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What To Expect From Cisco’s Q4 Earnings As Supply Chain Issues And Revenue Declines Loom

Gina Narcisi

The networking giant was seemingly harder hit by supply chain issues and other macro issues compared to competitors such as Arista Networks, Juniper Networks, and Extreme Networks. Here’s what to look for during Cisco’s Q4 fiscal quarter of 2022.

Cisco CEO Chuck Robbins
Cisco CEO Chuck Robbins

Supply Chain Challenges

Arguably one of the biggest issues the company is facing right now is shortages and longer wait times for products and components due to supply chain constraints.

Robbins told CRN in June that the supply chain crisis won’t necessarily accelerate the everythin-as-a-service (XaaS) trend, something that Cisco has been hotly pursuing across its entire portfolio.

“Considering that a lot of our services have hardware built into the core service, I wouldn’t say that [supply chain issues] are a significant accelerant because I’ve actually had some conversations where some of our challenges in getting some of these things adopted is actually still supply chain and trying to get that stuff out there,” Robbins said in an exclusive interview. “I think [XaaS] is not immune to supply chain challenges, unfortunately. For pure SaaS offers, it’s obviously a different story.”

Cisco’s total annual recurring revenue (ARR) was up 11 percent year-over-year in Q3 2022, to $21.9 billion, which fueled an all-time high backlog of well over $15 billion, up 10 percent sequentially and up 130 percent year over year. Cisco’s software backlog is growing 80 percent year over year. Product ARR growth climbed 18 percent compared to Q3 2021.

Robbins said that there’s a $2 billion in software backlog because that software is connected to a piece of hardware. That revenue can’t be recognized until the hardware ships. Once the supply chain challenges start to clear, the company expects normalized software growth rates that will be driven by renewals in fiscal year 2023 and subscription-based enterprise wireless and data center networking offerings.

 
Gina Narcisi

Gina Narcisi is a senior editor covering the networking and telecom markets for CRN.com. Prior to joining CRN, she covered the networking, unified communications and cloud space for TechTarget. She can be reached at gnarcisi@thechannelcompany.com.

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