(Bloomberg) — Cisco Systems rose about 5% in after-hours trading after the company gave a strong outlook for revenue and profit for the current quarter, indicating customers are starting to invest in computer networks again. .
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The company said in a statement Wednesday that sales for the fiscal fourth quarter ending in July will be between $13.4 billion and $13.6 billion. This compares with the average analyst estimate of $13.5 billion. Excluding certain items, earnings are expected to be 84 cents to 86 cents a share, compared with the forecast of 84 cents.
The stock price briefly rose to $54.11 on this outlook, but has since pared back some of its gains. The previous close was $49.67, down 1.7% for the year.
Chief Executive Officer Chuck Robbins continues his efforts to reposition Cisco as a provider of networking services and software. The strategy also includes the $28 billion acquisition of Splunk. The transition hasn't completely insulated the company from fluctuations in corporate hardware purchases. and carrier customers.
Cisco reported a 4% increase in orders (a measure of future revenue) last quarter, including Splunk. Everything else was flat, but analysts were concerned about a decline. Orders were down 12% in the previous quarter.
For the full fiscal year 2024, sales are expected to be between $53.6 billion and $53.8 billion. In comparison, the average forecast is $53.6 billion. According to Cisco, fiscal year 2025 revenue is expected to increase at a low-to-mid single-digit rate.
„Customers are consuming equipment shipped in the past several quarters in line with our expectations,“ Chief Financial Officer Scott Herren said in a statement. “As a result, we think demand is stabilizing.”
Robbins said on a conference call with analysts that customers will complete their backlog by July.
Cisco's adjusted gross margin (the percentage of sales remaining after production costs) is expected to be between 66.5% and 67.5% for the quarter.
In Cisco's fiscal third quarter, which ended April 27, revenue contracted 13% to $12.7 billion. Earnings, excluding certain items, were 88 cents per share. Analysts had expected sales of $12.66 billion and earnings of 82 cents a share.
Cisco noted that its relationships with large data center operators are improving. These so-called hyperscalers, such as Microsoft Corp. and Alphabet Inc.'s Google, have pioneered the use of in-house networking equipment, and Cisco has cut some of its cloud computing spending.
But now Cisco is benefiting from spending on AI infrastructure. Cisco's Herren said the company is „on track“ to receive $1 billion in orders from companies investing in hyperscalers and AI.
During the quarter, Cisco completed its acquisition of data processing software maker Splunk. This addition increased his revenue by $413 million.
The Splunk acquisition further increases Cisco's deferred revenue and helps it move from relying on one-time purchases of software and services to long-term contracts. The company currently has recurring revenue that accounts for more than half of its total sales and approximately $39 billion in outstanding performance obligations, Herren said.
Splunk CEO Gary Steele will become president of Cisco, which will focus on a „go-to-market“ strategy. Meanwhile, Jeff Sharitz, the company's chief customer and partner officer, will retire in mid-July.
„Mr. Steele is well known for his operational excellence, and in this new role, he will work closely with Mr. Robbins to set and execute Cisco's strategic plans and goals,“ the San Jose, Calif.-based company said in a statement. I will do it,” he said.
(Updates with CFO comment in 11th and 12th paragraphs.)
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