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Aug. 18, 2022, 8:21 a.m. EDT

Cisco earnings and revenue forecast quell fears of slowdown, stock rises

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By Jon Swartz and Jeremy C. Owens

Cisco Systems Inc. shares rose in extended trading Wednesday after the networking company forecast stronger-than-expected revenue growth in the months ahead, quelling fears of a slowdown in businesses’ technology spending.

Cisco  /zigman2/quotes/209509471/composite CSCO +2.02%  reported net income of $3.4 billion, or 68 cents a share, while revenue was flat from the year before at $13.1 billion. After adjusting for stock compensation and other effects, Cisco reported earnings of 83 cents a share, down from 84 cents a share a year ago.

Analysts surveyed by FactSet on average had expected adjusted earnings of 82 cents a share on revenue of $12.73 billion. Shares gained more than 3% in after-hours trading immediately following the results, after closing with down slightly in regular trading at $46.66.

“We had a strong end to our fiscal year thanks to our Q4 performance,” Cisco Chief Executive Chuck Robbins said in a statement. “Our teams executed well in the midst of an incredibly dynamic environment, resulting in the highest full-year non-GAAP earnings per share in the history of the company.”

Cisco’s Product ($9.69 billion) and Service ($3.41 billion) businesses were flat year-over-year. The company’s top business segment, Secure, Agile Networks, which includes data-center networking switches, dipped 1% to $6.09 billion during the fourth quarter.

Gradual easing of supply constraints should lead to stronger revenue growth than expected in the current quarter and beyond, Robbins said in a conference call with analysts.

Still, improved availability of components such as semiconductors and power supplies and sub-components in China isn’t likely to make a dent in record backlog of more than $15 billion, Cisco Chief Financial Officer Scott Herren told MarketWatch. He added supply constraint will remain an issue throughout fiscal 2023.

“We are not demand-constrained but supply-constrained,” Herren said. “This issue will take a long time to unwind.”

Cisco’s previous earnings report sparked concerns about business spending on technology , as the company’s forecast missed expectations. At the time, executives focused more on supply-chain issues and effects from the Russian invasion of Ukraine as reasons for the miss, and fears of a widespread slowdown for purchases of networking gear have dissipated amid solid results from competitors like Arista Networks Inc. /zigman2/quotes/206966450/composite ANET +5.20% and Juniper Networks Inc. /zigman2/quotes/207361368/composite JNPR +2.54% .

Wednesday’s forecast was even more important, as it provided executives’ expectations for the full new fiscal year, which began Aug. 1. Cisco’s forecast calls for adjusted earnings of $3.49 to $3.56 a share on revenue growth of 4% to 6%, after the previous fiscal year wrapped with adjusted earnings of $3.36 a share and sales of $51.56 billion. Analysts on average were projecting fiscal-year adjusted earnings of $3.53 a share on sales of $52.72 billion, which would reflect revenue growth of 2.2%.

For the fiscal first quarter, Cisco executives guided for 82 cents to 84 cents a share in adjusted profit and revenue growth of 2% to 4% in the fiscal first quarter. Analysts were forecasting adjusted earnings of 84 cents and a year-over-year revenue decline of roughly 3%, according to FactSet.

Cisco’s stock is down 26% so far in 2022, while the Dow Jones Industrial Average  /zigman2/quotes/210598065/realtime DJIA +1.88% , which counts Cisco as a component, has declined 6%. The broader S&P 500 index  /zigman2/quotes/210599714/realtime SPX +1.97%  is off 10% this year.

US : U.S.: Nasdaq
$ 41.34
+0.82 +2.02%
Volume: 23.22M
Sept. 28, 2022 4:00p
P/E Ratio
Dividend Yield
Market Cap
$166.49 billion
Rev. per Employee
$ 116.69
+5.77 +5.20%
Volume: 2.12M
Sept. 28, 2022 4:00p
P/E Ratio
Dividend Yield
Market Cap
$33.75 billion
Rev. per Employee
$ 26.68
+0.66 +2.54%
Volume: 2.77M
Sept. 28, 2022 4:00p
P/E Ratio
Dividend Yield
Market Cap
$8.39 billion
Rev. per Employee
US : Dow Jones Global
+548.75 +1.88%
Volume: 320.97M
Sept. 28, 2022 5:07p
+71.75 +1.97%
Volume: 2.22B
Sept. 28, 2022 5:07p

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