Cisco shares had their worst day since 2022 as memory prices put pressure on margins

Cisco Systems Shares fell as much as 12% on Thursday as rising memory prices pressured the networking company’s margins. This is the stock’s worst day since 2022.

Strong demand artificial intelligence chips Nvidia caused global shortage the amount of memory that caused the cost of the component. Large orders for data center memory have limited manufacturing capacity for other devices, including smartphones.

This has created uncertainty for a number of technology companies, including consumer electronics manufacturers Apple and Dell as well as chip makers Qualcommit showed deficits when released weakly management On February 4. Now Cisco is feeling the pinch.

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

“From a memory perspective, we’re going to be looking at what we can manage,” Cisco CFO Mark Patterson said on the call.

The company reported better than expected quarterly results on Wednesday, but shares fell about 7% when Cisco issued a average forecast.

Product gross margin for the quarter was 66.4%, down 130 bps from a year earlier, which Patterson said was “primarily due to negative mix effects and higher storage costs.”