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

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Cisco Systems (CSCO - Free Report) reported third-quarter fiscal 2022 non-GAAP earnings of 87 cents per share, which beat the Zacks Consensus Estimate by 1.16%. The bottom line increased 4.8% year over year.

Revenues inched up 0.2% year over year to $12.84 billion. Revenues lagged the consensus mark by 3.70%.

Quarter in Detail

Region-wise, the Americas revenues increased 3% year over year to $7.64 billion. Revenues from both EMEA and APJC increased 6% each year over year to $3.271 billion and $1.926 billion, respectively.

Service revenues (26.4% of total revenues) decreased 7.6% year over year to $3.39 billion, driven by growth in software and solution-support services.
 

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

 

Annualized recurring revenues (“ARR”) came in at $22.4 billion, up 11% year over year. Product ARR growth was 20% in the quarter under review.

Product revenues (73.6% of total revenues) increased 3.4% on a year-over-year basis to $9.45 billion.

Total product orders rose 8% on a year-over-year basis.

Break Down of Product Revenues

Secure, Agile Networks (62.1% of total Product revenues) revenues increased 7% year over year to $5.869 billion.

Collaboration (12% of Product revenues) revenues declined 7% on a year-over-year basis to $1.132 billion.

End-to-End Security (9.9% of Product revenues) revenues were up 7% to $938 million.

Internet for the Future (14% of Product revenues) revenues climbed 6% to $1.324 billion.

Optimized Application Experiences (1.9% of Product revenues) revenues were up 8% to 183 million.

Revenues from Other Products decreased 58% to $2 million.

Operating Details

Non-GAAP gross margin contracted 60 basis points (bps) from the year-ago quarter’s level to 65.3%.

On a non-GAAP basis, product gross margin contracted 80 bps to 64.1%. Service gross margin expanded 20 bps to 68.9%.

Non-GAAP operating expenses were $3.93 billion, down 5.2% year over year. As a percentage of revenues, operating expenses contracted 170 bps to 30.7%.

Non-GAAP operating margin expanded 110 bps year over year to 34.7%.

Balance Sheet and Cash Flow

As of Apr 30, 2022, Cisco’s cash & cash equivalents and investments balance were $20.1 billion compared with $21.1 billion as of Jan 29, 2022.

Total debt (short-term plus long-term) as of Apr 30, 2022, was $9.42 billion compared with $11.47 billion as of Jan 29, 2022.

Cash flow from operating activities was $3.7 billion compared with $2.5 billion reported in the prior quarter.

Cisco declared a quarterly dividend of 38 cents per share, up 3%, to be paid on Apr 27, 2022 to all stockholders of record as of the close of business on Apr 6, 2022.

In the quarter under review, Cisco returned $1.8 billion to shareholders, including dividend payments of $1.6 billion and share repurchases worth $252 million.

Remaining performance obligations (“RPO”) at the end of the fiscal third quarter were $30.2 billion, up 7%, with 54% of this amount to be recognized as revenues over the next 12 months. Product RPO was up 13% and service RPO was up 3%.

Guidance

For fourth-quarter fiscal 2022, revenues are expected to decline between 1% and 5.5% on a year-over-year basis.

Non-GAAP gross margin is anticipated between 64% and 65% for the quarter.

Non-GAAP operating margin is anticipated between 31.5% and 33.5% for the quarter. Non-GAAP earnings are anticipated between 76 cents and 84 cents per share.

For fiscal 2022, revenues are expected to rise by 2-3% on a year-over-year basis. Non-GAAP earnings are anticipated between $3.29 and $3.37 per share.

Zacks Rank & Upcoming Earnings to Watch

Cisco currently carries a Zacks Rank #2 (Buy).

CSCO’s shares are down 23.7% compared with the Zacks Computer and Technology sector’s decline of 24.8% year to date.

Smilarly ranked stocks in the broader Zacks Computer and Technology sector that are scheduled to report their earnings soon are Pure Storage (PSTG - Free Report) , The Descartes Systems (DSGX - Free Report) and Coupa Software . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Pure Storage shares have outperformed the sector year to date, declining 21.5%.

PSTG is set to report first-quarter fiscal 2023 results on Jun 1.

Descartes’ shares have underperformed the sector year to date, declining 28.1%.

DSGX is set to report first-quarter fiscal 2023 results on Jun 1.

Coupa Software’ shares have underperformed sector year to date, declining 58.8%.

COUP is set to report first-quarter fiscal 2023 results on Jun 6.

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