Cisco Systems Anticipates Strong Q2 Results

(Reuters) – Cisco Systems has forecast quarterly revenue and profit surpassing Wall Street expectations after delivering encouraging first-quarter outcomes, driven by an uptick in demand for its networking tools amid the AI surge.

Shares of the computer networking equipment maker dipped 1.4% in extended trading following the company's projection of annual revenue closely aligning with estimates.

Businesses are significantly increasing investments in AI technologies, which necessitate substantial computing power, leading to a surge in demand for data centers that utilize Cisco's products, including ethernet switches and routers.

Nonetheless, the California-based firm has been working to decrease reliance on its extensive networking equipment sector, which has recently been affected by supply chain challenges and a post-pandemic decline in demand.

The company has initiated two rounds of layoffs this year to enhance cost-efficiency as it shifts its focus towards cybersecurity, cloud systems, and AI-driven products.

Cisco finalized its $28 billion acquisition of Splunk in March, aiming to strengthen its software business during the AI boom while also addressing the post-pandemic demand slowdown by improving its cybersecurity capabilities.

For the second quarter, Cisco anticipates revenue between $13.75 billion and $13.95 billion, exceeding analysts' average estimate of $13.73 billion, according to LSEG-compiled data.

The company expects adjusted profit per share for the quarter to range from 89 cents to 91 cents, higher than estimates of 87 cents.

Cisco reported a 6% revenue decline to $13.84 billion in the first quarter ending October 26, surpassing expectations of $13.77 billion. Adjusted profit per share of 91 cents also exceeded estimates of 87 cents.

In its new forecast, Cisco expects annual revenue to range from $55.3 billion to $56.3 billion, an increase from its prior estimate of $55.0 billion to $56.2 billion. Analysts had projected $55.89 billion.

The company has raised its annual adjusted profit forecast range to between $3.60 and $3.66, up from its previous range of $3.52 to $3.58.