Cisco Jumps on an Earnings Beat and Better-Than-Anticipated Steering: 6 Takeaways

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Not like heaps of tech companies reporting in most modern weeks, Cisco Programs (CSCO) went into earnings going by means of a blinding low bar. And it cleared that bar comfortably.

On Thursday afternoon, Cisco reported October quarter (fiscal first quarter) earnings of $11.93 billion (down 9% annually) and non-GAAP EPS of $0.76 (down 10%), topping FactSet consensus estimates of $11.85 billion and $0.70.

The networking giant also guided for January quarter earnings to be flat to down 2% annually, and for non-GAAP EPS to be in a vary of $0.74 to $0.76. That respectively compares with consensus estimates for a 3.4% earnings tumble and EPS of $0.73.

Individually, Cisco launched that it has hired Autodesk (ADSK) CFO R. Scott Herren to be its CFO, effective Dec. 18. The news comes three months after Cisco disclosed that CFO Kelly Kramer would be retiring as soon as a successor is in get.

As of the time of this text, Cisco’s inventory is up 7.5% after hours to $41.55. Shares had long gone into earnings down 19% on the year, as markets digested the essential top-line pressures going by means of heaps of Cisco undertaking hardware companies.

Here are some key takeaways from Cisco’s earnings document and catch in contact with.

1. Chuck Robbins Instantaneous Request Trends Are Improving Some

“We’re impressed by the indicators of enchancment in our industry as we continue to navigate the pandemic and other uncertainties,” said Cisco’s CEO on the call.

Robbins also noted seek info from amongst “industrial” (SMB and midmarket) purchasers picked up following a rough July quarter, and that Cisco is now seeing more sizable undertaking deals in its pipeline. He added Cisco’s gross sales to public sector purchasers are taking good thing about heaps of stimulus efforts correct by means of the sphere, as successfully as from increasing gross sales to education and U.S. federal purchasers.

2. Product Orders Had been Aloof Rather Blended

Cisco’s whole product orders fell 5% annually, after dropping 10% within the July quarter.

Enterprise orders were a clear relaxed problem, with their annual decline increasing to 15% from the July quarter’s 7%. On the different hand, Cisco’s industrial product portray decline narrowed to eight% from 23%, and public sector orders went from being down 1% to up 5%. Provider provider orders were down 5% for the 2d straight quarter.

Cisco’s October quarter product orders. Source: Cisco.

Robbins bought more than one questions about the call about undertaking orders. He insisted he’s now not too thinking about them, while pointing out that Cisco now has more sizable undertaking deals in its gross sales funnel and predicting that videoconferencing-linked investments that will most definitely be made as workers launch returning to offices will give undertaking gross sales a desire.

3. Hardware Gross sales Fell Sharply All over again

Cisco’s Infrastructure Platforms section — amongst other issues, it covers gross sales of switches, routers, servers, Wi-Fi equipment and linked instrument — posted earnings of $6.34 billion, below a $6.45 billion consensus. With every COVID and aggressive pressures weighing, the section’s earnings changed into down 16% annually for the 2d quarter in a row.

Kramer said Cisco noticed earnings declines correct by means of its switching, routing, info center (server/storage) and wi-fi product strains. The Catalyst 9000 campus switch line and Wi-Fi equipment supporting the more contemporary Wi-Fi 6 customary were said to be solid parts.

4. Tool and Security Weren’t Ideal, Nonetheless Had Some Intellectual Spots

Cisco’s Capabilities section earnings came in at $1.38 billion, down 8% annually and a little below a $1.4 billion consensus. Nonetheless, Kramer indicated the decline had to discontinuance with decrease gross sales of unified communications and telepresence endpoint devices (IP phones, in-get of job videoconferencing equipment, etc.).

Though it be no Zoom (ZM) , the Webex videoconferencing industry changed into said to hold seen solid earnings and utilization growth, with monthly contributors having near to doubled since March to practically 600 million. And with 78% of Cisco’s instrument earnings now coming from subscriptions (up from 71% a year within the past), the company’s deferred product earnings rose 15%.

Security earnings rose 6% to $861 million, topping consensus by $5 million. “Solid double-digit growth” changed into reported for Cisco’s cloud security offerings, which consist of its Duo authentication platform and its cloud-basically basically based Umbrella Cyber net gateway. From the appears to be like of issues, Cisco’s sizable, on-premise, security appliance industry had a rougher time.

5. Some Inventory Was as soon as Repurchased

Cisco supplied lend a hand some inventory, but now not at the heady rates seen in some most modern years.

$800 million changed into spent to repurchase about 20 million shares closing quarter at a median value of $40.44. For comparability, $1.5 billion changed into used to return cash to shareholders by means of Cisco’s quarterly dividend.

6. Cisco Appears to be Making Some Growth with Cyber net/Cloud Giants

“We’re making sizable strides with our webscale prospects, with our fourth consecutive quarter of solid double-digit growth,” said Robbins. He later indicated that seek info from from Cyber net/cloud giants (i.e., hyperscalers) gave a meaningful boost to Cisco’s provider provider product orders at some stage within the quarter.

Robbins’ comments come a year after Cisco launched a significant diagram alternate for its efforts to purchase over hyperscalers, pointing out it would possibly perchance perchance well perchance sell switching/routing processors, optics and its IOS XR 7 router OS on a standalone foundation to the third-occasion hardware makers the hyperscalers work with. With the hyperscalers historically accounting for entirely a little portion of Cisco’s earnings, and now accounting for a extraordinarily sizable percentage of world provider provider capex, Cisco has solid incentives to hold a look at out laborious to develop its publicity to them.

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