(Bloomberg) — Cisco Systems Inc. gained about 4% in extended trading after providing a solid sales and profit forecast for the current quarter, indicating that some customers are starting to invest again in their computer networks.
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Sales will be $13.4 billion to $13.6 billion in the fiscal fourth quarter, which ends in July, the company said in a statement Wednesday. That compares to an average analyst estimate of $13.5 billion. Excluding certain items, earnings will be 84 cents to 86 cents per share, versus a forecast of 84 cents.
The outlook sent shares as high as $54.11 before paring some of the gains. They had previously closed at $49.67, down 1.7% for the year.
CEO Chuck Robbins continues his effort to remake Cisco as a provider of networking software and services — a strategy that included the $28 billion acquisition of Splunk Inc. and customers of telecommunications companies.
Cisco reported a 4% gain in orders last quarter – an indicator of future sales – when including Splunk. Otherwise, they were stable, but analysts feared a decline. Orders fell 12% in the previous period.
For the full fiscal year 2024, revenues will be $53.6 billion to $53.8 billion, compared to an average estimate of $53.6 billion. Sales will grow by a low-to-mid single-digit percentage in fiscal 2025, Cisco said.
“Customers are consuming the equipment shipped in recent quarters in line with our expectations,” Chief Financial Officer Scott Herren said in the release. “As a result, we are seeing a stabilization of demand.”
On the conference call, Robbins said clients will finish working on their backlog by July.
Cisco’s adjusted gross margin — the percentage of sales remaining after deducting the cost of production — is expected to be 66.5% to 67.5% this quarter.
In Cisco’s fiscal third quarter, ended April 27, revenue contracted 13% to $12.7 billion. Earnings were 88 cents per share, minus some items. Analysts estimated revenue of $12.66 billion and earnings of 82 cents per share.
Cisco leadership has argued that the company is experiencing a temporary slowdown in orders as customers work on installing equipment they have already purchased. Once this impasse is resolved, they will invest again.
Cisco closed its acquisition of data processing software maker Splunk during the quarter. This addition added $413 million in revenue.
Splunk CEO Gary Steele will become a Cisco president focused on its “go-to-market” strategy. Meanwhile, Jeff Sharritts, the company’s chief customer and partner officer, will depart in mid-July.
“Steele is known for his operational excellence and in this new role, he will work closely with Robbins to define and execute Cisco’s strategic plans and goals,” said the San Jose, California-based company.
(Updates shares starting in first paragraph.)
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