Cisco reported quarterly financials far below most Wall Street expectations. Further, the company warned that it expects to record revenues in its coming quarter that are also below expectations.

The situation sent the company's shares tumbling in trading this week after the news. But Cisco's tribulations do not stem from customers avoiding the company's products, including its offerings in the telecom space.

"Demand is not the problem," reported the financial analysts at Raymond James.

Cisco CEO Chuck Robbins pointed to two very clear reasons driving the company's misses: The Russian invasion of Ukraine and the COVID-19 lockdowns in China.

"If you recall, our quarter ends at the end of April. Most of what you've heard from others, they are quarters into the end of March," Robbins said during his company's quarterly conference call, according to a Seeking Alpha transcript. "So we experienced an entire quarter of the China lockdowns. In Shanghai, it was from March 27 until today."

Robbins explained that Cisco lost $300 million due to its inability to ship power supply components out of China. The country's lockdowns remain in place – affecting a wide array of technology companies – though Robbins suggested that the situation could improve starting next month.

Figure 1: (Source: Cisco)

Cisco also said it recorded a $200 million impact due to its decision to shutter operations in Russia. Cisco has joined a number of other massive telecom equipment suppliers – including Intel, Nokia and Ericsson – in withdrawing from Russia due to the country's ongoing invasion of Ukraine.

Nonetheless, "we continue to see strong demand resulting in record backlog," Robbins said.

However, the analysts at Raymond James did note that the pace of Cisco's customer orders slowed to 8% in the company's most recent quarter, down from 30% in previous quarters.

"Cisco implemented three rounds of price increases that we assert encouraged customers to place orders earlier than they would have otherwise," they wrote in a note to investors. "Further, customers worry about long lead times and need to place orders earlier than usual."

Cisco, like several other vendors, has been increasing prices on its products due to factors including supply chain tightening and overall inflation. Company officials said those price hikes helped raise Cisco's financial margins, even as it struggles to ship products amid component shortages.

Robbins suggested that Cisco may not be finished raising prices, based on ongoing troubles in its supply chain.

Cisco reported revenues of around $12.8 billion in its recent fiscal third quarter, and said it expects around $12.7 billion in its next fiscal fourth quarter. The Wall Street Journal reported that those numbers were 4% and 8% below expectations, respectively.

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— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano