Cisco Systems Inc. (NASDAQ: CSCO) is the biggest decliner in the past five sessions among technology stocks in the Technology Select Sector SPDR Fund (NYSEARCA: XLK).

The networking gear giant gapped down 9.83% on November 16 after issuing second-quarter and full-year sales forecasts that fell below analysts' views. 

The stock skidded another 0.59% on November 17, ending the week 9.19% lower. You can easily see that decline on the Cisco chart. 

In the company's earnings conference call, Cisco CEO Chuck Robbins said its customers are now taking time to onboard and deploy new product deliveries after strong demand in the previous three quarters. 

"While the macro challenges we have discussed still exist, we believe this implementation phase is the primary reason for the slowdown in new orders," Robbins said. 

He added that the company observed this pattern mostly in its larger enterprise, service provider and cloud customers, with the most pronounced trend in October.

A "temporary" phase

"Based on our analysis, we believe this phase is temporary and estimate there is an additional one to two quarters' worth of shipped orders in customers' hands still waiting to be deployed," he said.

Robbins noted that this has near-term consequences for revenue and the outlook for the next few quarters.

The company expects product order growth rates to increase in the second half of the current fiscal year. That means sometime after February, as Cisco is in its second quarter of fiscal 2024. 

Cisco's disappointing forecast came despite a first quarter that topped views, as you can see using MarketBeat's Cisco earnings data. The company beat expectations on both earnings and revenue, as it has for the past six quarters. However, as the market is a discounting mechanism, the big factor in stock price valuations is what's happening next.

When reported in early November, Cisco's revenue warning tracks with guidance issued by smaller networking gear rival Extreme Networks Inc. (NASDAQ: EXTR). 

Growth slowing across the industry

The Extreme Networks chart shows a selloff exacerbated by disappointing revenue guidance. The Extreme Networks CEO emailed MarketBeat, "As far as slowed growth, we are seeing it across the industry." 

He added that macro-environmental trends affect sales, including recession, higher interest rates, and economic challenges in key regions.

Meyercord also presaged Cisco's words, telling MarketBeat, "Given the current uncertainty of the macro environment and the fact that our channel partners are working through the delivery of a significant amount of backlog which requires deployment, we expect it to take a few quarters to normalize."

While Cisco, Extreme and some other networking stocks, such as Juniper Networks Inc. (NYSE: JNPR) are trading well off previous highs, industry leader and S&P 500 component Arista Networks Inc. (NASDAQ: ANET) advanced 3.77% in the past week and is holding above its 10-day moving average.

Cybersecurity giant seeing similar slowdown

There's still more news to make tech investors nervous: Palo Alto Networks Inc. (NASDAQ: PANW) issued guidance for the current quarter and fiscal year that came in below analysts' forecasts for billings. 

The cybersecurity company reported the same day as Cisco, casting doubt on the ability of enterprise customers to continue paying for IT spending in the foreseeable future. 

CEO Nikesh Arora downplayed the weaker-than-expected guidance in the earnings conference call, saying, "I am not concerned about the demand for cybersecurity for this quarter and upcoming quarters, nor am I concerned about our ability to execute."

He added that the billings variability results from the company's customer payment conversations.

"Cosmetic impact" to business

He said that is validated by the company's remaining solid performance obligation, or the sum of deferred revenue and backlogged the company must deliver. 

Palo Alto Networks is saying something similar to Cisco and Extreme: There's plenty of order backlog yet to be delivered, and the effects of a revenue slowdown should be temporary.

The Palo Alto Networks chart indicates that investors see the same phenomenon at the company, as the stock initially gapped down, but not nearly to the degree of Cisco. Palo Alto Network shares regained the lost ground and ended the November 17 session with a gain.