Cisco Systems (CSCO, Financial) reported its second quarter 2015 earnings after the closing bell on February 11. The technology company reported total second quarter 2015 revenue of $11.93 billion beating analysts’ expectation by $130 million and increasing revenue on a comparable quarter basis by 7%. Adjusted non-GAAP earnings for the quarter were $2.7 billion resulting in adjusted earnings per share of $0.53. At $0.53 Cisco beat analysts’ earnings per share expectation by $0.02.
The company also reported impressive six month revenue and earnings growth along with a $0.21 per share dividend payable on April 22. John Chambers, Cisco’s chief executive officer, attributed the company’s success to the increasing global demand for digitization. According to Chambers, “Every nation, every company, everything is becoming digitized and the network is at the center of this transformation." Cisco’s network connectivity products are essential for the global digitization movement and Cisco is poised to continue providing for digitization as the trend continues.
During the quarter Cisco saw the greatest revenue growth from its data center products. At $846 million, data center was up 22.1% from the previous quarter and 40% from the previous year. Growth in the segment was mainly attributed to Cisco’s Unified Computing System which provides companies with a unified server solution. The UCS server solution seeks to help companies reach optimal technology performance levels with multiple users accessing cloud data and utilizing enterprise applications. Over 85% of Fortune 500 companies use Cisco’s UCS because of its advanced capabilities.
Cisco’s total product revenue growth in the second quarter was mainly focused in the developed markets as developed countries continued to advance their digital capabilities. Globally, digitization, security and the Internet of Everything are the technology sector’s key focus areas and Cisco continues to remain at the forefront of innovation in all of these aspects, positioning it well for third quarter and future growth.
During the quarter Cisco launched its Cisco Connected Analytics Strategy which helps to manage distributive data on the internet, another product focused on capturing the Internet of Everything opportunity. In cloud, Cisco continued to gain momentum in its InterCloud ecosystem which provides customers with high security hybrid cloud capabilities. It also continued to integrate its recent acquisition of Meraki which provides cloud architecture with multiple capabilities for customers in the cloud.
A key focus area for Cisco in future quarters will be on security. While struggling slightly in the second quarter, year over year Cisco reported revenue growth in security of 6%. During the quarter it announced it would be acquiring Neohapsis, a security service that will help customers implement comprehensive security capabilities. The acquired service will help to increase Cisco’s security product offerings and is a timely acquisition for Cisco based on the market’s demand for enhancements in security.
Overall, Cisco appears poised to capitalize on nearly every aspect of the technology sector’s advancements and transitions. Its third quarter outlook reflects the company’s positive momentum with expected revenue growth of 3% to 5% and non-GAAP earnings per share of $0.51 to $0.53. In the day following the earnings announcement the stock gained 9.39% to end the day at $29.46. It has an approximate discounted cash flow value of $36.53 giving it even further upside potential for investors at the current price.
