Cisco beats earnings expectations as AI spurs networking gear demand

:Cisco Systems forecast quarterly revenue and profit above Wall Street estimates after posting upbeat first-quarter results, helped by improving demand for its networking gear amid the AI boom.
Shares of the computer networking equipment maker were down 1.4 per cent in extended trading after the company forecast annual revenue broadly in line with estimates.
Companies have been ramping up investments in AI technologies which require heavy computing power, creating a spike in demand for data centers, which use Cisco’s products such as ethernet switches and routers.
However, the California-based company has been trying to reduce reliance on its massive networking equipment business, which has suffered in recent years from supply chain issues and a post-pandemic slowdown in demand.
The company had announced two rounds of layoffs this year in a bid to cut costs, as it shifts focus to cybersecurity, cloud systems and AI-driven products.
Cisco completed its $28 billion acquisition of Splunk in March, which aims to boost its software business amid an AI boom while also helping to offset a post-pandemic slowdown in demand by enhancing its cybersecurity capabilities.
The company expects second-quarter revenue to be between $13.75 billion and $13.95 billion, which was above analysts’ average estimate of $13.73 billion, according to LSEG-compiled data.
It forecast quarterly adjusted profit per share of 89 cents to 91 cents, compared with estimates of 87 cents.
The company’s revenue fell 6 per cent to $13.84 billion in the first quarter ended Oct. 26, beating estimates of $13.77 billion. Adjusted profit per share of 91 cents also beat estimates of 87 cents.
Cisco now expects annual revenue to be between $55.3 billion and $56.3 billion, compared with its earlier forecast of between $55.0 billion to $56.2 billion. Analysts were expecting $55.89 billion.
It raised its annual adjusted profit forecast range to $3.60 to $3.66, from $3.52 to $3.58.