Cisco Systems (CSCO, Financial) released earnings results for its second quarter of fiscal 2021 on Feb. 9 after the market closed. Earnings and revenue beat estimates thanks to strong security and services revenue.
The company's shares were down 3.4% in after-hours trading to $46.87 per share on Tuesday following the earnings announcement.
The key numbers
The U.S. multinational technology conglomerate posted adjusted earnings per share of 79 cents, up from 77 cents reported the year before. Wall Street had predicted EPS of 76 cents.
Revenue of $11.96 billion was flat on a year-over-year basis but beat analyst expectations of $11.92 billion.
CEO and Chairman Chuck Robbins said:
"We are seeing encouraging signs of strength across our business showing how our technology will be a powerful engine for recovery and growth. Our team delivered a strong performance as we partnered with customers on accelerating their digital transformation and driving secure, remote work."
Segment results
Infrastructure Platforms, which consists of core networking offerings such as switching, NGN routing, wireless and data centre, generated revenue of $6.39 billion in the second quarter. This was a decline of 3% over the past year. Analysts projected revenue of $6.23 billion for the segment.
The application segment, which consists of inter alia (the WebEx video calling service), recorded revenue of $1.35 billion, which remained flat as compared to the same quarter of the previous year. This was below analysts' expectations of $1.40 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 $822 million was up 10% in the reported quarter. This was due to strong demand for identity and access management and unified threat management solutions. Services revenue improved 2% year-over-year to $3.39 billion.
Revenue tumbled 39% to $4 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 (GOOG, Financial) (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.
Last year in April, 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. In July, the company completed the acquisition. The acquisition has helped Cisco cater to the budding demand for IoT-based solutions in the market.
During the second quarter, the company had agreed to buy Acacia communication (ACIA, Financial), which develops, markets and sells high-speed coherent optical interconnect products, in a cash deal ($115 per share) worth roughly $4.5 billion. The previously agreed price was $2.6 billion. Cisco said it has received a go-ahead from all necessary regulatory authorities and the transaction is expected to close in the third quarter of fiscal 2021. Similarly, Cisco has intended to acquire IMImobile PLC, a cloud communications software provider based in the United Kingdom. The transaction is expected to close in the third quarter, subject to a vote of IMImobile holders and other regulatory approvals.
Guidance
Cisco has provided guidance for the fiscal third quarter. The company projects adjusted EPS to fall within the range of 80 cents to 82 cents. Revenue is expected to grow in the 3.5% to 5% range.
Disclosure: I do not hold any positions in the stocks mentioned.
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