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What’s happening: Shares of Cisco Systems fell in after-hours trading on Wednesday, following the release of the company’s fiscal first-quarter results.
What happened: The biggest maker of computer networking equipment reported stronger-than-expected sales and earnings for the latest quarter.
Cisco, which is seen as a bellwether for corporate technology spending, also raised its guidance for fiscal 2025.
How were the results: The San Jose, California-based company reported a single-digit decline in revenues in the first quarter ended October 26.
Why it matters: Cisco’s networking equipment business had been under pressure due to supply chain bottlenecks and a slowdown in demand. The company witnessed some recovery in corporate spending across all sectors during the quarter. Equipment required for AI computing boosted demand. Seen as a bellwether for corporate technology spending.
“Our customers are investing in critical infrastructure to prepare for AI, and with the breadth of our portfolio, we are uniquely positioned to capitalize on this opportunity,” CEO Chuck Robbins said.
Cisco announced two rounds of layoffs this year to reduce its overall cost burden, with plans to shift its focus to cybersecurity and AI-related products. The company also completed the acquisition of Splunk for $28 billion, with the aim of expanding its software business.
Cisco said its product revenues fell 9% year-over-year, while services revenue grew by 6% during the quarter.
The board declared a quarterly dividend of 40 cents per share. The company repurchased around 40 million shares of its common stock during the latest quarter.
Management guided to revenues between $13.75 billion and $13.95 billion and adjusted earnings of 89 cents to 91 cents per share for the fiscal second quarter.
For the full year, they raised their revenue guidance to a range of $55.3 billion to $56.3 billion, from their earlier forecast of $55.0 billion to $56.2 billion. Management also raised the adjusted earnings guidance to a range of $3.60 to $3.66 per share, versus their previous forecast of $3.52 to $3.58 per share.
How shares responded: Cisco’s shares fell 2.9% to $57.45 in extended trading on Wednesday, following the release of quarterly results. The stock had jumped around 9% over the past month in anticipation of the results.
What to watch: Investors will continue monitoring the ongoing AI boom and related infrastructure spend by companies. With the US federal government being Cisco’s biggest customer, markets will watch the impact of the change in administrations on federal budgeting.
Context: The CAD/USD forex pair fell on Wednesday, with the US dollar continuing its rally.
Details: The CAD/USD forex pair fell to its weakest level since May 2020 as higher inflation data released by the US provided a further boost to the greenback.
The annual inflation rate in the US accelerated to 2.6% in October, from the previous month’s reading of 2.4%. This sparked speculations of the Federal Reserve pausing its interest rate hikes, which supported the US dollar.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained more than 0.4% to 106.48 on Wednesday.
A lower-than-expected jobless rate and a positive PMI report from Canada limited did not help support the Canadian dollar. Instead, it triggered speculations of bigger interest rate hikes by the Bank of Canada, exerting pressure on the loonie.
Higher prices of crude oil, one of Canada’s major exports, limited the overall losses for the Canadian dollar. WTI crude oil prices gained around 0.5% to close at $68.43 a barrel on Wednesday.
The CAD/USD forex pair fell around 0.4% to 1.4002 on Wednesday. The S&P/TSX Composite Index rose by 0.26% to close at 24,989.02.
What to watch: With no major economic data due today, investors await the release of reports on manufacturing sales, new motor vehicle sales and wholesale sales from Canada tomorrow. Analysts expect manufacturing sales in Canada to decline by 0.8% in September, after a contraction of 1.3% in the previous month.
Car registrations in Canada, which fell to 168,620 units in August, are expected to decline further to 166,000 in September. Analysts expect wholesale sales to grow by 0.9% in September, following a 0.6% decline in the previous month.
Other Markets: US trading indices closed mixed on Wednesday, with the Dow Jones index and S&P 500 up by 0.11% and 0.02%, and the Nasdaq 100 down by 0.16%, respectively.
Russia stepped up its attack on Ukraine’s capital, with its first combined drone and missile attack. The news sent the safe-haven US dollar index higher in forex trading this morning.
Australia’s unemployment rate came in unchanged at 4.1% in October, in-line with market expectations. However, the number of unemployed people rising by 8,300 to a three-month high of 625,800 exerted pressure on the AUD/USD forex pair.
New Zealand’s annual food inflation came in steady at 1.2% in October. This being the highest reading since February sent the NZD/USD pair lower in forex trading this morning.
Poland’s trade deficit widened to €690 million in September, from €585 million in the year-ago month, exerting pressure on the PLN/USD forex pair.
Russia’s annual inflation rate fell for the second month to 8.5% in October, from 8.6% in September. This being the lowest rate since May sent the RUB/USD slightly higher in forex trading this morning.
India’s wholesale prices and money supply M3, Spain’s inflation rate, South Africa’s mining production and gold production, Eurozone’s employment change, GDP growth rate, industrial production and European Central Bank’s monetary policy meeting accounts, Brazil IBC-Br economic activity index, US producer price inflation, initial jobless claims, continuing jobless claims, crude oil stocks change, gasoline stocks change and distillate stocks, Saudi Arabia’s inflation rate and wholesale price inflation, as well as Bank of Mexico’s interest rate decision.
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