Cisco posts double-digit profit growth despite supply chain issues

Cisco executives confirmed the company implemented a series of price hikes to help offset increased supply costs caused by a global component shortage, but said the benefits likely won’t show up in its financial results until late 2021 or 2022.

On the company’s earnings call, CFO Scott Herren said it rolled out “very selective, very targeted” price increases on August 7, adding these impacted only “the products where we were seeing the higher component costs.” But he explained “it takes a while for those costs to flow through our standard costing system and show up in the cost of goods sold.”

“We always honor quotes that are out there for 30 days beyond that pricing because many of those quotes were produced before the price increase was put in,” he said. “So, you know, scroll 30 days ahead from August 7 before the first orders come in with those higher prices, and then it takes a while for those orders to come in, get built, and shipped back out to customers and for us to realize the benefit of that on the top line.”

Herren said the price increases would likely begin to show up in its fiscal Q2 and Q3 results (which roughly equate to calendar Q4 2021 and Q1 2022).

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The comments came as Cisco reported results for its fiscal Q4 2021 (the three months ending July 31, 2021).

Revenue of $13.1 billion was up 8% year on year, with net income of $3 billion up 14%. By segment, Infrastructure Platforms revenue from its switches and routers increased 13% to $7.5 billion, while Applications revenue fell 1% to $1.3 billion. Security revenue rose 1% to $823 million. Including $4 million from other products, total product revenue grew 10% to $9.6 billion. Services revenue was up 3% to $3.4 billion.

During the call, CEO Chuck Robbins said it achieved “very balanced performance” across its product portfolio in the quarter.

“In Q4, we saw double-digit revenue growth in campus switching, Catalyst 9000, high-end routing, wireless and in our Zero Trust solutions, along with strength in our security endpoint portfolio. We also had very strong adoption of our Acacia optical solutions driven by increasing customer demand for leading-edge technology to address their growing bandwidth requirements,” he said.

Robbins stated orders for 400G ports were up 668% in the quarter, with 400 customers already deployed and orders tallying nearly 180,000 ports. Meanwhile, he said its enterprise business “had the best quarter in terms of product orders in over a decade” with order growth of 25%.

But the CEO warned that “while we are seeing increasing demand for our technology” the company expects supply challenges and cost impacts to continue through the remainder of 2021 and possibly into the first half of 2022.