Cisco Systems, Inc. (Nasdaq: CSCO) reported fiscal third-quarter earnings and revenue beats on Wednesday afternoon, but the stock traded lower on Thursday morning as investors took profits on 2018 share gains. The market wasn’t impressed by Cisco’s modest beats and mostly in-line guidance, but analysts say the report was another step in the right direction for the company.
Cisco reported third-quarter adjusted earnings per share of 66 cents on revenue of $12.46 billion. Both numbers came in slightly above consensus analyst estimates of 65 cents and $12.43 billion, respectively. Revenue was up 4 percent from a year ago.
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Investors may have been disappointed by Cisco’s $3.16 billion in Services revenue on the quarter, up just 3 percent from a year ago. Analysts had anticipated Services revenue of $3.23 billion.
Product revenue was up 5 percent to $9.3 billion, boosted by a 19 percent increase in Applications revenue and an 11 percent increase in Security revenue. Infrastructure Platforms revenue, which includes Cisco’s data center networking switches, was $7.16 billion, beating consensus estimates of $7.14 billion.
Non-GAAP gross margin was 63.9 percent, down from 64.4 percent a year ago.
“We are executing well against our strategy, our innovation pipeline has never been stronger, and we continue to make great progress in transforming towards more software and subscriptions,” CEO Chuck Robbins says in a statement. “I am confident with our position in the industry and the impact we will continue to drive with our customers.”
Looking ahead, Cisco guided for fiscal fourth-quarter EPS of between 68 cents and 70 cents and revenue of between $12.62 billion and $12.86 billion. Guidance was mostly in-line with consensus estimates of 69 cents in EPS and $12.73 billion in revenue.
GBH Insights head of technology research Daniel Ives says Wall Street was hoping for more out of Cisco’s quarter.
“On the guidance front for the July quarter, the company gave an outlook generally in-line with Street expectations, with some isolated soft spots,” Ives says.
In the longer term, however, Ives remains optimistic.
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“We believe Cisco is slowly putting together newer growth engines to help lay the groundwork for a stronger bookings growth trajectory in [fiscal 2018 and 2019].”
GBH Insights has an “attractive” rating and $51 price target for CSCO stock.
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Cisco Systems, Inc. (CSCO) In-Line Guidance Isn’t Good Enough originally appeared on usnews.com
