Key revenue estimates for Cisco, but apparently not enough

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Cisco

Systems shares fell even as management reported better-than-expected results for its fiscal second quarter and issued strong financial guidance for the current three-month period.

While results were strong, expectations had risen ahead of the announcement, so the numbers may be lower than what are known as the whisper numbers – informal forecasts circulating among investors. Cisco shares fell 5.4% late in the session to $ 45.90.

For the quarter ended Jan. 23, Cisco (ticker: CSCO) reported revenue of $ 12 billion, stable from a year ago, and slightly ahead of Street’s consensus of 11.9 billions of dollars. The company had expected revenue to be stable at 2%. Adjusted earnings, not prepared in accordance with generally accepted accounting principles, were 79 cents per share, above both the 74-76-cent range that management had expected and the street consensus of 76 cents.

Cisco said total product orders were up 1% from the quarter last year.

In an interview with Barron’s On Tuesday evening, Cisco CEO Chuck Robbins said he believes the company has had a “strong quarter, continuing on the road to recovery.” He said Cisco had improved growth rates from last quarter in each business segment, noting the return to modest positive growth in business activity (which includes small and medium customers) after the three quarters of negative growth which at one point reached -25%.

The company predicted that April quarter revenue will be 3.5% to 5.5% higher than a year ago, before the consensual call from the streets for a 3% gain . Cisco said non-GAAP earnings for the quarter are expected to be 80 to 82 cents a share, in line with estimates at 81 cents.

Revenue produced in the quarter was $ 8.57 billion, ahead of the consensus at $ 8.49 billion. Revenue from infrastructure platforms was $ 6.39 billion, down 3% from a year ago, but slightly ahead of the $ 6.2 billion expected on Wall Street. Apps revenue was $ 1.35 billion, stable from a year ago and in line with estimates. Security revenue reached $ 822 million, up 10% from a year earlier, but slightly below expectations.

Sales fell 1% in the Americas, 2% in Europe, the Middle East and Africa, and 4% in Asia-Pacific, Japan and China.

The non-GAAP gross margin was 66.9%, down from 66.4% a year earlier.

Cisco said it repurchased $ 801 million of its common stock during the quarter at an average price of $ 42.82 per share. The company has $ 9.2 billion remaining on its current buyout authorization.

“The metrics indicate it was a good quarter,” Robbins said. “We must now deliver the third quarter and continue our momentum.”

Robbins noted that the company first launched its ‘web-scale’ business, in reference to large cloud providers. He said Cisco saw 100% growth in this business during the quarter and cloud was an industry where Cisco was lagging behind and had the opportunity to increase its market share. Robbins said business was strong with traditional cable companies, but a little weak with traditional carriers. Cisco is always at the forefront of the benefits of deploying 5G wireless networks, Robbins added.

Cisco continues to see double-digit revenue growth from its WebEx video conferencing service, Robbins also said, and noted that the company plans to “get aggressive on marketing” in this segment. While the company has seen increased demand from vertical businesses, particularly financial services and manufacturing, growth in the business segment has been dampened by the pursuit of software in segments deeply affected by the pandemic, such as travel and retail, the CEO said. Barron’s.

Write to Eric J. Savitz at [email protected]