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Cisco forecast raise allays tech spending fears, lifts shares
Global Banking & Finance Review®
Company
By Yuvraj Malik
(Reuters) -Cisco Systems Inc on Wednesday raised its full-year earnings forecast and delivered strong second-quarter results, indicating that spending on network infrastructure was staying resilient in the face of an economic slowdown.
The maker of routers and other products that run computer networks and the internet said customers were keeping investments steady in systems related to cloud, artificial intelligence and tools for hybrid work.
The company is also benefiting from the easing of pandemic-driven supply chain constraints, which plagued its business last year and resulted in significant inventory buildup.
“Cisco is better positioned today than at any time since I became CEO almost eight years ago,” Chuck Robbins said in a post-earnings analyst call. Shares of the company were 3% higher after earlier jumping 12% in extended trading.
For fiscal 2023, Cisco said it expects revenue growth of 9% to 10.5%, and adjusted per share earnings between $3.73 to $3.78. It had previously forecast revenue growth of 4.5% to 6.5% and earnings per share of $3.51 to $3.58.
Its second-quarter adjusted earnings of 88 cents per share and revenue of $13.59 billion were both higher than market estimates pooled by Refinitiv.
“This is very strong growth and shows that the company may finally be exiting a difficult period related to supply-chain challenges,” said Scott Raynovich, chief analyst at Futuriom.
Cisco said it reduced backlog 6% sequentially, while remaining performance obligations (RPO), a metric that denotes contractual revenue that will be recognized in the future, was $31.8 billion as of January-end, compared to $30.9 billion in October.
Cisco’s strong performance comes at a time of cost-cutting and restructuring across the U.S. technology sector in response to economic headwinds. Cisco had announced a nearly 5% workforce reduction in November.
(Reporting by Yuvraj Malik in Bengaluru; Editing by Shailesh Kuber)
Supply chain constraints refer to limitations or disruptions in the supply chain that affect the production and delivery of goods. These can arise from various factors, including economic downturns or global events.
Adjusted earnings per share (EPS) is a company's profit divided by the number of outstanding shares, excluding certain items like one-time expenses or gains. It provides a clearer view of a company's profitability.
A backlog in business refers to the accumulation of orders or tasks that have not yet been completed. It can indicate high demand but may also signal operational inefficiencies.
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