Cisco (CSCO) earnings Q3 2020

Chuck Robbins, CEO of Cisco Systems, speaking at the World Economic Forum, Davos, Switzerland, January 21, 2020.

Adam Galica | CNBC

Cisco shares rose 4% and later lost part of their gains in extended trading on Wednesday after the company reported third quarter earnings better than expected. Revenues fell 8% from last year’s quarter, stronger than the 4% drop the previous quarter.

Here’s how the company did it:

  • Earnings: 79 cents per share, adjusted
  • Returned: $ 11.98 billion

Analysts polled by Refinitiv expected 69 cents per share adjusted to $ 11.70 billion in revenue for the quarter, which ended April 25. Comparing the results with the estimates is not easy given the unpredictable impact of the coronavirus during the quarter.

Cisco’s largest segment, infrastructure platforms, which includes networking switches and routers for enterprise data centers, generated $ 6.43 billion in revenue, down 15 % year over year and below the $ 6.83 billion consensus among analysts polled by FactSet.

During the quarter, Cisco experienced “manufacturing challenges and component constraints,” CFO Kelly Kramer told analysts on a conference call on Wednesday. She said the pace of product orders slowed in April.

The applications segment, which contains, among other things, the video call service Webex, posted revenue of $ 1.36 billion, down 5% from a year earlier and below the FactSet consensus of $ 1.43 billion. dollars.

Cisco “added many new insights with free WebEx trials that we plan to convert into revenue in the future,” said CEO Chuck Robbins during the conference call. He said that in April there were more than 500 million participants in Webex meetings.

Turning to the forecast, Cisco said it expects adjusted earnings per share of 72 to 74 cents and a 8.5% to 11.5% drop in revenues for the fourth fiscal quarter. Analysts polled by Refinitiv were expecting adjusted earnings per share of 69 cents and revenue of $ 11.82 billion, which implies a decrease of 12%.

Robbins suggested that the activities of companies operating large data centers could grow.

“I guess the good news is that the success we’ve seen in the webscale space over the past two quarters hasn’t even seen the impact of 8000 [router line] however, it is still being tested by many customers, “he said.” They have very long evaluation periods before their deployment, but I will tell you that it goes incredibly well in these tests. “

In the third fiscal quarter, Cisco said it would allow deferred payments on new orders to help customers whose finances have been affected by Covid-19. The company also announced plans to acquire a wireless business Fluidmesh networks for an undisclosed sum.

KeyBanc analysts led by Alex Kurtz lowered their rating to the equivalent of withholding the purchase equivalent last month, suggesting that customers who would normally focus on buying modern Cisco network switches are turning towards technologies for remote work.

“Our discussions with partners have highlighted the continued importance of CAT9K, but we believe that the great first wave of upgrades has likely taken place in the past 24 months and that we could move to a growth rate of more moderate refresh over a longer period, “analysts said. wrote.

Cisco shares have declined 13% since the start of the year preceding the after-sales movement.

WATCH: Cisco CEO Chuck Robbins Explains How The Private Sector Can Help During The Coronavirus Crisis

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