Cisco Stock Rallies On Order Rebound

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Cisco

shares moved higher in late trading Wednesday, after the networking giant showed signs of improvement in its product orders.

Cisco’s outlook for fiscal 2024 came in below Wall Street estimates, but results for the firm’s fiscal fourth quarter that ended in July topped the company’s forecast for both revenue and profits.

Cisco stock was initially down 2% in late trading after the report, but rebounded after the company made positive comments about its orders during a call with investors. Shares were up about 4% as of 4:45 p.m. ET.

For the fiscal fourth quarter ended July 29, Cisco (ticker: CSCO) posted revenue of $15.2 billion, up 16% from a year ago, ahead of the Wall Street consensus of $15.1 billion, and at the high end of the company forecast for growth of 14% to 16%. On an adjusted basis, the company earned $1.14 a share, ahead of the company’s forecast of $1.05 to $1.07 a share. Under generally accepted accounting principles, Cisco earned 97 cents a share. The company said operating cash flow was $6 billion, up 62% from the year-ago quarter.

The company’s largest unit, “secure, agile networks,” had revenue of $8.1 billion, up 33%. Cisco’s collaboration unit, which includes WebEx, was down 12%.

For the full year, revenue was $57 billion, up 11%, while non-GAAP profits were $3.89 a share.

For the fiscal first quarter, Cisco forecast revenue of $14.5 billion to $14.7 billion; At the middle of the range, that’s in line with the Wall Street consensus at $14.6 billion. Cisco sees non-GAAP profits of $1.02 to $1.04 a share, which is a little above consensus of $1. The company sees GAAP profits for the quarter of 79 to 84 ents a share.

For the full year, Cisco is projecting revenue of $57 billion to $58.2 billion, which at the middle of the range would be just a 1% increase from a year ago, and below the Street consensus at $58.3 billion. Cisco sees full-year adjusted profits of $4.01 to $4.08 a share, which, at the midpoint, is about in line with consensus of $4.04 a share.

CEO Chuck Robbins noted on the earnings call that product orders in the quarter were up 30% sequentially, with double-digit increases in all customer markets.

Cisco faced considerable demand crosswinds heading into the quarter. Last month, shares of both

Nokia

(NOK) and

Ericsson

(ERIC) slumped after the companies warned that the spending outlook for U.S. carriers looked weak for the second half. Nokia blamed both “the macroeconomic environment and customers’ inventory digestion.”

A few weeks after that,

Juniper Networks

(JNPR) shares slumped after the company warned that it was seeing weak bookings activity, in particular from cloud customers. Juniper blamed the same factors that Nokia cited: economic issues and high inventories at customers.

The situation was better at

Arista Networks

(ANET), which posted strong June quarter results, though Arista warned that it was seeing “a return to shorter lead times and reduced visibility.”

Evercore ISI analyst Amit Daryanani wrote in a note previewing the quarter that Cisco faced a volatile environment, “with peers pointing to a digestion period for telecoms and cloud customers,” offset by strong demand from other large businesses. 

Write to Eric J. Savitz at eric.savitz@barrons.com