10-QPeriod: Q3 FY2022

CISCO SYSTEMS, INC. Quarterly Report for Q3 Ended Apr 30, 2022

Filed May 25, 2022For Securities:CSCO

Summary

Cisco Systems, Inc. reported stable revenue for the third quarter of fiscal year 2022, largely in line with the prior year's comparable period, totaling $12.8 billion. This stability was achieved despite significant headwinds, including ongoing global supply chain constraints and the impact of COVID-19 lockdowns in China, which particularly affected component availability. The company's product revenue saw a modest increase of 3%, driven by growth in networking and security solutions, while service revenue declined by 8%. Profitability remained strong, with operating income increasing by 4% to $3.6 billion and diluted earnings per share rising by 7% to $0.73. This performance reflects the company's ability to manage expenses effectively, with total operating expenses decreasing by 4% year-over-year, partly due to the benefit of an extra week in the prior year's comparable quarter. Cisco continues its strategic focus on software and subscription-based offerings, aiming for long-term profitable growth amidst a challenging macroeconomic and competitive landscape.

Financial Highlights

56 data points
Beta

Revenue

$12.84B

63.3% Gross Margin

Net Income

$3.04B

23.7% Net Margin

EPS (Diluted)

$0.73

Total Assets

$92.80B

Cash & Equivalents

$6.95B

Free Cash Flow

$3.56B

Financial Statements
Beta
Revenue$12.84B
Cost of Revenue$4.71B
Gross Profit$8.12B
R&D Expenses$1.71B
Operating Expenses$4.51B
Operating Income$3.61B
Interest Expense$90.00M
Net Income$3.04B
EPS (Basic)$0.73
EPS (Diluted)$0.73
Shares Outstanding (Basic)4.15B
Shares Outstanding (Diluted)4.17B

Key Highlights

  • 1Total revenue remained flat at $12.8 billion for Q3 FY2022 compared to Q3 FY2021.
  • 2Product revenue increased by 3% year-over-year to $9.45 billion, while service revenue decreased by 8% to $3.39 billion.
  • 3Operating income grew by 4% to $3.61 billion, with operating income as a percentage of revenue improving to 28.1% from 27.1% in the prior year.
  • 4Diluted earnings per share increased by 7% to $0.73.
  • 5The company experienced impacts from supply chain constraints, including component shortages and COVID-19 lockdowns in China, which affected product shipments.
  • 6Cisco announced its intention to stop business operations in Russia and Belarus, impacting revenue by approximately 1% and resulting in non-recurring charges of $67 million.
  • 7Cash provided by operating activities for the first nine months of fiscal 2022 was $9.55 billion, and free cash flow was $9.21 billion.

Frequently Asked Questions

Cisco's total revenue was flat year-over-year at $12.8 billion. Product revenue increased by 3% to $9.45 billion, driven by growth in Secure, Agile Networks, Internet for the Future, End-to-End Security, and Optimized Application Experiences categories. Service revenue, however, decreased by 8% to $3.39 billion, primarily due to the impact of the extra week in the prior year's comparable quarter and the Russia/Ukraine conflict.

The company faced significant challenges from ongoing global supply chain constraints, particularly component shortages. Additionally, COVID-19 related lockdowns in China created further supply challenges, preventing the shipment of products as anticipated. The Russia and Ukraine war also had an impact, leading Cisco to stop business operations in Russia and Belarus and resulting in revenue impacts and non-recurring charges.

Cisco demonstrated strong profitability. Operating income increased by 4% to $3.61 billion, and operating income as a percentage of revenue improved to 28.1% from 27.1%. This was supported by effective management of operating expenses, which decreased by 4% year-over-year, partly due to the prior year's extra week. Diluted earnings per share increased by 7% to $0.73.

Cisco generated strong cash flow. For the first nine months of fiscal 2022, cash provided by operating activities was $9.55 billion, and free cash flow was $9.21 billion. The company returned significant cash to stockholders through $5.3 billion in stock repurchases and $4.7 billion in dividends during this period.