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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
CSCO,
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.
ANET,
and Juniper Networks Inc.
JNPR,
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
DJIA,
which counts Cisco as a component, has declined 6%. The broader S&P 500 index
SPX,
is off 10% this year.
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