Cisco reports Q3 earnings beat, says 95% of global workforce working from home

On Wednesday, reported third-quarter net income of $2.8 billion, or $0.65 a share, as revenue declined 8% to $12 billion from $12.96 billion year-over-year. The company also said 95% of its global workforce is working from home amid the coronavirus pandemic. Myles Udland breaks down Cisco’s quarterly results on The Final Round.

Video Transcript

JEN ROGERS: We got earnings crossing the tape, Cisco a little bit of a reality check here. On this company, Myles Udland has the numbers for us. Myles.

MYLES UDLAND: Yeah, stock up 2 and 1/2% now on Cisco's beat on the top and bottom line, $0.79 per share adjusted earnings in the company's third fiscal quarter. That was against expectations for $0.69 per share. Revenues coming in $11.9 billion. The Street was looking for 11.7-- actually, 11.98, so $12 billion, but a $30 million beat there for Cisco on its top line.

Its guidance for the current quarter, its fourth quarter, fiscal fourth quarter here a little bit better than expected. The company is looking for revenue to decline between 8 and 1/2% and 11 and 1/2% year over year. The Street was expecting a drop closer to 12% year over year.

In the company's current quarter, revenues were down 8%. And so a sequential increase in the loss of revenue expected for the company, but I think in this environment, when you beat the Street's very low expectations, you get a little bit of the benefit of the doubt. We're seeing the stock here, again, a little bit higher after hours.

Just some light commentary here on coronavirus, the company pointing out 95% of its workforce is working from home. They said it was a seamless transition there, and also talking about how they've pivoted to that recurring revenue model. 74% of its software revenue is now from a subscription side of the business. That's up from 65% last year.

I think it's going to be very interesting in 2021 and '22 whether these software contracts are renewed at the same pace that the Street is so excited about. But certainly, if you are continuing to emphasize your SAS model as it were, investors have looked quite favorably on those shifts over the last couple of years.

ANDY SERWER: And Myles, you think about Cisco's primarily an enterprise business, and it is. But they actually do have a significant exposure to the consumer. And so that was definitely something that analysts were looking for, which is how much would a consumer-facing business mitigate declines in enterprise? And it sounds like some of that took place.

RICK NEWMAN: Another important thing about Cisco is their quarter ended at the end of April, I believe, not at the end of March. So they're actually accounting for more than one full month of activity during the shutdown in this quarter, where most of the other earnings reports we've gotten have just been through the end of March. So I'd say that is encouraging.

JEN ROGERS: Definitely, and this was really a bellwether. Dan Ives had told us to watch out for this. This was one of the more important earnings releases that we've had for the remainder of earnings season, especially on the tech front, to get a sense of even though there is a consumer-facing part of this business, that how much the companies are spending on upgrading their systems.

We've heard from, you know, the move to cloud with Microsoft and Amazon. We heard from Facebook and Google. But this was really nuts and bolts that analysts wanted to hear. And to Rick's point, it is important, the timing of the quarter.

ANDY SERWER: So take that, Scott Minerd and [INAUDIBLE] and Stan Druckenmiller and Jay Powell-- Chuck Robbins coming at you.

JEN ROGERS: It's up 3 and 1/2% after hours here, Cisco right now. And to Myles' point also about the pandemic, they said in here, Chuck Robbins said the pandemic has driven organizations across the globe. They said, remember, this is a global company to digitize their operations and support remote workforces at a faster speed and greater scale than ever before.

ANDY SERWER: [INAUDIBLE]

JEN ROGERS: So this is the biggest they have seen. Sorry, Andy, what?

ANDY SERWER: No, I'm sorry, Jen. It's kind of consumer and enterprise when you're working from home. Go ahead. Sorry about that.

JEN ROGERS: Oh, yeah, for sure. And also with the WebEx part their business as well in there, we know that's a Zoom competitor. Been around for a while, so they're also trying to make some moves in that space as well.