Cisco Shares Rise on Guidance Boost

Cisco Hq2

By: R. Scott Raynovich
August 16, 2018


There was lots of good news in Cisco's earnings report Wednesday night. Cisco shares rose as much as six percent in early trading Thursday after the company announced quarterly earnings and boosted its annual revenue guidance, with the company saying it expects to return to 5-7% annual growth.

The networking giant reported earnings of $0.70 per share on revenue of $12.84 billion. Analysts were expecting earnings of $0.69 per share on an adjusted basis and revenue of $12.77 billion, according to FactSet. Shares rose $1.75 (4%) to $45.61 in morning trading.

The company appears to be entering a period of stronger growth after years of living in a flat world. Cisco reported year-over-year revenue growth came in at 5.9%, up from 4.4% in the prior quarter. Year-over-year product order growth accelerated to 7% from 4%.

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Another bright spot was the growth in Cisco's software sales, which is a major focus for CEO Chuck Robbins. Revenue from recurring software rose 23%. Some of the growth will come from an accounting change known as ASC606, which will accelerate revenue recognition on certain software license sales. But Cisco reported that deferred revenue growth, another measure of software subscriptions, slowed. Deferred revenue grew 6% year-over-year (y/y) versus 9% y/y in the last quarter.

Cisco even had good news in its long-suffering service provider market. The company reported an acceleration in service provider orders.

"The acceleration in orders in 4QFY18 was impressive, and looks to have been driven by Service Providers, Asia Pacific and Emerging Markets," wrote MKM Partners analyst Michael Genovese in an investor note this morning.

Other analysts were also impressed, but pointed to growing risks in the global macro environment.

"We see enterprise demand as healthy and saw improvement from the previously weak service provider vertical," wrote Simon Leopold of Raymond James. "We worry about the global macro presenting risk, and imagine some grumble about deceleration in metrics such as deferred revenue growth."