Cisco Systems shares fell more than 5% in extended trading Wednesday after the company projected its first quarterly revenue decline in more than two years amid continued weak demand.
For the first quarter, Cisco earned an adjusted 84 cents per share, up from 75 cents a year ago, as revenue rose 0.7% to $13.16 billion. Analysts had predicted earnings of 81 cents per share on revenue of $13.09 billion.
“We delivered a solid quarter against a challenging macro environment,” CEO Chuck Robbins said in a news release. “We’re focused on continuing to drive innovation, transform our business and exceed our customers’ expectations.”
But Cisco’s shares dropped 5.1% to $48.46 in the after-hours session Wednesday as it also guided for a revenue decline of 3% to 5% in the current quarter. Analysts were expecting an increase of about 2.4%.
According to Robbins, the weak customer demand the company experienced in the last quarter of 2019 has continued, extending from service-provider offering and emerging markets to larger businesses, including enterprise and commercial.
He cited several geopolitical issues that are weighing on business confidence — from protests in Hong Kong and Latin America to Brexit.
“I did say that we began to see some early signs of some macro impact toward the end of Q4, and then we just basically saw that continue throughout the quarter and obviously the entire quarter was worse than we had expected when we began, and it was fairly broad-based,” Robbins told analysts in an earnings call.
“It feels like there’s a bit of a pause,” he added. “We saw things like conversion rates on our pipeline were lower than normal, which says things didn’t close the way we have historically seen it. … It was really just stuff slipping. We saw some large deals get done but got done smaller.”
Revenue from Cisco’s core business — switches, routers and other networking equipment — fell 1% to $7.54 billion in the first quarter, missing analysts’ estimates, while revenue from the applications and security segments rose 6% and 22%, respectively.