Cisco shares jump on record FQ3 revenue, FY outlook

Today’s headlines

What’s happening: Shares of Cisco Systems rose sharply in after-hours trading on Wednesday following the release of its fiscal third-quarter results.

What happened: The networking equipment company reported better-than-expected sales and earnings for the latest quarter.

Cisco raised its outlook for the full year and announced plans to slash around 4,000 jobs.

How were the results: The San Jose, California-based company reported low double-digit sales growth for its fiscal third quarter (February to April).

• Revenues surged 12% year-over-year to $15.84 billion, beating consensus estimates of $15.56 billion.
• Adjusted earnings came in at $1.06 per share for the quarter, surpassing Wall Street expectations of $1.03 per share.

Why it matters: Cisco delivered strong revenue growth, driven by product revenue growth of 17%, even as services revenue contracted by 1%.

Product revenue growth was driven by a 25% jump in Networking and a 3% gain in Observability. While Security product revenue came in flat, Collaboration revenue fell 1%.

“Cisco delivered record quarterly revenue in Q3 and we saw very strong, broad-based demand for our products, demonstrating the relevance of our technology for connecting and securing AI,” CEO Chuck Robbins said.

Benefiting from higher AI spending by companies, Cisco’s networking product orders jumped more than 50% year-over-year, while datacentre switching orders climbed more than 40%.

Cisco announced strategic investments in ​optics, silicon and security, shifting investment toward AI, with plans to cut jobs in some areas.

The company plans to downsize by around 4,000 jobs during the ongoing quarter, accounting for less than 5% of its overall workforce.

Management guided to fiscal fourth-quarter revenue of $16.7-$16.9 billion, higher than market expectations of $15.82 billion. They projected adjusted earnings of $1.16-$1.18 per share, significantly above consensus estimates of $1.07 per share.

Cisco raised its full-year revenue forecast to $62.8-$63 billion, from its previous outlook of $61.2-$61.7 billion. The company also raised its adjusted earnings outlook to $4.27-$4.29 per share, from its earlier forecast of $4.13-$4.17 per share.

Cisco said it already has AI infrastructure orders worth $5.3 billion year to date and expects this to reach $9 billion by yearend.

How shares responded: Cisco’s shares surged 19.8% to $122.00 in after-hours trading following the release of quarterly results on Wednesday. The stock has climbed around 24% over the past month.

What to watch: Investors will continue monitoring the growing AI adoption by companies, which is expected to boost the company’s results ahead.

The markets today

Crude oil in focus today ahead of the Trump-Xi Jinping meeting

Context: Crude oil prices rose this morning as investors digested the latest crude inventories data.

Details: US President Donald Trump has travelled to Beijing to meet China’s Premier Xi Jinping to discuss trade, Iran and Taiwan.

Trump said that the two superpowers would have a “fantastic future together”. President Xi warned of a potential derailment of talks over Taiwan.

The US had recently also threatened new sanctions on countries involved in Iran’s crude oil sales to China, which is the biggest importer of its crude.

Meanwhile, the US EIA (Energy Information Administration) reported that crude and fuel flows through the Strait of Hormuz had contracted by around 6 million barrels per day (bpd) during the first quarter after the start of the war with Iran in late February.

The EIA also warned that the global oil market could remain significantly undersupplied until October even if the war ends next month.

Data released on Wednesday showed US crude inventories declined by 4.306 million barrels to 452.9 million barrels during the week ended May 8. This was higher than market estimates of a drawdown of 2.1 million barrels.

Gasoline inventories fell by 4.084 million barrels to 215.7 million, while distillate stocks rose 0.190 million barrels to 102.5 million during the week. Net US crude imports declined by 318,000 bpd during the week.

Weakness in the US dollar lent further support to oil prices, as a softer greenback makes commodities cheaper for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, edged lower to 98.49 this morning.

Spot price for WTI crude oil rose 0.2% to $101.92 a barrel, while Brent crude added 0.1% to trade at $108.95 a barrel this morning.

In other energy trading, natural gas rose 0.2% to $2.869, while gasoline fell 0.4% to $3.6058 and heating oil prices slipped 0.1% to $3.9646.

What to watch: Investors will continue monitoring announcements related to the US-China meeting.

Data on US EIA natural gas stocks change (1830 UAE Time) will be released today. US natural-gas stockpiles, which surged by 63 billion cubic feet in the week ended May 1, are expected to jump by 86 billion cubic feet in the latest week.

Other Markets: European indices closed higher on Wednesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.58%, 0.76%, 0.35% and 0.79%, respectively.

The news shaping the markets

Russia hit Ukraine with over 800 drones in a major daytime assault. The news sent the USD/RUB pair lower in forex trading this morning.

New Zealand’s visitor arrivals rose 15.1% year-over-year to 358,911 in March. This being a deceleration from the previous month’s 15.2% surge exerted pressure on the NZD/USD forex pair.

Germany’s current account surplus shrank to €23.6 billion in March from €27.4 billion in the year-ago period, which sent the EUR/USD pair lower in forex trading this morning.

Brazil’s retail sales grew by 0.5% in March, easing from a 0.7% surge in February and lending support to the USD/BRL forex pair.

Israel’s trade deficit widened to $4.19 billion in April from $3.58 billion in the year-ago period. However, the USD/ILS pair slipped in forex trading this morning.

What else to watch today

South Africa’s gold production (1330 UAE Time) and mining production (1330 UAE Time), Turkey’s foreign exchange reserves (1530 UAE Time), Canada’s new motor vehicle sales (1630 UAE Time) and wholesale sales (1630 UAE Time), US retail sales (1630 UAE Time), export prices (1630 UAE Time), import prices (1630 UAE Time), initial jobless claims (1630 UAE Time), continuing jobless claims (1630 UAE Time) and business inventories (1800 UAE Time), Russia’s balance of trade (1700 UAE Time) as well as Argentina’s inflation rate (2300 UAE Time).