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Cisco's (CSCO) Q3 Earnings Top Estimates, Revenues Up Y/Y

Cisco Systems CSCO reported third-quarter fiscal 2023 non-GAAP earnings of $1 per share, which beat the Zacks Consensus Estimate by 3.09%. The bottom line increased 15% year over year.

Revenues increased 13.5% year over year to $14.57 billion and beat the consensus mark by 1.27%.

Product revenues (76.1% of total revenues) increased 17.4% on a year-over-year basis to $11.09 billion.

Secure, Agile Networks revenues rose 29% year over year to $7.55 billion. End-to-End Security revenues were up 2% to $958 million. Internet for the Future revenues increased 5% to $1.39 billion. Optimized Application Experiences revenues were up 12% to $204 million. Revenues from Other Products increased 19% to $3 million.

Collaboration revenues decreased 13% on a year-over-year basis to $985 million.

Cisco Systems, Inc. Price, Consensus and EPS Surprise

Cisco Systems, Inc. Price, Consensus and EPS Surprise
Cisco Systems, Inc. Price, Consensus and EPS Surprise

Cisco Systems, Inc. price-consensus-eps-surprise-chart | Cisco Systems, Inc. Quote

 

Service revenues (23.9% of total revenues) inched up 2.7% year over year to $3.48 billion.

Quarter in Detail

Region-wise, America’s revenues increased 13% year over year to $8.63 billion. EMEA revenues increased 16% from the year-ago quarter to $3.81 billion. APJC revenues increased 11% year over year to $2.13 billion.

Annualized recurring revenues came in at $23.8 billion, up 6% year over year and product ARR increased 10% year over year.

Non-GAAP gross margin contracted 20 basis points (bps) from the year-ago quarter’s level to 65.2%.

On a non-GAAP basis, the product gross margin expanded 40 bps to 64.5%. Service gross margin contracted 160 bps to 67.3%.

Non-GAAP operating expenses were $4.55 billion, up 15.8% year over year. As a percentage of revenues, operating expenses increased 60 bps year over year to 31.3%.

Non-GAAP operating margin contracted 80 bps year over year to 33.9%.

Balance Sheet and Cash Flow

As of Apr 29, 2023, Cisco’s cash & cash equivalents and investments balance were $23.29 billion compared with $22.05 billion as of Jan 28, 2023.

Total debt (short-term plus long-term) as of Apr 29, 2023, was $8.39 billion compared with $8.89 billion as of Jan 28, 2023.

Cash flow from operating activities was $5.2 billion, higher than the $4.7 billion reported in the previous quarter.

The remaining performance obligations (“RPO”) at the end of the fiscal third quarter were $32.1 billion, up 6%, with 53% of this amount to be recognized as revenues over the next 12 months. Product RPO was up 9% and service RPO was up 4%.

Guidance

For fourth-quarter fiscal 2023, revenues are expected to grow between 14% and 16% on a year-over-year basis.

Non-GAAP gross margin is anticipated between 64.5% and 65.5% for the quarter.

Non-GAAP operating margin is anticipated between 34% and 35% for the quarter. Non-GAAP earnings are anticipated between $1.05 and $1.07 per share.

For fiscal 2023, revenues are expected to rise 10-10.5% on a year-over-year basis. Non-GAAP earnings are anticipated between $3.80 and $3.82 per share.

Zacks Rank & Upcoming Earnings to Watch

Cisco currently carries a Zacks Rank #3 (Hold).

Ciena CIEN, CrowdStrike CRWD and HP HPQ are some better-ranked stocks that investors can consider in the Zacks Computer & Technology sector. All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ciena, CrowdStrike and HP are set to report their earnings results on Jun 6, May 31 and May 30, respectively.

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