Cisco Systems, Inc. Shares Slump Despite Earnings Beat

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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 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.

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