Cisco shares its best day since 2020 after beating fourth quarter earnings

Chuck Robbins, CEO and President of Cisco, at the WEF in Davos, Switzerland on May 25, 2022.

Adam Galica | CNBC

Cisco shares jumped about 6% on Thursday and headed for their best day in nearly two years after the computer networking company reported better than expected quarterly results and offered optimistic guidance for the year ahead.

Revenue fell slightly in the fiscal fourth quarter from a year earlier to $13.1 billion, but still topped analysts’ average estimate of $12.79 billion, according to Refinitiv. Earnings per share came in at 83 cents, beating a penny.

Cisco has been grappling with supply chain constraints following the Covid-related lockdowns. These issues finally started to fade in the last quarter.

“We’ve been saying all along that we’ve got a record backlog, and when the supply chain starts to loosen up, we’ll start to see the revenue come through,” Cisco CEO Chuck Robbins told “Squawk on the Street” from CNBC. “We’ve seen some early easing in the supply chain, which is positive, and we’re looking to next year and we think that’s going to continue.”

For fiscal 2023, Cisco forecast revenue growth of 4% to 6%, while analysts expected growth of just 2.3%. In fiscal 2022, revenue increased by 3.4%. Needham analysts were optimistic after the results.

“Cisco’s guidance primarily reflects the existing backlog and expectations for improved parts availability as well as better realization of the price increase,” wrote analysts at Needham, which has a rating of hold on stock. “Improved supply helps revenue beat street estimates.”

Cisco designs and sells a range of technologies that power the internet, and the company has struggled to grow as the tech world moves away from physical boxes and towards cloud subscription software. Prior to Thursday’s rally, Cisco’s stock price was down 24% this year, while the Nasdaq was down 17%.

CFO Scott Herren said in a press release that the company’s revenue for the quarter reflected strong execution of Cisco’s initiatives to combat the “global supply situation.”

Loop Capital analysts said in a note Thursday that Cisco sees no signs of slowing demand, reflecting the value of the networking technology.

“Put simply, networking is becoming too critical and we are in the midst of an unprecedented cycle of investment in networking,” they wrote.

However, JMP analysts said supply chains will continue to pose challenges for Cisco’s business.

“We believe supply chain constraints will limit growth for several quarters,” they wrote in a Thursday note.

LOOK: Full CNBC interview with Cisco CEO Chuck Robbins

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