After a strong rally, stock markets looked poised to return to a more bearish outlook on Thursday, and the Nasdaq Composite (^IXIC +0.36%) once again saw the biggest impact. The index was down between 1% and 1.5% at the open on Thursday morning, with concerns about interest rates continuing to put pressure on the high-growth stocks that make up a large part of the Nasdaq.
A couple of high-profile stocks announced their latest financial results late Wednesday, and investors are reacting to what they've learned. Cisco Systems (CSCO +2.56%) got a relatively favorable reception from shareholders, while Nvidia (NVDA 0.22%) is dealing with a somewhat less optimistic reaction following its quarterly release. Both companies are large enough to have ripple effects across the tech sector, offering insight about whether tech stocks can mount a longer-term recovery from a harsh bear market.
Cisco gets some relief
Shares of Cisco Systems moved higher by 3% at the open on Thursday morning. The networking equipment giant reported fiscal first-quarter results for the period ending Oct. 29 that indicated it had gotten off to a good start for fiscal 2023.
Cisco was able to reassure investors with modest growth during the quarter. Revenue moved higher by 6% year over year to $13.6 billion as the tech giant kept making progress in emphasizing recurring revenue as part of its overall business model. Adjusted earnings of $0.86 per share represented 5% growth from the same period a year ago.
NASDAQ: CSCO
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Moreover, shareholders were pleased with Cisco's guidance. The company believes that fiscal Q2 revenue should grow 4.5% to 6.5% from year-ago levels, with adjusted earnings of between $0.84 and $0.86 per share being roughly consistent with first-quarter performance. Similarly, the company expects full-year revenue growth in the same 4.5% to 6.5% range, and adjusted earnings of between $3.51 and $3.58 per share.
In general, Cisco believes that supply chain pressures are finally starting to ease up, but it's being cautious about the macroeconomic environment. Moves to restructure its business in order to keep costs under control and emphasize higher-growth areas of the company got a favorable reception from investors, and that could help Cisco build momentum heading into the new year.
Nvidia holds its own
Meanwhile, shares of Nvidia were basically flat on Thursday morning. The semiconductor maker's results for the fiscal third quarter ending Oct. 30 showed a steep pullback, with the company having made dramatic moves to adapt to the challenging macroeconomic environment.
Nvidia's revenue dropped 17% year over year to $5.93 billion, showing the extent of the slowdown in the semiconductor industry and affirming the challenges that some of its rivals have seen in their own financial reports. Profits took an even bigger hit, with adjusted earnings falling 50% from year-ago levels to $0.58 per share.
NASDAQ: NVDA
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Yet founder/CEO Jensen Huang is more excited than ever about Nvidia's prospects. The company is working hard to release new cutting-edge products to extend its current platform lines, noting the importance of accelerated computing as a necessary component of offering productivity gains to its customers. With a host of applications including autonomous vehicles, robotics, quantum networking, and graphics, Nvidia is working through short-term inventory challenges to prepare for a growth spurt in the near future.
Nvidia sees revenue in its fiscal second quarter of between $5.88 billion and $6.12 billion, and investors seemed to take some solace in the idea that sales are remaining flat to up slightly on a sequential basis. Yet the big question is the extent to which semiconductor companies will keep seeing earnings pressure, especially for businesses that don't have the same exposure to cutting-edge technology that Nvidia does.
