Cisco Systems, Inc. (NASDAQ: CSCO) Releases Its Q3 Earnings But Its Stock Turn Bearish

The company revealed its Q3 earnings at 66 cents per share which were higher than the analyst estimates by just one penny. The revenue reported for the quarter was $12.46 billion, marking a 4 percent rise compared to the revenue figure reported in Q3 of the previous year. The actual figure just barely managed to top the revenue estimate of $12.42 billion.

Cisco’s stock has so far managed to surge by more than 14 percent year-to-date and just a week ago, it managed to reach a new high of more than 17 years. During the announcement, the company stated that it was optimistic about future growth but unfortunately, Cisco’s stock took a dive by roughly 4 percent on Thursday following the announcement of the quarterly performance results. It turns out investors were expecting better performance, and thus the slight decline in the performance of the stock.

Despite the slight slump, the Cisco reported that it has a positive outlook about the demand for its products and services. More than half of the company’s revenue is generated through hardware sales. The firm has reported sales growth in just two quarters in the past nine quarters.

Cisco CEO Chuck Robbins has been working towards making sure that it expands its revenue sources, especially so that it stops depending heavily on its hardware business. Other than selling hardware, the company has been doubling down on software and network services. Meanwhile, it has also been investing in networking equipment to support its main business.

Robbins revealed that the strategy that Cisco revealed three years ago has been working and the firm is pleased that they are doing what they set out to do. The company’s new business model is expected to help achieve faster revenue growth once the company starts moving its traditional routing and switching customers to products that feature software subscriptions.

Cisco also announced that it expects its revenue for the fourth quarter to be between $0.68 and $0.70 per share. The revenue projection by the company is also in line with analysts revenue estimate of $0.68 per share for Q4. The firm expects Q4 revenue to rise by 4 percent to 6 percent. This means revenue is expected somewhere around the $12.7 billion figure.

Robbins stated that Cisco has been carefully executing its strategy and that its innovation pipeline is stronger than it has ever been. He also added that the company has been making significant strides towards subscriptions and more software. The Cisco CEO also stated that the firm is confident with its current position in the industry.

Meanwhile, there is speculation that the recent slump in Cisco’s stock might be the result of a narrow gross margin for its products. The company, however, maintains that its switch towards software should provide proper cushioning in the future. Network technology has been shifting towards software and Cisco is one of the adopters of the trend.