NEW YORK ( TheStreet) -- Cisco (CSCO - Get Report) delivered some much-needed good news in a less-than-stellar tech earnings season on Tuesday, beating estimates and offering healthy guidance despite an uncertain macroeconomic environment.
From spending headwinds to Europe and the looming threat of a fiscal cliff in the U.S., this is hardly the easiest time for Silicon Valley, as evidenced by Nasdaq's 5.26% decline over the last month. Prior to the release of Cisco's results late on Tuesday, there were concerns that Cisco could feel the same pressures that have impacted other tech heavyweights, such as Intel (INTC) and IBM (IBM).
"Almost uniquely, Cisco beat expectations and guided such that consensus estimates are likely to rise this morning," wrote Stuart Jeffrey, an analyst at Nomura Equity Research, in a note released on Wednesday. "We see this as a major positive for Cisco given a backdrop of worsening US tech trends, rivals that missed and guided lower, and broad expectations (including our own) that estimates might be at risk of being cut."
Bucking the trend, the tech bellwether offered decent guidance, predicting second-quarter revenue between $11.9 billion and $12.1 billion and earnings of 47 cents to 48 cents a share. Analysts surveyed by Thomson Reuters were looking for revenue of $12.02 billion and earnings of 47 cents a share.Jeffrey reiterated his buy rating and $22 price target for Cisco. Speaking during Cisco's earnings conference call, CEO John Chambers lauded the company's 6% revenue growth "in a very challenging market" noting that many of the firm's peers are reporting declines and lowering future expectations. The CEO, who guided Cisco through a recent turbulent spell, also pointed to the company's solid expense management, which delivered better-than-expected margins. Once again, Cisco's enterprise business proved key, with the San Jose, Calif.-based firm growing its U.S. enterprise revenue 9% compared to the prior year's quarter. Cisco also enjoyed a 13% hike in its stateside service provider revenue, much to the delight of investors, who have pushed the company's stock northward. Other highlights from the quarter were Cisco's 62.7% gross margin, up from 61.9% in the prior quarter, and its 27.9% operating margin, up sequentially from 27.5%.