(Bloomberg) — Cisco Systems Inc., the biggest maker of computer networking equipment, gained in late trading after giving a bullish forecast for the current quarter and boosting its share buyback program.
Sales will increase 3% to 5% in the period ending in April, the company said Wednesday in a statement. That compares with the average analyst projection of 4% revenue growth, or $13.3 billion, according data compiled by Bloomberg. Excluding certain items, earnings will be 85 cents to 87 cents a share.
Chief Executive Officer Chuck Robbins said his company is seeing strong demand for equipment across its businesses, driven by companies looking to upgrade their infrastructure. In fact, it’s more than Cisco can handle. The company is swamped with orders it can’t fill because of a shortage of components — a problem hurting industries across the economy.
“We delivered solid top-line growth combined with margins and earnings that exceeded the high ends of our guidance despite operating in a supply constrained and inflationary environment,” Robbins said on a conference call with analysts.
The bulk of Cisco’s income comes from hardware, which serves as the backbone of the internet and corporate computer networks. The reliance on equipment sales has made the company vulnerable to industrywide shortages of electronic components, which have pushed up its costs and left it unable to ship as many products as it has orders for.
More components will translate into faster revenue growth, Chief Financial Officer Scott Herren said. Cisco now has a backlog of $14 billion, more than double the level it was a year ago, and orders grew at more than 30% for a third consecutive quarter. The company expects improvement in the second half of fiscal 2022, which ends in July. The inability to ship enough hardware is even dragging down software and services revenue because some of that is tied to device sales, he said on the conference call.
Cisco shares rose as much as 6.7% to $57.87 in extended trading. The stock had fallen 14% this year through the close.
The company also announced a $15 billion increase to its share buyback program, which brings the total repurchase authorization to $18 billion.
The company has revised the categories used in earnings reports to reflect changes to its business. Sales in the Secure Networks unit, which includes networking hardware such as switches and routers, rose 7% to $5.9 billion in the quarter. Revenue from Internet for the Future, which includes optical networking and 5G-related products, jumped 42% to $1.32 billion. Both units topped analysts’ estimates.
Hybrid Work, which includes Webex and other collaboration products, declined 9% to $1.07 billion.
Services revenue was $3.37 billion, down about 1% from the period a year earlier and less than the average estimate of $3.45 billion.
(Updates with CFO comments on constraints in sixth paragraph.)
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