Cisco Systems Inc. (NASDAQ:CSCO) experienced a roughly 4% increase in after-hours trading following its optimistic sales and profit forecast for the current quarter, indicating a resurgence in investments in computer networks by some customers.
In a statement on Wednesday, Cisco projected sales of $13.4 billion to $13.6 billion for the fiscal fourth quarter ending in July, slightly above the average analyst estimate of $13.5 billion. The company anticipates earnings, excluding certain items, to be in the range of 84 cents to 86 cents per share, in line with predictions.
The upbeat outlook propelled Cisco’s shares to reach as high as $54.11 in extended trading, though they later moderated some gains. Before this announcement, the stock had closed at $49.67, down 1.7% for the year.
CEO Chuck Robbins continues to advance Cisco’s transformation into a provider of networking services and software, highlighted by the $28 billion acquisition of Splunk Inc. However, the company remains susceptible to fluctuations in hardware purchases by corporate and telecommunications customers.
Cisco reported a 4% increase in orders last quarter, factoring in Splunk, signaling potential future sales growth. Although orders were flat otherwise, this stability was welcomed by analysts who had been concerned about a decline following a 12% drop in the previous period.
For fiscal 2024, Cisco expects revenue to range between $53.6 billion and $53.8 billion, aligning with the average estimate. Sales are projected to grow by a percentage in the low- to mid-single digits in fiscal 2025.
According to Chief Financial Officer Scott Herren, “Customers are consuming the equipment shipped over the last few quarters in line with our expectations,” indicating stabilization in demand.
During the call, Robbins noted that customers are expected to clear their backlog of orders by July. Additionally, Cisco forecasts an adjusted gross margin of 66.5% to 67.5% for the current quarter.
In the fiscal third quarter, which concluded on April 27, Cisco reported a 13% decline in revenue to $12.7 billion. However, profit stood at 88 cents per share, surpassing analyst expectations.
Following the acquisition of Splunk, Gary Steele, Splunk’s CEO, will assume the role of Cisco president focused on the company’s “go-to-market” strategy. Meanwhile, Jeff Sharritts, Cisco’s chief customer and partner officer, will depart in mid-July.
Cisco’s leadership remains confident that the temporary slowdown in orders will dissipate as customers proceed with installing previously purchased equipment, paving the way for renewed investments.
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