Shulou(Shulou.com)11/24 Report--

On the morning of February 16, Beijing time, Cisco released its financial results for the second quarter of fiscal 2023. According to the report, Cisco's second-quarter net revenue was $13.6 billion, up 7% from $12.7 billion in the same period last year, and net profit was $2.8 billion, down 7% from $3 billion in the same period last year. Excluding certain one-time items (not in accordance with US GAAP), Cisco's adjusted net profit for the second quarter was $3.6 billion, up 3 per cent from $3.5 billion in the same period last year.

Cisco's second-quarter results beat Wall Street analysts' expectations and its outlook for the third quarter and the entire fiscal year 2023 beat expectations, sending its shares up nearly 4 per cent in after-hours trading.

Summary of results for the second quarter of fiscal 2023: in the fiscal quarter ended January 28, 2023, Cisco's net profit was $2.8 billion, down 7 per cent from $3 billion in the same period last year. Under GAAP, Cisco's diluted earnings per share in the second quarter were $0.67, compared with $0.71 per share in the same period last year, down 6% from a year earlier.

Excluding some one-time items (not in accordance with GAAP), Cisco's adjusted net profit for the second quarter was $3.6 billion, up 3% from $3.5 billion in the same period last year, and adjusted earnings per share was 88%. Up 5% from $0.84 in the same period last year, which exceeded analysts' expectations. On average, 21 analysts had expected Cisco's second-quarter earnings per share to reach 85 cents, according to data provided by Yahoo Finance.

Cisco's second-quarter net revenue was $13.6 billion, up 7% from $12.7 billion in the same period last year and exceeding analysts' expectations. On average, 19 analysts had expected Cisco's second-quarter net revenue to reach $13.43 billion, according to Yahoo Finance.

Cisco's second-quarter cost of sales was $5.165 billion, compared with $4.671 billion in the same period last year. Of this total, Cisco's cost of selling products in the second quarter was $4.038 billion, compared with $3.569 billion in the same period last year, and the cost of selling services was $1.127 billion, compared with $1.102 billion in the same period last year.

Cisco's total operating expenses were $5.135 billion in the second quarter, compared with $4.562 billion in the same period last year. Of this total, Cisco's R & D expenditure in the second quarter was $1.855 billion, compared with $1.67 billion in the same period last year; sales and marketing expenses were $2.384 billion, compared with $2.266 billion in the same period last year; general and administrative expenses were $582 million, compared with $544 million in the same period last year; amortization expenditure on acquired intangible assets was $7100, compared with $7900 in the same period last year. Restructuring and other expenses were $243 million, compared with $3 million in the same period last year.

Cisco's total operating expenses in the second quarter increased by 13% compared with the same period last year, accounting for 37.8% of revenue. Excluding some one-time items (not in accordance with GAAP), Cisco's operating expenses for the second quarter were $4.3 billion, an increase of 8% over the same period last year, and accounted for 31.4% of revenue.

Cisco's total fiscal second quarter gross margin, product gross margin and service gross margin were 62.0%, 60.2% and 67.2%, respectively, compared with 63.3%, 61.8% and 67.3% in the same period last year. Excluding some one-time items (not in accordance with US GAAP), Cisco's total fiscal second quarter gross profit margin, product gross margin and service gross margin were 63.9%, 62.1% and 69.1%, respectively, compared with 65.5%, 64.3% and 68.8% in the same period last year.

By region, Cisco's total gross profit margin in the US, Europe, Middle East and Africa (EMEA) and Asia Pacific operations were 62.9%, 66.2% and 63.6% respectively.

Cisco's second-quarter operating profit was $3.3 billion, down 6% from a year earlier, with an operating margin of 24.2%. Excluding some one-time items (not in accordance with GAAP), Cisco's adjusted operating profit for the second quarter was $4.4 billion, an increase of 1% over the same period last year, and an adjusted operating margin of 32.5%.

Cisco's reserve income tax rate for the second fiscal quarter is 18.8%, and the reserve income tax rate that is not in accordance with GAAP is 19.0%.

Cisco's deferred revenue for the second quarter was $23.9 billion, up 7 per cent from the same period last year. Among them, product deferred revenue increased by 9% over the same period last year, and service deferred revenue increased by 6% compared with the same period last year.

In the second quarter of fiscal 2023, Cisco's operating cash flow was $4.7 billion, up 93 percent from $2.5 billion in the second quarter of fiscal 2022. The total value of cash, cash equivalents and investments held by Cisco at the end of the second quarter was $22.1 billion and $19.3 billion at the end of fiscal 2022.

