Cisco stock has worst day since 2022 as memory prices pressure margins

Cisco Systems Shares closed 12% lower on Thursday as rising memory prices put pressure on the networking company’s margins. It’s the stock’s worst day since 2022.

Strong demand for AI chips has led to a global memory shortage, causing the component’s costs to skyrocket. Large orders for data center memory have limited production capacity for other devices, including smartphones.

This has created uncertainty for many technology companies, including consumer electronics manufacturers. Apple And Dell as well as chip manufacturers QualcommHe was referring to this shortcoming when he issued weak guidance on February 4. Now Cisco is feeling the pinch.

Cisco CEO Chuck Robbins addressed memory price increases in the market during the company’s earnings call on Wednesday. Robbins said Cisco will raise prices, revise contracts and negotiate terms to account for improving component prices.

“From a memory standpoint, we’re going to control what we can control,” Cisco finance chief Mark Patterson said on the call.

Company reported better than expected quarterly results On Wednesday, however, shares fell nearly 7% after Cisco issued a mediocre forecast.

Product gross margin in the quarter was 66.4%, down 130 basis points from the prior year, which Patterson said was “primarily driven by adverse impacts from mix and higher memory costs.”