Cisco Systems Inc., the biggest maker of machines that run computer networks and the internet, gained in late trading after an upbeat forecast showed that demand for tech infrastructure is holding up better than expected.
(Bloomberg) — Cisco Systems Inc., the biggest maker of machines that run computer networks and the internet, gained in late trading after an upbeat forecast showed that demand for tech infrastructure is holding up better than expected.
Sales in the quarter ending in April will rise 11% to 13%, Cisco said Wednesday in a statement. Analysts had predicted a gain of about 6%. Excluding some items, profit will be 96 cents to 98 cents a share, compared with an average prediction of 89 cents.
Cisco is benefiting from a backlog of orders built up during the pandemic, helping cushion it from a slowdown in tech demand. Some corporate customers also have continued to upgrade networks as they deal with the ever-expanding flow of information, even as they cut spending in other areas.
The shares jump more than 8% in extended trading following the announcement, though they later pared those gains. The stock had earlier closed at $48.45 in New York, leaving it up less than 2% this year.
The company faced repeated questions on a conference call with analysts about how sustainable the current growth levels are. A key issue: whether demand falls off once Cisco gets enough supply to fill orders more quickly.
Chief Executive Officer Chuck Robbins said that order cancellation rates are low and the overall demand environment remains steady. The company expects to end the fiscal year with double its normal amount of orders. The trends should continue into fiscal 2024, which will help the company’s sales stay on the growth track, he said.
“It’s certainly an uncertain time,” he said. “I don’t want to paint a picture that we’re immune. But we’ve been able to see our customers moving forward with projects.”
In Cisco’s fiscal second quarter, revenue rose 7% from a year earlier to $13.6 billion. Profit, minus some items, was 88 cents a share.
For the year, Cisco also gave a projection that was well ahead of what analysts were estimating. Revenue will grow 9% to 10.5% in fiscal 2023, and profit — minus certain items — will be $3.73 to $3.78 a share.
Chief Financial Officer Scott Herren cited a “healthy backlog and steps we’ve taken to improve supply” as helping to raise the company’s confidence in how this year will play out.
Robbins also has been trying to recast Cisco as a provider of networking services and software, which are paid for on a recurring basis, and decrease the company’s reliance on onetime sales of expensive machines.
Increasing shipments of gear will allow the company to begin charging customers for software that’s associated with the devices, Cisco said.
Shortages of some components had held back Cisco’s ability to fill all of the orders it was given. The chip industry, one of the main chokepoints in a supply chain that suffered major disruptions during the pandemic, now has a glut of supply. That means electronics makers such as Cisco have better access to parts and the possibility to negotiate lower prices.
(Updates with additional CEO quotes starting in sixth paragraph.)
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