Burn, backlog, burn: Cisco inferno clears away supply chain hassles

As rival Arista admits Meta and Microsoft now account for at least ten percent of its business

Cisco has again increased revenue guidance thanks to an improving supply chain that's given the networking giant confidence it will sell more stuff in the second half of 2023.

Like many hardware companies, Cisco struggled to get the parts it needs to make product during the plague years of 2020 and 2021, resulting in long delays for customers and a bulge of backlogs on Cisco's books.

The nabob of networking today told investors who tuned in to its Q2 22/23 earnings call that they can expect a sales surge in the second half of calendar year 2023 thanks to supply chain matters easing.

"While components for a few product areas remain highly constrained, we did see an overall improvement," observed CEO Chuck Robbins.

"Combined with the aggressive actions our supply chain and engineering teams took to redesign hundreds of our products, we increased product deliveries and saw significant reductions in customer lead times," he added. "As our product deliveries increased, channel inventories also declined as our partners were able to complete customer projects."

Execs claimed lead times for products are trending towards the pre-pandemic normal, and Cisco's ability to deliver on orders from its backlog will contribute to "significant growth" in the second half of the financial year. The business forecast between 11 and 13 percent growth year on year for Q3, and full year growth of between 9 and 10.5 percent.

Which will make for nice numbers, since Cisco posted Q2 revenue of $13.6 billion on Wednesday – up seven percent year over year and its second highest ever quarterly revenue total. Net income was $2.8 billion. Recurring revenue now delivers 44 percent of the cash that arrives in Cisco's coffers.

Cisco's collaboration business – across WebEx services and hardware – dipped ten percent due to "declines in meetings and collaboration devices." Well, the plague couldn't last forever, right?

Enterprise and commercial buyers delivered a double-digit sequential rise. Cisco's UCS servers delivered what CFO Scott Herren called "nice growth" in revenue. "And at least based on our calculations, we feel like we're gaining share there as well," he added.

CEO Robbins also touched on service provider and web-scale sales, and revealed Cisco has "roughly 35 use cases or franchises within the largest players, and we've actually been designed into 18 of those at this point."

"And we are very confident that we'll continue to get designed in … we just got notice about a new design win today."

Robbins didn't name names of its colosso-customers, but rival networking vendor Arista did. On Monday it named Meta and Microsoft as huge contributors to full year revenue of $4.4 billion.

"We expect both of them to once again contribute greater than ten percent of our total revenue in 2023," said president and CEO Jayshree Ullal.

Full-year revenue handily topped guidance offered in 2021. Q4 revenue of $1.3 billion was an increase of 54.7 percent year on year. Full year net income was $1.35 billion, of which Q4 contributed $427 million.

The world's other significant standalone networking company, Juniper, reported 12 percent annual revenue growth in late January, when it wrapped up its financial year with news of $5.3 billion coming through the doors and net income of $471 million – up 86 percent year over year. ®