Cisco beats revenues and profits estimates amidst strong demand

CIO Review Europe | Sunday, February 21, 2021

Citing strong broad-based demand, Cisco Systems Inc. fiscal second-quarter revenue and profit growth that beat analysts’ forecasts and the high end of its guidance

FREMONT, CA: Demand was good across the board, according to officials, but supply chain concerns prevented the company from growing even faster. As a result, the backlog has continued to grow considerably beyond historical norms. Cisco had a product backlog of more than USD14 billion at the end of the quarter, increasing 150 percent year over year. Due to advance payments required to ensure future supply, operating cash flow decreased by 17 percent.

Cisco lowered its third-quarter and full-year revenue forecasts. Revenue growth is expected to be between 3 percent and 5 percent, with gross margins of 63.5 percent to 64.5 percent. Revenues are forecast to increase by 5.5 percent to 6.5 percent this year, with earnings-per-share increasing by roughly 7percent.

The industry's supply chain issues, on the other hand, weighed on the top line and drove up expenses. The total cost of sales increased by nearly 12percent, outpacing the revenue line. Gross margins, meanwhile, increased marginally from the prior quarter to 63.3 percent from 62.4 percent.

The secure, agile networks sector, which includes campus switching, data centre switching, and enterprise routing, rose 10 percent to USD5.97 billion in product lines. "Internet for the Future," which includes routed optical networking, public 5G, as well as silicon and optics, was by far the fastest-growing segment. It increased by 46 percent from a significantly lower starting point. The section of "hybrid work," which includes cooperation contact centres, declined 7percent.

The company's data centre portfolio is in high demand, indicating customers are investing more and more in private data centres. During the quarter, the company received orders for more than 730,000 400-gigabit ports.

Cisco's security division, which has been one of the company's fastest-growing businesses, only increased by 4percent. Experts attributed the slowdown in part to supply chain concerns and expected that the business would pick back. Cisco experienced particularly strong growth in Asia/Pacific, which increased by 13 percent year over year. The region of Europe, the Middle East, and Africa grew by 11 percent, while the Americas grew by 3 percent.

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