Enterprise Spending Boosts Cisco’s Fourth-Quarter Revenue Outlook

Cisco has projected fourth-quarter revenue to exceed analysts’ expectations, signaling a positive outlook for the network equipment maker. The company attributed this optimism to a surge in enterprise spending and improvements in supply chain operations.

Over recent years, Cisco has been actively seeking to reduce its reliance on its traditional networking equipment business, which faced challenges due to supply chain issues and a slowdown in demand post-pandemic. However, recent quarters have seen an uptick in spending, particularly in areas like artificial intelligence (AI) and cloud computing, where Cisco has been strategically focusing its efforts.

According to Scott Herren, Cisco’s Chief Financial Officer, customer demand has stabilised, aligning with the company’s expectations. Additionally, the recent addition of Splunk to Cisco’s product line is anticipated to further drive growth, particularly in bolstering cybersecurity capabilities.

In response to the positive forecast, Cisco’s shares rose approximately 4.7 per cent to USD 51.98 in extended trading on Wednesday. Despite a year-to-date decline of about 2 per cent prior to the earnings report, Cisco’s performance stands out against the broader market, with the S&P 500 posting an 11 per cent gain over the same period.

For the third quarter, Cisco reported a 13 per cent decline in revenue to USD 12.7 billion, though it surpassed estimates of USD 12.53 billion. Splunk, acquired by Cisco to enhance cybersecurity capabilities, contributed USD 413 million to the revenue. However, Cisco has faced challenges with inventory backlogs, impacting its revenue over consecutive quarters.

(Inputs from Reuters)