Cisco slumps as memory price spike weighs on margins

Cisco is falling Thursday, despite delivering a beat-and-raise Q2 result after the previous close. Analysts think surging costs of memory chips are the culprit. Here’s some of what they’re saying.

William Blair: “On the margin front, Cisco guided a contraction in non-GAAP gross margins to 66% in the third quarter (down 150 basis points sequentially), citing elevated memory price inflation and higher mix of hardware.”

Barclays: “While the revenue outlook has improved, and AI orders accelerated, we are not seeing enough translation to EPS growth, particularly given the [gross margin] concerns that recently popped up.”

Citi: “CSCO indicated that memory price increases hit the company with [zero] lead time. That said, the company is working to add more flexibility around their terms & conditions framework in order to pass along memory pricing increases faster.”

Evercore ISI: “Though the guide does imply gross margins will be down ~150bps [quarter over quarter] due to a combination of Mix and Memory inflation, CSCO expects to recover some of these headwinds via price increases and other levers.”