Cisco Systems released the earnings results from its first quarter of fiscal 2016 after closing bell tonight, posting adjusted earnings of 59 cents per share on $12.7 billion in sales, a 4% increase year over year. Analysts had been expecting earnings of 56 cents per share and revenue of $12.65 billion for the quarter. Management had guided for revenue of between $12.49 billion and $12.74 billion. In last year’s first quarter, Cisco reported earnings of 54 cents per share and $12.2 billion in sales.
Cisco demonstrates solid sales growth
GAAP earnings were 48 cents per share, compared to last year’s 35 cents per share. Product revenue climbed 4% year over year, while service revenue edged upward by 1%. Sales in the Americas increased 4%, while sales in Europe, the Middle East, and Africa and the Asia Pacific, Japan, and China reason each increased 3% year over year.
Cisco reported that Data Center revenue increased 24%, leading growth in product revenue. Collaboration sales increased 17% year over year, while the Wireless and Security segments each improved 7%. The Switching business saw a 5% increase in sales, while revenue from the NGN Routing segment declined 8%. Revenue from the Service Provider Video segment declined 2%. Cisco’s deferred revenue increased 10% to $15.2 billion, including a 15% increase in deferred product revenue. The main driver of that increase was subscription-based and software offerings. Deferred service revenue grew 7%.
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The total non-GAAP gross margin was 63.2%, while the product gross margin was 62.3% on a non-GAAP basis and the service non-GAAP margin was 66.2%.
Cisco Systems’ guide misses estimates
Cisco management said they expect second quarter non-GAAP earnings to be between 53 cents and 55 cents per share, coming up a little light of Wall Street’s estimate of 56 cents per share. They expect revenue to be flat or increase by up to 2% year over year for the second quarter. Cisco expects a non-GAAP gross margin of 62% to 63%.
“We guided to solid growth in Q2,” said Cisco CEO Chuck Robbins in a statement. “Our guidance reflects lower than expected order growth in Q1, driven largely by the uncertainty of the macro environment and currency impacts. Despite these headwinds, I believe we are executing very well. We are moving very fast to capture new opportunities and I feel good about how we are positioned for the second half of the year.”
Shares of Cisco Systems slipped in after-hours trades, falling by as much as 1.8% to $27.35 per share.