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Cisco reported product revenue in the quarter that was 10% higher than last year.
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Shares of
Cisco Systems
fell in late trading Wednesday after reporting July quarter results and fiscal year 2022 guidance that largely matched expectations. But the company warned that it continues to see pressure from component shortages, a factor that figured into the company’s October quarter outlook.
The stock was down 1.6% in after-hours trading at $54.25.
For the quarter, Cisco (ticker: CSCO) posted revenue of $13.12 billion, up 8% from a year ago and at the high end of the company’s forecast range of 6% to 8% growth. Street consensus had been $13.03 billion. Non-GAAP profit were 84 cents a share, toward the high end of the company’s guidance range of 81 to 85 cents a share. Street consensus called for 82 cents a share. Under generally accepted accounting principles, the company earned 71 cents a share, ahead of the company’s guidance range of 64 to 69 cents a share.
Product revenue was $9.7 billion, up 10% year over year, while service revenue was $3.4 billion, up 3%. Revenues were up 8% in the Americas, 6% in EMEA (Europe, Middle East, and Africa), and 13% in Asia. Infrastructure platforms revenue was up 13%, while applications revenue was off 1% and security revenue was up 1%.
For the full fiscal year, revenue was $49.8 billion, up 1% from a year ago. Non-GAAP profit were up a penny from the previous year at $3.22 a share.
The company said orders in the quarter were up double-digits across all customer markets and geographies, with product orders up 31%, the strongest growth in more than a decade. The company saw particularly strong growth from the webscale cloud business, with orders up 160% from a year ago and 80% sequentially. Cisco reported 25% growth in enterprise customer orders and 41% growth from smaller commercial customers. Overall product orders were up 17% from the fourth quarter of fiscal 2019.
Gross margins on a non-GAAP basis expanded to 65.6% from 65% a year ago, above expectations, with product gross margin improving to 65% from 63.2%.
Cisco said it bought back $791 million of stock in the quarter. The company has $7.9 billion remaining on its current repurchase authorization.
For the fiscal first quarter ending in October, Cisco projects revenue growth of 7.5% to 9.5%, with profit of 79 to 81 cents a share on a non-GAAP basis. Street consensus called for profit of 81 cents. On a GAAP basis, the company projects profit of 61 to 66 cents a share. Cisco sees non-GAAP gross margins slipping to the 63.5% to 64.5% range, falling as much as 2 percentage points from the July quarter, reflecting continued component shortages.
Chief Financial Officer Scott Herren said on a conference call with analysts that the company is taking steps to ensure it can meet customer demand, including buying parts in the spot market and qualifying second sources for some parts. He noted that Cisco installed price increases on some products earlier this month.
In an interview with Barron’s, Herren added that Cisco is seeing shortages of memory, other semiconductors, power supplies, and substrates, among other things, with lead times for some parts stretching to 40 to 50 weeks. He said the company could have produced higher revenue in the quarter if it had more parts. Herren said that higher shipping costs were also a factor, with reduced commercial flights to Asia reducing air freight capacity and boosting costs.
Cisco sees full-year fiscal 2022 revenue up 5% to 7%, a little higher than the Street consensus forecast for 4.4% growth. At the middle of the range, 6% would imply revenue of $52.8 billion, a little above the Street consensus at $51.9 billion. Cisco sees full-year profit of $3.38 to $3.45 a share, with the midpoint a little above the Street consensus at $3.40. Note that Cisco had not previously provided annual guidance; Herren said Cisco’s decision to offer a full-year view reflects growing visibility as the company grows the software portion of its business.
“We continue to see great momentum in our business as customers are looking to modernize their organizations for agility and resiliency,” Cisco CEO Chuck Robbins said. “The demand for Cisco technology is strong with our Q4 performance marking the highest product order growth in over a decade. With the power of our portfolio, we are well positioned to help our customers accelerate their digital transformation and thrive in a hybrid world.”
Robbins added told Barron’s that Cisco isn’t seeing any impact on demand from the rise of the Delta variant of Covid and that customers continue to invest in their networks to adjust to hybrid work environments. “People need a permanently adaptable network,” he said. “The pandemic has exacerbated the need for a flexible architecture.”
Write to Eric J. Savitz at eric.savitz@barrons.com