At the end of the second quarter of fiscal 2023, Cisco's remaining debt service obligations were $31.8 billion, an increase of 4% over the same period last year, of which 53% will be recognized as revenue over the next 12 months. By the end of the second quarter of fiscal 2023, the remaining debt service obligations of the Cisco products business increased by 7% year-on-year, and the remaining debt service obligations of the services business increased by 2% year-on-year.

In the second quarter of fiscal 2023, Cisco returned $2.8 billion in cash to shareholders in the form of dividends and share buybacks. During the quarter, Cisco announced and paid a cash dividend of 38 cents per common share for a total expense of $1.6 billion. Cisco repurchased about 26 million common shares under its share repurchase program in the second quarter at an average repurchase price of $47.72 per share, for a total expenditure of $1.3 billion. According to Cisco's authorized share repurchase program, the company's remaining share repurchase amount is $13.4 billion with no maturity date.

Segment results: in the second quarter of fiscal 2023, sales of Cisco products (including routers and switches) were $10.155 billion, compared with $9.353 billion in the same period last year, and services sales were $3.437 billion, compared with $3.367 billion in the same period last year.

By product, Cisco's revenue from security and Agile Networks business in the second quarter was $6.746 billion, up 14% compared with the same period last year; revenue from Internet for the Future business was $1.306 billion, down 1% compared with the same period last year; revenue from cooperative business was $958 million, down 10% from the same period last year Revenue from the end-to-end security business was $943 million, up 7% from the same period last year; revenue from optimized application experience was $199 million, up 11% from the same period last year; and revenue from other products was $3 million, up 25% from the same period last year.

Geographically, Cisco's revenue from the US in the second quarter was $1.825 billion, up 9 per cent from the same period last year; revenue from EMEA was $3.728 billion, up 5 per cent from the same period last year; and revenue from the Asia-Pacific region was $2.039 billion, up 1 per cent from the same period last year.

Performance outlook: performance outlook for the third quarter of fiscal year 2023

Cisco predicts that in the third quarter of fiscal 2023, the company's revenue will grow by 11% to 13% compared with the same period last year, the gross profit margin will reach 63.5% to 64.5%, and the operating profit margin will reach 33% to 34%. The effective reserve income tax rates in accordance with and without GAAP will reach 18% and 19%, respectively. Earnings per share that do not comply with GAAP will be between $0.96 and $0.98, with an average of $0.97 exceeding analysts' expectations.

Cisco previously reported revenue of $12.8 billion in the third quarter of fiscal 2022. Based on Cisco's forecast year-on-year growth of 11% to 13%, this means that the company expects revenue of between $14.2 billion and $14.5 billion in the third quarter of fiscal 2023, exceeding analysts' expectations. According to data provided by Yahoo Finance Channel, 19 analysts had expected Cisco's third-quarter revenue to reach $13.58 billion, while 21 analysts had expected Cisco's third-quarter earnings per share to reach 89 cents.

Cisco also expects earnings per share under GAAP to range from 74 cents to 79 cents in the third quarter of fiscal 2023.

Performance outlook for fiscal year 2023

For the entire fiscal year 2023, Cisco expects revenue to grow 9% to 10.5% year-on-year, effective reserve income tax rates of 20% and 19% under and without GAAP, respectively, and earnings per share of $2.85 to $2.96. Earnings per share without GAAP will reach $3.73 to $3.78, with an average of $3.755 exceeding analysts' expectations.

Cisco previously reported revenue of $51.6 billion for the full year of fiscal 2022. Based on Cisco's forecast year-on-year growth of 9 to 10.5 per cent, this means that the company expects revenue of between $56.2 billion and $57 billion for fiscal 2023, exceeding analysts' expectations. According to data provided by Yahoo Finance Channel, 25 analysts on average expect Cisco's revenue to reach $54.54 billion in fiscal 2023, and 25 analysts expect Cisco's earnings per share to reach $3.55 in fiscal 2023.

Share price reaction: on the day, Cisco shares rose 75 cents, or 1.57 percent, to $48.45 in regular Nasdaq trading. Cisco shares rose another $1.85, or 3.82 per cent, to $50.30 in after-hours trading as of 05:10 EDT on Wednesday (06:10 Beijing time on Thursday). In the past 52 weeks, the highest price for Cisco is $57.69 and the lowest price is $38.60.

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