Cisco Systems shares rose about 4% before the bell on Thursday after an upbeat fourth-quarter forecast signaled further stabilization in networking equipment demand and benefits from its $28 billion deal for cybersecurity firm Splunk.
The world’s largest networking equipment maker (CSCO.O) had struggled with sluggish demand as customers adjusted piled up inventory from frenetic buying during the pandemic, as well as lingering supply-chain snags.
“After the past couple of quarters of meaningful inventory digestion headwinds, we viewed these order numbers as a positive,” Morgan Stanley analysts said in a note.
Cisco on Wednesday forecast fourth-quarter revenue between $13.4 billion and $13.6 billion, compared with analysts’ estimates of $13.23 billion, according to LSEG data.
“We currently expect customers to complete the installation of the majority of their inventory by the end of our fiscal year in July,” said CEO Charles Robbins on a post-earnings call.
Cisco said that three of the top four cloud-computing companies were deploying its ethernet, as it reiterated a target of $1 billion worth of AI product orders in fiscal 2025.
The company raised its 2024 revenue forecast to a range of $53.6 billion to $53.8 billion, from its previous expectations for a range of $51.5 billion to $52.5 billion.
SPLUNK BOOST
Cisco completed its acquisition of Splunk in March as part of its efforts to reduce dependence on its core networking business.
Including Splunk, revenue in Cisco’s security segment jumped 36% in the third quarter.
Total third-quarter gross margin was 65.1%, compared with 63.4% in the year-ago period.
Cisco had said that the acquisition will accelerate gross margin expansion in the first fiscal year after the deal’s close.
Content Courtesy – Reuters
