Cisco Systems Inc. (Cisco) last week reported 1Q19 net income of $3.55bn, or USc77/share, vs $2.39bn, or USc48/share, in 1Q18. Adjusted earnings came in at USc75/ share. Revenue rose 7.7% YoY to $13.07bn from $12.14bn in the year-ago quarter. Cisco beat Refinitiv consensus forecasts, which had expected earnings of USc72/ share on revenue of $12.86bn as the firm benefited from demand for its routers and switches as well as growth in newer focus areas such as software. Reuters writes that Cisco turned to software and cyber security to soften the impact from slowing demand for its routers and switches as companies increasingly shift to cloud services instead of building their own networks.
The firm’s application software businesses rose 18% YoY to $1.42bn, beating Refinitiv consensus analysts’ estimates of $1.35bn. Sales in its security business (offering firewall protection and breach detection systems), advanced by 11% YoY to $651mn, slightly exceeding the Refinitiv consensus estimate of $648mn. Revenue at its largest business – the infrastructure platform unit, which houses the switches and routers business, grew c. 9% YoY to $7.64bn (above consensus expectations of $7.39bn). Subscriptions, which provide a steady revenue flow, accounted for 57% of Cisco’s total software revenue in the quarter, vs 56% in 4Q18.
The company noted that various acquisitions, including the $2.35bn purchase of cyber security provider Duo Security in August, provided an 80-bpt boost to 1Q19 results.
Looking ahead to 2Q19, Cisco said it now expects adjusted earnings of USc71-USc73/share on 5%-7% YoY revenue growth, or $12.48bn to $12.72bn, while analysts have forecast USc72/ share on revenue of $12.54bn. Cisco noted that its outlook includes divestiture of its Service Provider Video Software Solutions unit, which may not have been considered in some analyst estimates.
Cisco shares rose 1.3% in after hours following the results release. However, from Thursday (15 November) to Tuesday’s (20 November) close the share price is down 4.9%.
