CISCO SYSTEMS, INC. Quarterly Report for Q2 Ended Jan 23, 2016

Summary

Cisco Systems, Inc. (CSCO) reported its fiscal second quarter 2016 results, ending January 23, 2016. The company demonstrated resilience with flat total revenue year-over-year, amounting to $11.93 billion. This stability was achieved despite a 1% decline in product revenue, which was offset by a 3% increase in service revenue. A notable event was the sale of the Service Provider Video CPE Business, which impacted year-over-year comparisons but contributed to a significant improvement in gross margin, up 2.9 percentage points to 62.3%. Net income saw a substantial increase of 31.3% to $3.15 billion, largely influenced by favorable tax benefits stemming from an IRS settlement and the reinstatement of the R&D tax credit, which contributed to a significantly lower effective tax rate of 4.8%. Diluted earnings per share rose 34.8% to $0.62. The company also continued its capital return program, repurchasing $2.47 billion in stock and paying $2.13 billion in dividends during the six-month period, while generating strong free cash flow of $6.11 billion.

Key Highlights

• 1Total revenue remained flat at $11.93 billion for the quarter, with product revenue down 1% and service revenue up 3%.
• 2Gross margin significantly improved by 2.9 percentage points to 62.3%, driven by the sale of the lower-margin SP Video CPE Business and productivity improvements.
• 3Net income increased by 31.3% to $3.15 billion, significantly boosted by tax benefits from an IRS settlement and R&D tax credit reinstatement.
• 4Diluted earnings per share grew 34.8% to $0.62.
• 5Operating income as a percentage of revenue increased to 27.6% from 22.0% in the prior year's quarter.
• 6The company continued substantial capital returns, repurchasing $2.3 billion in stock and paying $2.1 billion in dividends during the first six months of the fiscal year.
• 7Free cash flow for the six months ended January 23, 2016, was strong at $6.11 billion.

Frequently Asked Questions