Brocade's sales decreased 3% year over year to $559 million, while Wall Street would have settled for $555 million. Non-GAAP earnings surged 41% higher to $0.24 per share, leaving the $0.18 analyst target far behind.
A favorable product mix and some manufacturing efficiencies helped Brocade increase gross margins from 62.3% to 64.9%, year over year. Non-GAAP operating margins expanded by 4 percentage points to 26.6%. The cost savings program included more than 600 headcount cuts, reducing Brocade's overall payroll by more than 13%.
Enterprise orders surged while government revenues declined. Management pointed to "a challenging federal spending environment" as the Congressional shutdown held back IT equipment upgrades and installations.
Brocade did not issue official guidance for the coming quarter or year. Share prices jumped about 2% higher in after-hours trading, cementing Brocade's 54% price surge over the past year. Management will hold a conference call to discuss the fourth quarter at 5 p.m. ET, and you can listen to the webcast by clicking here.