Cisco Systems second-quarter earnings and revenue came in higher than Wall Street expected.
The networking company reported earnings of 94 cents a share on revenue of $14 billion. Analysts surveyed by FactSet were expecting earnings of 91 cents a share from revenue of $13.9 billion.
Cisco’s earnings rose from last year’s 87 cents a share, while revenue increased from $12.8 billion.
“Cisco’s strong quarterly results were driven by accelerating customer demand for our technology,” Chief Executive Chuck Robbins said in a news release. “As AI becomes more pervasive, we are well positioned to help our customers scale their network infrastructure, increase their data capacity requirements, and adopt best-in-class AI security.”
The gain in revenue came from the data platform Splunk, which Cisco acquired last year. Excluding the contribution from Splunk, total revenue was down 1% from last year.
Chief Financial Officer Scott Herren told Barron’s that because of supply constraints during the Covid-19 pandemic, many customer orders were previously backlogged.
“Q2 a year ago still had just short of a billion dollars of excess backlog that we shipped out. If you netted that out, we would have had nice growth organically, but having that in the compare point is what drove the organic growth to be slightly negative,” Herren said.
For the third quarter, Cisco expects revenue to be between $13.9 billion and $14.1 billion, compared with the consensus forecast among analysts for $13.88 billion. Earnings for the quarter are expected to be between 90 cents a share and 92 cents a share, about in line with Wall Street estimates of 90 cents a share.
Revenue for the year is also now expected to be between $56 billion to $56.5 billion. Cisco previously guided for revenue between $55.3 billion and $56.3 billion.
The increased revenue guidance comes during a time of economic uncertainty, where inflation is sticky, interest rates remain high and the U.S. is pushing for tariffs on imported goods.
Herren said that the company has taken the potential impact of tariffs into consideration for its guidance, noting that the levies could increase the cost of goods sold and lower gross margins.
“I’ve built into our cost structure what those tariffs might cost us if they actually get implemented the way they’re currently proposed,” he said.
The tech company is also raising its dividend by a penny a share to 41 cents.
“This signals our confidence in the growth of our company and our ability to continue to generate really strong cash flows looking ahead,” Herren said.
Cisco stock rose 2.7% to $64.19 in Thursday trading. The stock has climbed 5.5% this year and 24% over the last 12 months.