Cisco’s Stock Jumps as Positive Forecast Indicates Strong Tech Spending

Cisco Systems Inc. saw an increase in their stock price during after-hours trading following a positive forecast for the upcoming quarter, which showed that demand for technology infrastructure is holding up better than anticipated. The company reported that sales in the quarter ending in April will rise between 11% to 13%, higher than the predicted 6% increase from analysts. Cisco’s profit is also expected to be between 96 to 98 cents per share, compared to an average prediction of 89 cents, excluding certain items.

The company has benefited from a backlog of orders built up during the pandemic, cushioning it from a slowdown in tech demand. Additionally, some corporate customers have continued to upgrade their networks in response to the ever-expanding flow of information, even as they cut spending in other areas.

However, during the conference call with analysts, the company faced questions about whether the current growth levels are sustainable. CEO Chuck Robbins stated that the company has seen low order cancellation rates and a steady demand environment, and expects to end the fiscal year with double the normal amount of orders, with the trends expected to continue into fiscal 2024.

Cisco’s revenue in their fiscal second quarter rose 7% from the previous year to $13.6 billion, with profit, excluding certain items, at 88 cents a share. The company also gave a projection for fiscal 2023, which was well above analyst estimates, with projected revenue growth of 9% to 10.5%, and profit, excluding certain items, of $3.73 to $3.78 per share.

The company’s Chief Financial Officer, Scott Herren, cited a healthy backlog and improvements to supply as reasons for increased confidence in the upcoming year. CEO Chuck Robbins has also been working to shift the company’s focus towards networking services and software, which are paid for on a recurring basis, to decrease the company’s reliance on one-time sales of expensive machines. Cisco also expects to begin charging customers for software associated with the devices, as increasing shipments of gear have allowed better access to parts and the possibility to negotiate lower prices.