Cisco third quarter beats Street thanks to enterprise sales

Cisco (NASDAQ: CSCO) pleased Wall Street yesterday when it announced net sales for its fiscal third quarter of $12.2 billion and GAAP net income of $2.5 billion ($0.46 per share). The revenue numbers were within Cisco’s guidance of $12.05 billion to $12.28 billion, but surpassed consensus pre-announcement estimates of $12.18 billion.

Cisco’s data center business performed strongly during the quarter, while service provider spending worldwide remains “challenged,” in the words of Cisco Chairman and CEO John Chambers during an analyst call yesterday. He noted that spending is trending away from wireline and toward wireless. Meanwhile, Chambers touted 77% growth in the company’s data center business.

The revenue for the quarter, which ended April 27, 2013, represented a 5.4% increase from that of the year-ago quarter. Net income was 14.5% greater than 3Q12 as well. All four of Cisco’s customer segments – enterprise, commercial, service provider, and public sector – grew year-on-year, according to Chambers. Orders from the U.S. market within all four segments grew as well, which may build optimism among investors about the U.S. economy.

Cisco’s non-GAAP gross margin was 63.0%, versus 62.3% in the previous quarter and 63.1% a year ago.

Looking forward, the company forecasts non-GAAP year-on-year revenue growth of 4% to 7% for the fourth fiscal quarter versus the $11.7 billion it earned in 4Q12. Non-GAAP earnings per share should range from $0.50 to $0.52 per share, with GAAP earnings in the quarter $0.07 to $0.10 per share lower than non-GAAP earnings.

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