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 -0.15% 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 +1.67% and Juniper Networks Inc. /zigman2/quotes/207361368/composite JNPR +0.19% .
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 -0.43% , which counts Cisco as a component, has declined 6%. The broader S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.21% is off 10% this year.