Cisco on Wednesday reported a surprise beat in earnings and revenue in fiscal third-quarter, suggesting the networking-gear maker's customers are spending more on technology.
"We are starting to see some good signs in the US and other parts of the world which are encouraging," Cisco Chairman and CEO John Chambers said in the earnings release, calling the economic landscape "slow but steady."
The company's shares jumped more than 8 percent in after-hours trading. (Click here to get the latest quote.)
Net income for the quarter ended April 27 rose 14 percent to $2.5 billion, or 46 cents a share, from $2.17 billion, or 40 cents a share, in the year-earlier period.
Excluding items, earnings increased to 51 cents a share from 48 cents a share a year ago.
Revenue climbed 5 percent to $12.22 billion from $11.59 billion.
Analysts had expected Cisco to report earnings excluding items of 49 cents a share on $12.18 billion in revenue, according to a consensus estimate from Thomson Reuters.
Recent weak results from companies including Juniper Networks and International Business Machines made investors worry that Cisco would follow suit, due to sluggish spending by customers such as the U.S. government.
"I am a little surprised. It was a really tough quarter for networking. Clearly, Cisco was able to come through," said Erik Suppiger, managing director at JMP Securities, on CNBC. He said that service providers and federal sectors were really tough, but Cisco was able to overcome. "That's pretty encouraging."
Cisco said that total U.S. public sector revenue grew 5 percent during the quarter, while federal spending was down 3 percent.
RBC Capital markets analyst Mark Sue said that Cisco's better- than-expected revenue showed that they are executing well to make the most out of a weak economic environment.
"They seem to be bucking the trend and that's encouraging," said Sue.
Mark McKechnie, an analyst at Evercore was impressed with Cisco's gross margin of 63 percent, above the company's target of 61 to 62 percent.
"It will be interesting to see if they can raise the guidance on margins," McKechnie said.
For the fourth quarter, Cisco expects earnings excluding items of 50 to 52 cents a share. Analysts currently expect earnings of 51 cents a share, according to Thomson Reuters.
Cisco expects revenue for the quarter to grow 4 to 7 percent and for adjusted gross margins to be between 61 and 62 percent.