Written by Michelle Jones

Cisco Systems (CSCO) released the earnings results from its first quarter of fiscal 2016 after closing bell tonight, posting adjusted earnings of 59 cents per share on $12.7 billion in sales, a 4% increase year over year. Analysts had been expecting earnings of 56 cents per share and revenue of $12.65 billion for the quarter. Management had guided for revenue of between $12.49 billion and $12.74 billion. In last year’s first quarter, Cisco reported earnings of 54 cents per share and $12.2 billion in sales.

CSCO

Cisco demonstrates solid sales growth

GAAP earnings were 48 cents per share, compared to last year’s 35 cents per share. Product revenue climbed 4% year over year, while service revenue edged upward by 1%. Sales in the Americas increased 4%, while sales in Europe, the Middle East, and Africa and the Asia Pacific, Japan, and China reason each increased 3% year over year.

Cisco reported that Data Center revenue increased 24%, leading growth in product revenue. Collaboration sales increased 17% year over year, while the Wireless and Security segments each improved 7%. The Switching business saw a 5% increase in sales, while revenue from the NGN Routing segment declined 8%. Revenue from the Service Provider Video segment declined 2%. Cisco’s deferred revenue increased 10% to $15.2 billion, including a 15% increase in deferred product revenue. The main driver of that increase was subscription-based and software offerings. Deferred service revenue grew 7%.

The total non-GAAP gross margin was 63.2%, while the product gross margin was 62.3% on a non-GAAP basis and the service non-GAAP margin was 66.2%.

Cisco Systems’ guide misses estimates

Cisco management said they expect second quarter non-GAAP earnings to be between 53 cents and 55 cents per share, coming up a little light of Wall Street’s estimate of 56 cents per share. They expect revenue to be flat or increase by up to 2% year over year for the second quarter. Cisco expects a non-GAAP gross margin of 62% to 63%.