After experiencing a revitalization in fiscal year 2012, tech giant Cisco (NASDAQ:CSCO) reported terrific results for its fiscal year 2013 second quarter. Revenue jumped 5% year-over-year to $12.1 billion, slightly better than consensus estimates. Earnings, on a non-GAAP basis, increased 9% year-over-year to $0.51 per share.
Cisco produced solid revenue growth across most segments, particularly wireless and data centers, which grew 27% and 65%, respectively. After admittedly being behind the curve for the first few years during the shift to wireless, the firm has focused on high-return internal investment and strategic acquisitions to help shift its position in the marketplace. We don't see mobility slowing down anytime soon, and we anticipate that it could become an even more important part of the overall revenue mix over the next few years.
Data Center revenue surged 65% compared to the same period a year ago. Given Cisco's already stellar position in several IT end markets, its data centers have caught on rather quickly. Cisco is really pushing its UCS (Unified Computing System), on which CEO John Chambers provided some very bullish commentary.
Switching continues to be Cisco's bread-and-butter operations, with revenue growing 3% year-over-year to $3.7 billion. The overall switching market is expected to see flat growth, but Cisco has done a fantastic job maintaining gross margins, and its Nexus data center switches continue to grow at a strong pace. We're particularly excited by results given that European enterprise revenues sunk 10%.
Looking ahead, the company anticipates revenue growth of 4%-6% for fiscal year 2013, in line with current forecasts. Third quarter gross margins are expected to be between 61%-62%, driving earnings per share of $0.48-$0.50 (non-GAAP), which is also in line with consensus expectations. The firm's guidance accounts for relatively cautious spending in the U.S., early signs of stability in Europe, and a return to growth in emerging markets. Cisco returned $500 million worth of cash to shareholders via share repurchases, and we think the company has plenty of room to raise its dividend going forward. Though the company faces some tail-risk from the potential national Wi-Fi network in the works (in the U.S.), we're not overly concerned about it at this time.
Given its strong Dividend Cushion score, cheap valuation, and the potential upside from an increase in global economic growth, we think Cisco looks relatively attractive at current levels. Shares score only a 6 on the Valuentum Buying Index (our stock-selection methodology), so we would wait for a pullback before considering the company in the portfolio of our Dividend Growth Newsletter.