Why is Cisco Systems Inc. Soaring Today?

I don't know if you noticed, but the markets look terrible today. The Dow Jones Industrial Average (DJINDICES: ^DJI  )  was down 1.1% at 2:10 p.m. EDT, while the S&P 500 and Nasdaq indices were doing about as bad. Only two of the Dow's 30 member stocks were trading in the green.

Cisco Systems (NASDAQ: CSCO  )  up 7.2%, doing more than its share to stabilize the Dow. Cisco pulled over 10 Dow points out of thin air today, all by itself. That's not small potatoes, though even Cisco's heroic efforts are a long way from stemming a nearly 200-point Dow point hemorrhage.

Cisco's secret sauce is the rock-solid fiscal third-quarter report it posted last night.

The networking giant edged out analyst targets on both the top and bottom lines, and painted a picture of strong prospects going forward.

For the fourth quarter, Cisco expects sales to decline something like 2% year over year. If that sounds bad, consider that analysts currently project a 4% revenue drop. Cisco's adjusted earnings guidance points to about $0.52 per share, just ahead of the consensus analyst target.

Cisco CEO John Chambers. Source: Cisco Systems.

More to the point, Cisco CEO John Chambers waxed downright poetic about the improving business landscape in front of him.

"We continue to be optimistic about the future opportunity," Chambers said in the earnings call with analysts. "As our customers embrace cloud, mobility, social, analytics and the Internet of Everything, they're seeing Cisco as uniquely positioned to help them build and run the highly secure environments they require."

Chambers has been talking about the Internet of Everything (also known as the Internet of Things or Industrial Internet) as a $14 trillion market for several years now. This time, he upped the ante: "We are making measurable progress connecting the $19 trillion value, we've identified in the Internet of Everything to specific business opportunities and pipelines."

But it's not all about unlocking the long-term value of nascent megamarkets. At long last, Chambers also sees signs of a global economic recovery -- starting with the developed world.

"Our U.S. enterprise and commercial segments are usually a very good indicator of GDP slowly increasing or GDP decreasing," the Cisco CEO explained. "From a geographic perspective, total U.S. product orders grew 7% with U.S. commercial and U.S. enterprise both up by over 10%. The momentum in U.S. enterprise and commercial remains very strong."

That's particularly true in the big-ticket market where Cisco's largest customers buy some of its most expensive products. "In the U.S. enterprise, total deals over $1 million are up over 25% from Q3 start to Q4 start, and deals over $5 million are up more than 50%," Chambers said.

Source: Cisco Systems.

Similar trends are emerging across the Atlantic, where European customers are coming back to place large orders once again. "I think they are out of this downturn, slowly improving," Chambers said. "When I talked with our customers and the top financial people in New York which I did just a week ago, most everybody else is beginning to see very similar trends. In fact, it almost was scary because when you describe the world just like I did earlier including emerging markets and the challenges in Russia and Brazil, we could finish each other's sentences regardless of industry."

It's not 100% wine and roses, of course. All of these positive signs are counterbalanced by hard times in traditional high-growth markets. "We feel good about the U.S., good about Europe, don't feel very good about emerging markets. They are still very challenged, especially the BRICs," Chambers said.

So Cisco's big quarter actually comes across as a hint of fresh air for the global economy as a whole. It almost feels wrong to get these tidings on a day when the markets are slumping. Call me a blue-eyed optimist if you like, but I don't believe Chambers would get this rosy-cheeked unless he saw a real trend happening. Plus, Cisco is not the only bearer of good economic news right now.

Whether or not you like Cisco as an investment, this report is telling you to have some confidence in the economy -- at a time when investors just aren't feeling it.

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