In its latest quarterly earnings report, networking hardware maker Cisco exceeded analysts' expectations for both earnings and revenue. However, the company's guidance for the current quarter and full fiscal year fell short, leading to a significant drop in its stock prices.

For the fiscal first quarter, which ended on October 28, Cisco reported adjusted earnings of $1.11 per share, surpassing the expected $1.03 per share. The company's revenue also saw a growth of 7.6% to reach $14.67 billion, slightly higher than the projected $14.61 billion.

Despite these positive results, Cisco's shares plunged by as much as 13% in extended trading after the company provided a less optimistic forecast. Cisco attributed the slowdown in product orders to clients being occupied with implementing the Cisco offerings they had received in the previous quarters.

Cisco CEO Chuck Robbins acknowledged that the slow sales cycle was a concern, as it indicated that one or two quarters of shipped products were yet to be implemented by customers. He also highlighted that the slowdown in new product orders was a result of strong product delivery in the preceding quarters.

For the fiscal second quarter, Cisco's guidance included adjusted earnings per share of 82 to 84 cents on a revenue range of $12.6 billion to $12.8 billion, implying a 6.6% decline in revenue. Analysts polled by LSEG, formerly known as Refinitiv, had expected adjusted earnings per share of 99 cents on $14.19 billion in revenue.

Additionally, Cisco adjusted its full-year outlook, lowering its revenue forecast to $53.8 billion to $55.0 billion, and raising its view for earnings to $3.87 to $3.93 per share. This revised guidance is a change from the previous projection of $57.0 billion to $58.2 billion in revenue and $3.19 to $3.32 per share in earnings. Analysts had anticipated adjusted earnings per share of $4.05 and revenue of $57.76 billion.

During the quarter, Cisco announced its plans to acquire data analytics software maker Splunk for a staggering $28 billion. The company believes it can secure over $1 billion worth of orders for artificial-intelligence infrastructure from cloud providers by the 2025 fiscal year.

Despite the disappointing guidance, Cisco remains optimistic about its prospects in the cloud market and its ability to adapt to the evolving demands of cloud providers. The company has demonstrated flexibility in working with these providers and aims to leverage its expertise in Ethernet technology to cater to their AI infrastructure needs.

While the after-hours trading reaction reflected investor concerns, Cisco's shares have seen a year-to-date increase of 12%. However, this growth lags behind the broader market, with the S&P 500 index rising by 17% over the same period.

In conclusion, while Cisco's quarterly results outperformed expectations, the company's cautious guidance reflects a temporary slowdown in product orders as clients focus on implementing existing offerings. Cisco remains confident in its ability to capitalize on the cloud market and is working towards securing future orders in the AI infrastructure segment.

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