling below the 68.2% estimated by analysts.
This outlook overshadowed a strong sales forecast, which is being bolstered by increasing revenue from artificial intelligence. Cisco, a major networking equipment manufacturer, is contending with a widespread shortage of memory chips. The company is actively managing this challenge by increasing prices and renegotiating customer contracts.
