Cisco Systems (CSCO, Financial) released its fiscal third-quarter 2020 earnings results on May 13 after the market closed.
By the numbers
The U.S. multinational technology conglomerate posted adjusted earnings per share of 79 cents, up from 78 cents reported the year before. Wall Street had predicted earnings of 71 cents per share.
Revenue of $11.98 billion was down 8% on a year-over-year basis, but beat analyst expectations of $11.88 billion.
Chief Financial Officer Kelly Kramer said:
"We executed well in Q3 in a very challenging environment, delivering strong margins and non-GAAP EPS growth. The resiliency that we have been building into our business model is paying off, with software subscriptions now at 74% of our software revenue, up 9 points year over year. We are focused on driving long-term profitable growth while delivering shareholder value."
Segment performance
Infrastructure Platforms, which consists of core networking offerings such as switching, NGN routing, wireless and data centre, generated revenue of $6.43 billion in the third quarter. This was a decline of 15% over the past year. Analysts projected revenue of $6.83 billion for the segment.
The application segment, which consists of inter alia (the WebEx video calling service), recorded revenue of $1.36 billion, which represented a decline of 5% from the same quarter last year. This was also below analysts’ expectations of $1.43 billion. The decline was mitigated thanks to robust use of Webex video conferencing as well as business efficiency efforts amid the pandemic.
Security revenue of $776 million was up 6% in the reported quarter. This was due to strong demand for identity and access management and unified threat management solutions.
Revenue tumbled 27% to $28 million for other products, which include service provider video, cloud and system management and emerging technology.
Partnerships and acquisitions
Cisco and Microsoft’s (MSFT, Financial) Azure virtual van integration with Office 365, together with strong collaboration with Amazon (AMZN, Financial) web services, has helped Cisco in providing secured end-to-end connectivity and improved application performance. In addition, the company has also partnered with Alphabet’s (GOOGL, Financial) Google Cloud. These partnerships are expected to help sell more SD-Wan solutions, given that the customers are moving more applications to the cloud.
On April 6, the company announced its intension of expanding its Industrial Internet of Things (IoT) portfolio by acquiring Fluidmesh Network, which is a global leader in wireless systems for security, industrial and business-critical operations. This acquisition will help the company cater to the budding demand for IoT-based solutions in the market.
Guidance
Cisco has provided guidance for the fiscal 2020 fourth quarter. The company projects adjusted EPS to fall within the range of 72 cents to 74 cents. Revenue is expected to decrease by 8.5% to 11.5%.
Disclosure: I do not hold any positions in the stocks mentioned.
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