Cisco Delivers Slight Beat as Revenue Grows 8%

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  • Cisco exceeded quarterly estimates, but earnings guidance was just slightly off.
  • The networking hardware maker called for 5% to 7% revenue growth in the new fiscal year, more than analysts had expected.

Cisco shares moved slightly lower in extended trading on Wednesday after the networking hardware company reported earnings that exceeded analysts' expectations.

Here's how the company did:

  • Earnings: 84 cents per share, adjusted, vs. 82 cents per share as expected by analysts, according to Refinitiv.
  • Revenue: $13.13 billion, vs. $13.03 billion as expected by analysts, according to Refinitiv.

Revenue grew about 8% year over year in the fiscal fourth quarter, which ended on July 31, according to a statement. In the previous quarter revenue rose almost 7% on an annualized basis. Gross margin narrowed to 63.6% from 63.9% in the prior quarter.

"Looking ahead we expect the supply challenges and cost impacts to continue through at least the first half of our fiscal year, and potentially into the second half," CEO Chuck Robbins told analysts on a conference call. In May, Cisco had indicated it could face supply constraints at least through the end of 2021.

The company raised prices for some products on Aug. 7 because of the supply environment, said Scott Herren, Cisco's finance chief. Cisco is approaching brokers for extra supply and sometimes going to second sources, which bumps up expenses, and it will continue to evaluate whether to adjust prices further, he said.

The Infrastructure Platforms segment, which accounts for most of Cisco's revenue, delivered $7.55 billion in sales. That's up 13% year over year and more than the $7.11 billion that analysts had expected, according to StreetAccount. The segment includes sales of ethernet switches and routers for data centers.

Cisco's Applications segment, which includes sales from Webex video-calling products, produced $1.34 billion in sales. That's down 1% and below the $1.46 billion StreetAccount analyst consensus.

Security revenue came in at $823 million, up 1% but missing the $904.7 million consensus.

In the quarter, Cisco acquired start-ups Kenna Security and Socio Labs, which produces event software. Terms were not disclosed.

With respect to guidance, Cisco said it sees 79 cents to 81 cents in adjusted fiscal first-quarter earnings and revenue growth of 7.5% to 9.5%. Analysts polled by Refinitiv had been expecting 81 cents in adjusted earnings per share on $12.84 billion in revenue, which implies 7.7% revenue growth.

The company's adjusted gross margin will likely narrow to about 63.8% in the fiscal first quarter, from from 65.5% in the fiscal fourth quarter because of extra costs related to supply constraints, Herren said.

Cisco also issued guidance for the 2022 fiscal year, in a break from tradition. It called for $3.38 to $3.45 in adjusted earnings per share and 5% to 7% revenue growth. Analysts surveyed by Refinitiv had expected adjusted earnings of $3.41 per share, along with $51.91 billion in revenue, which works out to 4% growth.

Excluding the after-hours move, Cisco stock is up about 24% since the beginning of the calendar year, trailing the 30% rise of the S&P 500 index over the same period.

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