Industry Updates

Cisco has reported third quarter results for the period ended April 29, 2023. Cisco reported third quarter revenue of $14.6 billion, net income on a generally accepted accounting principles (GAAP) basis of $3.2 billion or $0.78 per share, and non-GAAP net income of $4.1 billion or $1.00 per share.

"We once again delivered a strong quarter in a dynamic environment," said Chuck Robbins, chair and CEO of Cisco. "In Q3, we delivered record revenue and double-digit growth in both software and subscription revenue. As key technologies like cloud, AI and security continue to scale, Cisco's long-established leadership in networking, and the breadth of our portfolio position us well for the future."

"Our operational discipline and focused execution resulted in strong top and bottom-line growth, margin expansion and record operating cash flow," said Scott Herren, CFO of Cisco. "Our healthy backlog, recurring revenue streams and RPO, as well as the improving availability of supply, underpin our confidence to increase full year guidance."

Reconciliations between net income, EPS, and other measures on a GAAP and non-GAAP basis are provided in the tables located in the section entitled "Reconciliations of GAAP to non-GAAP Measures."

Cisco Declares Quarterly Dividend

Cisco has declared a quarterly dividend of $0.39 per common share to be paid on July 26, 2023, to all stockholders of record as of the close of business on July 6, 2023. Future dividends will be subject to Board approval.

Financial Summary

All comparative percentages are on a year-over-year basis unless otherwise noted.

Q3 FY 2023 Highlights

Revenue -- Total revenue was up 14% at $14.6 billion, with product revenue up 17% and service revenue was up 3%. Revenue by geographic segment was: Americas up 13%, EMEA up 16%, and APJC was up 11%. Product revenue performance was led by growth in Secure, Agile Networks up 29%, Internet for the Future up 5%, End-to-End Security up 2%, and Optimized Application Experiences up 12%. Collaboration was down 13%.

Gross Margin -- On a GAAP basis, total gross margin, product gross margin, and service gross margin were 63.4%, 62.7%, and 65.4%, respectively, as compared with 63.3%, 61.8%, and 67.3%, respectively, in the third quarter of fiscal 2022.

On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 65.2%, 64.5%, and 67.3%, respectively, as compared with 65.3%, 64.1%, and 68.9%, respectively, in the third quarter of fiscal 2022.

Total gross margins by geographic segment were: 64.2% for the Americas, 66.6% for EMEA and 66.4% for APJC.

Operating Expenses -- On a GAAP basis, operating expenses were $5.3 billion, up 17%, and were 36.3% of revenue. Non-GAAP operating expenses were $4.6 billion, up 16%, and were 31.3% of revenue.

Operating Income -- GAAP operating income was $3.9 billion, up 9%, with GAAP operating margin of 27.1%. Non-GAAP operating income was $4.9 billion, up 11%, with non-GAAP operating margin at 33.9%.

Provision for Income Taxes -- The GAAP tax provision rate was 18.8%. The non-GAAP tax provision rate was 19.0%.

Net Income and EPS -- On a GAAP basis, net income was $3.2 billion, an increase of 6%, and EPS was $0.78, an increase of 7%. On a non-GAAP basis, net income was $4.1 billion, an increase of 13%, and EPS was $1.00, an increase of 15%.

Cash Flow from Operating Activities -- $5.2 billion for the third quarter of fiscal 2023, an increase of 43% compared with $3.7 billion for the third quarter of fiscal 2022.

Balance Sheet and Other Financial Highlights

Cash and Cash Equivalents and Investments -- $23.3 billion at the end of the third quarter of fiscal 2023, compared with $19.3 billion at the end of fiscal 2022.

Remaining Performance Obligations (RPO) -- $32.1 billion, up 6% in total, with 53% of this amount to be recognized as revenue over the next 12 months. Product RPO were up 9% and service RPO were up 4%.

Deferred Revenue -- $24.3 billion, up 9% in total, with deferred product revenue up 11%. Deferred service revenue was up 7%.

Capital Allocation -- In the third quarter of fiscal 2023, we returned $2.9 billion to stockholders through share buybacks and dividends. We declared and paid a cash dividend of $0.39 per common share, or $1.6 billion, and repurchased approximately 25 million shares of common stock under our stock repurchase program at an average price of $49.45 per share for an aggregate purchase price of $1.3 billion. The remaining authorized amount for stock repurchases under the program is $12.2 billion with no termination date.

Acquisitions

In the third quarter of fiscal 2023, we closed the acquisition of Valtix, a privately held cloud network security company.

Guidance

Cisco expects to achieve the following results for the fourth quarter of fiscal 2023:

Cisco estimates that GAAP EPS will be $0.82 to $0.87 for the fourth quarter of fiscal 2023.

Cisco expects to achieve the following results for fiscal 2023:

Cisco estimates that GAAP EPS will be $2.93 to $2.98 for fiscal 2023.

Our Q4 FY 2023 guidance assumes an effective tax provision rate of 18% for GAAP and 19% for non-GAAP results. Our FY 2023 guidance assumes an effective tax provision rate of 20% for GAAP and 19% for non-GAAP results.

A reconciliation between the Guidance on a GAAP and non-GAAP basis is provided in the tables entitled "GAAP to non-GAAP Guidance" located in the section entitled "Reconciliations of GAAP to non-GAAP Measures."

Source: https://newsroom.cisco.com/c/r/newsroom/en/us/a/y2023/m05/cisco-reports-third-quarter-earnings.html