Networking giant Cisco Systems Inc. posted stronger-than-expected fiscal fourth-quarter earnings and revenue and followed with a bullish forecast for the new financial year, sending its stock higher in extended trading today.

The company reported net income for the fourth quarter of $3.4 billion, or 68 cents per share. Earnings before certain costs such as stock compensation came to 83 cents per share, with revenue hitting just over $13.1 billion, flat from a year earlier.

The results were better than expected, with Wall Street analysts modeling earnings of 82 cents per share on revenue of $12.73 billion. Investors signaled their approval of the company’s performance, as Cisco’s stock gained more than 4% in the after-hours trading session. In the hours prior to the results being published, Cisco’s stock had barely moved.

Cisco Chief Executive Officer Chuck Robbins (pictured) said the company delivered a strong end to its fiscal year thanks to the better-than-expected fourth-quarter showing. “Our teams executed well in the midst of an incredibly dynamic environment,” he said, producing what he said was the highest full-year adjusted earnings per share in the history of the company.

For the full year fiscal 2022, Cisco delivered $51.6 billion in revenue, up 3% from one year earlier. Meanwhile, earnings before certain costs came to $3.36 per share, up 4% from a year before.

Breaking down the numbers from Cisco’s fourth quarter, both the Product and Service businesses were flat year-over-year, with the former delivering $9.69 billion in revenue and the latter $3.41 billion. Cisco’s top business segment, Secure, Agile Networks, which includes its data center switches, saw sales fall by 1%, to $6.09 billion.

In a conference call with analysts, Robbins said a gradual easing of the supply constraints the company had warned about three months earlier led to better-than-expected revenue growth. That’s likely to extend into future quarters, he reiterated.

Cisco Chief Financial Officer Scott Herren told MarketWatch that the company still has a record order backlog of more than $15 billion, though, mainly because of the lack of components such as semiconductors and power supplies. It’s expected that supply constraints will continue to dog the company throughout fiscal 2023, he added.

That said, the company should deliver better results than many analysts had first thought. For the fiscal year 2023, Cisco is expecting to deliver earnings of $3.49 to $3.56 per share, with revenue growth of between 4% and 6%. The forecast was just ahead of Wall Street’s projection of $3.53 per share in adjusted earnings and $52.72 billion in sales, which would reflect growth of just over 2%.

As for its first-quarter earnings forecast, Cisco said it sees earnings of between 82 and 84 cents per share and revenue growth of 2% to 4%. Wall Street earlier said it was looking for earnings of 84 cents per share and a revenue decline of about 3%.

Forrester Research Inc. Vice President & Research Director Glenn O’Donnell said Cisco’s numbers were better than most people had hoped for, though a closer analysis shows that it only did this thanks to a big improvement in sales in the Europe, Middle East and Africa region, where revenue jumped 8.5%. He pointed out that revenue from the Americas was down 3.4%, while Asia Pacific sales fell by 2%.

“Basically, Europe saved Cisco,” O’Donnell said. “U.S. business was soft, but I suspect EU measures to migrate off Chinese vendors had some benefit for Cisco. Overall, Cisco beat Wall Street’s estimates. I expected revenue to be down year-over-year, and it was ever so slightly, but it did better than I anticipated.”

Holger Mueller of Constellation Research Inc. told SiliconANGLE that Cisco’s transformation remains ongoing, only the problem is that it’s doing things at an incredibly pedestrian pace, with revenues rising by just 3% from a year ago. “At this pace it’s going to take Cisco a very long time,” he said. “Granted, the supply chain issues still exist and make Cisco’s life challenging, but the company seems to have factored this into its expectations for the next year.”

Offering some food for thought, Mueller said keen investors may have noted that Cisco spent an extra $4 billion on stock repurchases during the previous quarter, which is almost as much as it spent on sales and marketing and research and development. “Only the future will tell if this is the right allocation of funds, but it does not bode well in terms of confidence we have in Cisco’s willingness to invest into its core business,” the analyst added.

Regarding the stock uptick, Charles King of Pund-IT Inc. said investors likely felt a lot of relief that they were spared a repeat of Cisco’s last ugly quarter, and were instead bolstered by its generally optimistic forecast. “Perhaps more important was Cisco’s optimism about economic and supply chain issues,” the analyst added. “That appears to be at odds with some analysts’ gloomier assessments but oftentimes the best barometers of business sentiment are the customers that vendors, including Cisco, deal with directly.”

During its previous earnings call, three months earlier, Cisco had sparked worries that businesses might be spending less on technology than they were doing before. However, Cisco’s strong results and better-than-expected forecast, along with the strong performance of competitor Arista Networks Inc. earlier this month, seems to have quelled those fears.

Cisco’s stock is still down 26% in the year to date, while the broader S&P 500 has declined by just 10%.

Photo: Cisco Pics/Flickr