Why Cisco Earnings Aren’t Good Enough For Investors

By Chris Lange Updated Jan 12, 11:54AM EST · Published May 17, 4:24PM EDT

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Cisco Systems, Inc. (NASDAQ: CSCO) reported fiscal third-quarter financial results after markets closed Wednesday. The networking giant said that it had $0.60 in earnings per share (EPS) and $11.9 billion in revenue, which compares with consensus estimates from Thomson Reuters that called for $0.58 in EPS and $11.9 billion in revenue. The same period from last year had $0.57 in EPS and $12.0 billion in revenue.

Deferred revenue totaled $17.3 billion, up 13% from last year, with deferred product revenue up 26%, driven largely by subscription-based and software offerings. Deferred service revenue was up 7%.

During the quarter, Cisco completed its acquisition of AppDynamics. At the same time, the company announced its intent to acquire Viptela, Advanced Analytics team and associated advanced analytics intellectual property developed by Saggezza and MindMeld.

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In terms of the outlook for the coming quarter, the company expects to see EPS in the range of $0.60 to $0.62 and revenues declining between 4% and 6% from the same period last year. The consensus estimates are calling for $0.62 in EPS and $12.51 billion in revenue.

Cash flow from operating activities was $3.4 billion, an increase of 10% compared with $3.1 billion for the third quarter of fiscal 2016. On the books, cash, cash equivalents, and investments totaled $68.0 billion at the end of the quarter, versus $65.8 billion at the end of the previous fiscal year.

Chuck Robbins, CEO of Cisco, commented:

I am pleased with the progress we are making on the multi-year transformation of our business. The Network is becoming even more critical to business success as our customers add billions of new connections to their enterprises. We are laser focused on delivering unparalleled value through highly secure, software-defined, automated and intelligent infrastructure.

Shares of Cisco closed Wednesday down 1.4% at $33.82, with a consensus analyst price target of $36.09 and a 52-week trading range of $26.49 to $34.60. Following the release of the earnings report, the stock was initially down about 5% at $32.10.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.