By Senad Karaahmetovic
Cisco Systems (NASDAQ:CSCO) shares are up 4% pre-market Thursday after the company reported better-than-expected results for its first fiscal quarter.
The digital communications firm posted earnings per share of $0.86, $0.02 better than the analyst estimate of $0.84. Revenue increased by 5.7% year-over-year (YoY) to $13.6 billion, above expectations of $13.29B.
The total annualized recurring revenue (ARR) rose by 7% to $23.2B YoY, while software revenue increased by 5%.
"Our fiscal 2023 is off to a good start as we delivered the largest quarterly revenue and second highest quarterly non-GAAP earnings per share in our history," said Chuck Robbins, chair and CEO of Cisco. "These results demonstrate the relevance of our strategy, our differentiated innovation, and our unique position to help our customers become more resilient."
The company added that its easing supply chain situation, alongside its annualized recurring revenue increase, significant backlog, and strong remaining performance obligations, provides the company with "great visibility and predictability."
Cisco raised its full-year guidance so it now sees FY EPS between $3.51 and $3.58, up from the prior range of saw $3.49 to $3.56. Revenue growth for the period is expected to be from 4.5% to 6.5%, up from 4-6%.
The fiscal second-quarter adjusted earnings per share are expected to be between $0.84 to $0.86, in line with the consensus. Revenue growth during the period is seen from 4.5% to 6.5%, ahead of the 4.2% consensus.
Oppenheimer analysts said Cisco reported "solid" results, which reflect "a stable demand environment and improving supply conditions amidst a tough macro environment."
"We come away positive on the outlook, and while we expect investors to focus on the dynamic between backlog and order growth, we believe the company is positioned to deliver on its growth targets as it increases its investments into higher-growth areas (security, observability). Adj. est. for results/guidance," the analysts said in a client note.
Deutsche Bank analysts also took note of easing supply chain constraints.
"We believe the relative resilience of customer demand (i.e.: demand "not falling off a cliff" as CSCO put it, in a tougher macro) and easing supply-chain constraints, paired with CSCO's elevated backlog, yields greater visibility into FY23 targets," the analysts wrote.