Cisco Systems, Inc. Shares Slump Despite Earnings Beat

Cisco Systems, Inc. (NASDAQ:CSCO) released its latest earnings report tonight after closing bell, posting adjusted earnings of 60 cents per share on $11.94 billion in revenue. Wall Street was looking for earnings of 58 cents per share on $11.9 billion in revenue. Management had guided for non-GAAP earnings of 57 cents to 59 cents per share on $11.76 billion to $12 billion in revenue.

In the same quarter a year ago, Cisco Systems posted $12 billion in revenue and 57 cents per share in non-GAAP earnings, although the company had one extra week in that quarter.

cisco systems earnings
By Cisco [Public domain], via Wikimedia Commons

Cisco Systems’ earnings rise

GAAP profits came in at 50 cents per share, up from 46 cents per share a year ago. Recurring revenue was $17.3 billion or 31% of total revenue, an increase of 2 points from the same quarter a year ago. Product revenue was flat year over year, while service revenue declined 2%. The total GAAP gross margin was 63%, while the product gross margin was 61.7% on a GAAP basis. The total non-GAAP gross margin was 64.4%, while the non-GAAP product gross margin was 63.2%. Cisco said pricing and product mix pushed the product gross margin lower.

Wireless revenues grew 13%, while Security revenues increased 9% year over year. Switching revenue rose 2% year over year. NGN Routing revenue fell 2% year over year, while Collaboration revenues declined 4% and Data Center revenues declined 5%. Service Provider Video revenues plunged 30%.

Cisco Systems offers weak guidance

Cisco Systems management guided for a 4% to 6% decline in revenue for the company’s fourth fiscal quarter. They also guided for GAAP profits of 46 cents to 51 cents per share and non-GAAP earnings of 60 cents to 62 cents per share. Wall Street was looking for $12.5 billion in revenue and earnings of 62 cents per share. Cisco also expects a non-GAAP gross margin of 63% to 64% for the fourth quarter.

Shares of Cisco Systems plunged in after-hours trades, falling by as much as 4.97% to $32.15 after tonight’s release.