Cisco’s supply chain shortages are history, AI networking gains momentum
2 mins
Published by: Alina Chernomorets
20 March 2024, 05:07PM
Cisco experiences a slowdown in new orders due to a backlog of uninstalled gear, impacting revenues, says CEO Chuck Robbins.
Delays stem from customers taking time to deploy received products, shifting supply chain issues downstream.
Despite positive Q1 product revenue growth, it's lower due to the backlog's impact on new orders.
Cisco's CFO Scott Herren notes eased overall supply chain constraints and returning ship and lead times to normal levels.
AI networking gains traction, with significant orders expected for AI infrastructure in fiscal year 2025, according to Robbins, Arista, and Juniper.
Cisco’s supply chain shortages are history, AI networking gains momentum
Cisco faces slowdown in new orders due to a backlog of purchased but uninstalled gear, impacting its revenues, according to CEO Chuck Robbins. Customers are taking time to deploy the products they've received, causing delays in new orders.
The supply chain issues have shifted downstream to implementation by customers and partners, resulting in a slowdown in new orders until the backlog is cleared. While product revenue growth in Q1 was positive, it's lower compared to previous quarters due to the backlog.
Cisco's CFO Scott Herren confirms that overall supply chain constraints have eased, with ship and lead times returning to normal levels. Additionally, AI networking is gaining momentum, with significant orders expected for AI infrastructure in fiscal year 2025.
We see continued momentum in AI with three of the top four customers deploying our hyperscale Ethernet AI fabric. We also already have line of sight to over $1 billion in orders for AI infrastructure for major cloud providers in fiscal year 2025.
Robbins highlights the growth potential of the AI switching market, with forecasts exceeding $10 billion by 2027. Other vendors like Arista and Juniper also report growth in AI networking, expecting trials and deployments to increase in the coming years.
Our optimism is driven by our strong wide-area footprint, the rapid traffic growth that continues in many of these customers’ environments and the opportunity to capitalize on the adoption of large language model and the build-out of AI clusters, where we are seeing strong customer engagement that is driving optimism regarding our opportunity to benefit as the industry increasingly considers Ethernet as the right choice for a wide array of AI-ML use cases, including front-end, back-end, in-print and storage networks
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