AI infrastructure spending boosts Cisco’s earnings and revenue, but its stock declines after-hours
Networking giant Cisco Systems Inc. coasted to a solid earnings and revenue beat and issued strong guidance for the current quarter, but a drop in gross margins seems to have spooked investors, sending its stock down in late trading today.
The company reported fourth-quarter earnings before certain costs such as stock compensation of $1.22 per share, easing past the analyst consensus estimate of $1.17 per share. Revenue for the period came to $17.25 billion, up 18% from a year earlier and ahead of Wall Street’s $16.82 billion forecast. Net income, meanwhile, was up 51% from the year-ago period to $3.9 billion.
Ahead of today’s report, Cisco’s stock had posted some impressive gains, rising more than 60% during the quarter and by about 8% so far this month. Investors have been encouraged by the idea that the company is starting to benefit more from the artificial intelligence boom.
The company’s latest results suggest that is exactly what is happening. Cisco’s biggest business, the networking segment, which covers equipment used in AI data centers, saw its revenue grow significantly thanks to increased sales of that gear. All told, the unit generated revenue of $9.79 billion, up 28% from a year ago and surpassing the Street’s forecast of $9.66 billion. Hyperscalers, or the massive data center operators that are driving much of the spending on AI infrastructure, placed orders worth $4 billion during the quarter, bringing the total spent on such equipment to $9.3 billion throughout Cisco’s fiscal year.
