Spirent Communications (LSE:SPT)’s share price plunged by more than 30% on Wednesday morning after the company released a profit warning for the third quarter.
The provider of automated test solutions for next-generation devices and networks said its revenue is expected to be “down broadly 20 per cent” for the first nine months of 2023, “in line with the reduction seen in the first half”.
It expects depressed revenue for the rest of the financial year and said “negative operating leverage will impact operating profit very materially”, but is preparing to take cost precautions.
The FTSE 250-listed company said it lost momentum on order intake in the third quarter, with orders down 24% in the first three quarters compared to the same period of last year.
Ethernet demand was “particularly challenged” in the third quarter, it said, especially after the Chinese government reduced its spending plans, but order intake growth was “good” in Positioning solutions, which supplies military, automated vehicle and space sectors.
Spirent also said 5G launches have “remained sluggish” due to the complexity of deployment and the cloud-native core network, but expects an acceleration in 2024 as demand-side drivers increase.
Spirent’s chief executive officer Eric Updyke said: "We saw positive trading momentum and pipeline build in the second quarter which gave us confidence for the remainder of the year, however a slow summer and disappointing September meant that we fell materially short of our expectations for the third quarter.
“In the long run, our drivers remain intact, but the near term orderbook isn't strong enough to support our final quarter expectations, and our outlook for the full year reduces accordingly."