Though its enterprise hardware sales are slumping right now, Cisco Systems (CSCO) is seeing some improvement in its long-pressured sales to telcos and cable companies.
And Cisco might not be alone on this count, judging by what a rival and some chip and component suppliers have recently shared.
Cisco, which is up about 4% post-earnings today, disclosed on its Wednesday earnings call that orders from service provider clients fell 3% annually during its April quarter. That's a healthy improvement from the 11% decline recorded for Cisco's January quarter, not to mention the 21% drop seen during its October quarter.
Moreover, CEO Chuck Robbins said that service provider orders in the Americas, which were down 8% in the January quarter, rose by a mid-single digit percentage. He indicated that strong demand from cable companies looking to add capacity during COVID-19 lockdowns provided a boost, and that sales to heavy-spending internet/cloud giants -- a group of companies that Cisco has limited exposure to, but is trying hard to make deeper inroads with -- also grew.
Cisco's disclosures come after routing arch rival Juniper Networks (JNPR) disclosed on its April 28 earnings call that -- although its sales to service providers were down 14% amid supply chain issues -- its service provider orders saw 4% annual growth in Q1, their first quarter of growth since 2017. CEO Rami Rahim said that orders received a "modest" boost from COVID-19-driven investments, but insisted Juniper's existing efforts to diversify its customer base played a bigger role.
But while Juniper downplayed the boost that it's getting from an improved carrier spending environment, some, some of the chip and component vendors that have reported over the last seven days haven't.
On its Monday earnings call, chip, component and materials supplier II-VI (IIVI) reported (in addition to blowout results and guidance) that it's seeing an "overall acceleration" in optical network buildouts, both to upgrade "legacy" telecom networks and support 5G network rollouts. Also, the company reported hearing from an unnamed major OEM that "U.S. [network] traffic increased in the first week of the nationwide shelter-in-place orders by more than the increase for the entire prior year."
Earlier on Monday, analog and mixed-signal chipmaker ON Semiconductor (ON) said on its Q1 call that it expects sales of chips going into 5G infrastructure equipment to grow at a "robust" sequential rate in Q2. CEO Keith Jackson said that Chinese 5G network investments are expected to be the biggest growth contributor, while adding that demand elsewhere continues to be healthy.
And last Thursday, telecom and networking chip supplier Inphi (IPHI) posted strong results and guidance, while indicating demand from both telecom and data center end-markets is benefiting from strong network traffic growth.
It's worth noting here that the commentary provided by II-VI, ON and Inphi about mobile infrastructure spending is a little more upbeat than what some chip suppliers shared in April. At that time, companies such as Xilinx (XLNX) and Cree (CREE) were only forecasting moderate Q2 improvement in their sales to mobile infrastructure clients. From the looks of things, the demand environment has been improving over the last few weeks as carriers gradually react to strong traffic growth by upping their capex plans.
For some hardware and chip/component suppliers, strong carrier spending won't be enough to fully offset weakness in other end-markets, such as cars, smartphones and enterprise hardware. But it is at the least a silver lining for them. And for heavily-exposed companies such as II-VI and Inphi, it's clearly more than that.