Cisco, Take-Two Tell 2 Tales of Earnings Season

The stock market moved sharply higher on Wednesday, buoyed by hopes that Washington might reach some kind of resolution to the debt ceiling debate. Gains for the Dow Jones Industrial Average (^DJI 0.27%), S&P 500 (^GSPC -0.00%), and Nasdaq Composite (^IXIC -0.21%) all topped 1%, bouncing back from weakness earlier in the week.

Data source: Yahoo! Finance.

Yet even on a strong day, there was still considerable uncertainty regarding the future course of the economy. The latest financial results from Cisco Systems (CSCO 0.61%) and Take-Two Interactive Software (TTWO -0.12%) got very different reactions from shareholders, but both showed a combination of positive and negative factors that are affecting businesses across the economy. Learn more about the details below.

Cisco drops despite solid earnings

Shares of Cisco Systems fell almost 4% in after-hours trading late Wednesday. The networking giant reported fiscal third-quarter financial results for the period ended April 29 that looked solid on their face, but investors weren't happy with how one measure of future activity performed.

The headline numbers from Cisco showed modest but significant growth. Revenue climbed 14% year over year to $14.6 billion, which was better than many of those following the stock had expected to see. Adjusted net income grew at a similar 13% pace to $4.1 billion, and the resulting $1 per share in adjusted earnings climbed 15% from year-ago levels.

Cisco got good growth across its geographical footprint, with the best gains in its European segment. Yet some might not have been pleased to see Cisco's service-oriented sales climb by just 3% from year-ago levels, with product sales jumping 17% and carrying most of the growth burden for the networking company.

Yet some investors didn't seem comfortable with Cisco's guidance, which included calls for the company to bring in between 10% and 10.5% more revenue during fiscal 2023 as a whole and earn $3.80 to $3.82 per share on an adjusted basis. Moreover, Cisco said that orders were down 23% during the quarter, and that continued to spook those watching the networking stock as it continued a troubling trend from past periods.

Take-Two plays to win

Meanwhile, shares of Take-Two Interactive Software climbed 8% in after-hours trading. The video game maker's fiscal Q4 results for the period ended March 31 included some extremely strong revenue gains despite also seeing a lot of red ink.

Take-Two's latest results showed that its revenue soared 56% year over year to $1.45 billion. The company pointed to a near-doubling in recurring consumer spending, which now makes up nearly four-fifths of Take-Two's overall sales. Revenue from digitally delivered content now accounts for almost all of the money that the video game maker brings in and was up 67% from the same period a year ago.

However, Take-Two posted massive losses of $610 million, or $3.62 per share. That included about $520 million in impairment charges, but it still reversed a year-ago profit.

What might be most surprising is that investors were comfortable with Take-Two's guidance despite anticipating continued losses. The game maker projected that revenue for fiscal 2024 will be between $5.37 billion and $5.47 billion, but the company is likely to lose $2.80 to $3.05 per share. Nevertheless, positive adjusted pre-tax operating profits should be sizable, and that seemed to be enough to drive enthusiasm for Take-Two's future prospects.