Cisco Q2 outlook well below expectations; Shares slide 8%

CNBC.com with Reuters
John Chambers, CEO, Cisco
Simon Dawson | Bloomberg | Getty Images

Cisco's shares were set to open about 13 percent lower after the network equipment maker forecast a steep drop in revenue, prompting at least two brokerages to downgrade its stock and 12 to cut their price targets.

Cisco Systems said sales in the current quarter will drop by as much as 10 percent, shocking analysts who had expected revenue to grow in the period. The company also warned it was expecting business to be "challenging" for the next few months.

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On CNBC's "Closing Bell" Cisco CEO John Chambers said that "CEOs are very concerned and probably more cautious about next year than I've seen them in quite a while ... " He added that recent government activity contributed to the "lack of confidence that people are seeing."

Chambers later told CNBC that he is likely to stay as CEO for at least two more years, putting him at the latter end of the range he'd given previously for his expected retirement.

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The company also said it would boost its stock buyback program by $15 billion.

"The quarter you did not want to end in October was this quarter with all the uncertainties going on. The government business was down a little bit, but not as bad as we thought," he said.

Cisco posted fiscal first-quarter earnings, excluding items, of 53 cents per share, up from 48 cents a share in the year-earlier period.

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Revenue increased to $12.09 billion from $11.88 billion a year ago.

Analysts had expected the network equipment maker to report earnings excluding items of 51 cents a share on $12.34 billion in revenue, according to a consensus estimate from Thomson Reuters.

The company said net income dropped to $2 billion from $2.1 billion in the year-ago period.

—By CNBC.com with Reuters

—CNBC's Jon Fortt contributed to this report.