Cisco Q3 revenue outlook strong after Q2 beat

Network equipment maker Cisco Systems Inc promised further revenue growth after its second quarter results beat estimates, thanks to a restructuring, leading to a dividend increase.

The company, a sector bellwether because of its global scale and diverse client base, forecast 5 to 7 percent growth in fiscal third-quarter revenue.

That translates into a sales outlook of $11.4 billion to $11.6 billion, matching or slightly exceeding Wall Street’s average forecast of $11.46 billion.

Executives also forecast gross margins of 61.5 to 62 percent in the fiscal third quarter ending April.

“Broadly speaking, people expected a good quarter. This is probably a little better than expected and the dividend is an added surprise,” said Mizuho Securities analyst Joanna Makris.

Revenue rose 10.6 percent from the year-ago quarter to $11.5 billion. Analysts on average were expecting $11.23 billion.

Net income grew to $2.2 billion, or 40 cents per share, from $1.5 billion, or 27 cents share, a year earlier.

Excluding items, earnings were 47 cents per share, beating the average estimate of 43 cents a share, as compiled by Thomson Reuters I/B/E/S.

Cisco said on Wednesday it plans to pay a quarterly dividend of $0.08 per common share, up 2 cents from the previous quarter.

“Our operational focus continues to yield positive results – we hit our billion dollar expense reduction a quarter early,” Chief Executive John Chambers said in a statement on Wednesday.

Cisco last year scaled back on consumer businesses and laid off thousands in a sweeping 4-month overhaul, aiming to cut expenses by $1 billion.

Cisco’s core business is routers and switches, which direct Internet traffic, but the company has also focused on data centers, enabling and providing cloud computing technology and video platforms.

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Cisco Q3 revenue outlook strong after Q2 beat