Cisco Systems (CSCO 43.35, +1.26, +3.0%) reported its fiscal second quarter results after Wednesday's close and it checked just about every box investors were hoping the company would be able to check.
Total revenue increased 3% to $11.9 billion; the non-GAAP gross margin rate increased 230 basis points to 64.7%; the non-GAAP operating margin rate jumped 70 basis points to 31.7%; and the company's non-GAAP profit per share increased 11% to $0.63.
Revenue and earnings per share were ahead of analysts' average expectations. Cisco benefited in part from a new product ramp and improved productivity.
The company's product revenue rose 3%, paced by a 2% increase in Infrastructure Platforms, a 6% increase in Applications, and a 6% increase in Security. Cisco's best-performing region was the Americas, which delivered 5% revenue growth. Revenues were flat in the EMEA segment and down 2% in the APJC region.
The company called the second quarter a "great quarter" and acknowledged the progress it is making in leading the business toward more software and recurring revenue.
Looking to the fiscal third quarter, Cisco anticipates revenue growth between 3% and 5%, a non-GAAP gross margin rate of 63% to 64%, and non-GAAP earnings per share of $0.64 to $0.66, which is ahead of what analysts had been expecting.
Cisco also announced a capital return plan that was probably more robust than investors were expecting.
Cisco's Board of Directors approved a 14% increase in the quarterly dividend to $0.33 per common share and authorized a $25 billion increase to its stock repurchase program,bringing the total repurchase authorization to $31 billion.
There is no fixed termination date for that program, which would effectively enable Cisco to repurchase 14% of its outstanding stock at the current price.
Shares of CSCO have responded favorably to the earnings results and capital plan, and understandably so. Including today's gain, CSCO is up 13.2% year-to-date, leaving it well ahead of the S&P 500 (+1.1%) and the S&P 500 information technology sector, which is up 4.3%.