Cisco predicts revenue growth of 5% to 7%, higher than estimates

(Bloomberg) — Cisco Systems Inc., the largest manufacturer of computer networking equipment, forecasts revenue to grow 5% to 7% over the next four fiscal years, beating analysts’ forecasts. That revenue increase could allow earnings per share, minus certain items, to grow at the same pace, Chief Financial Officer Scott Herren told analysts and investors on Wednesday. Wall Street had forecast growth to reach 6% in fiscal 2022 and then slow down, according to data collected by Bloomberg. The optimistic outlook was presented as evidence that Chief Executive Officer Chuck Robbins’ efforts to overhaul the Silicon Valley strongman are paying off. He’s transformed the company into a provider of network services delivered over the Internet and a software vendor — rather than just a hardware vendor.

The company has traditionally generated most of its revenue from the expensive switches and routers that make up the backbone of computer networks, but that is changing. Subscription revenues will reach 50% of Cisco’s total by fiscal year 2025, the company predicted Wednesday.

Cisco shares rose a whopping 3% to $59.60 in New York on Wednesday, the largest intraday gain in nearly a month, before the gains were wiped out. The stock had already risen 29% this year until Tuesday’s close.

Executives at the San Jose, California-based company said Cisco is getting a boost from the work-from-home service. Companies are rushing to upgrade their hardware and software to accommodate the change. And they’re adding security and shifting workloads to cloud service providers, a market that Cisco is now increasingly serving with new products.

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