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What Drove Cisco’s Earnings in Q2 2019?

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Feb. 14 2019, Published 1:16 p.m. ET

Cisco’s earnings performance

Cisco Systems (CSCO) posted better-than-expected earnings in the second quarter of fiscal 2019 on February 13 after the market bell. Second-quarter earnings of $0.73 per share exceeded analysts’ expectations of $0.72 per share by 1.4%. The company has managed to beat analysts’ estimates on earnings for the past six quarters. Cisco’s second-quarter earnings were in line with the company’s guidance of $0.71 to $0.73 per share.

Peer NetApp (NTAP) also posted upbeat earnings of $0.99 per share in the third quarter of fiscal 2018 on Wednesday after the market bell. Juniper (JNPR) and GoPro (GPRO) also reported better-than-expected earnings in their respective fourth-quarter 2018 results.

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Earnings growth drivers

Cisco’s earnings of $0.73 per share jumped ~15.9% YoY driven by its top line and higher operating income growth despite higher operating expenses. Earnings also got a boost from the lower share count driven by share repurchases. Revenues and adjusted operating income each grew 7% YoY in the third quarter. The total adjusted gross margin of 64.1% in the third quarter was lower than the year-ago quarter’s margin of 65.1%. However, adjusted operating margin remained flat at 32.1%. Further, the company repurchased around 111 million shares worth $5 billion during the quarter.

Third-quarter outlook

For the third quarter, Cisco expects adjusted earnings to lie in the range of $0.76 to $0.78 per share. Analysts have given estimates of $0.77 per share for the third quarter.

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