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Yesterday, May 16, earnings from Cisco Systems (CSCO) and Wal-Mart (CSCO) before the open powered U.S. stocks higher to start the day.So what did Cisco say? (I reported on Wal-Mart in a post yesterday.)

Cisco reported earnings per share of 78 cents for the company’s fiscal third quarter. That was a penny ahead of Wall Street projections of 77 cents a share. Revenue grew 4% to $12.96 billion versus the Wall Street forecast of $12.89 billion. For the next quarter Cisco told Wall Street to expect revenue growth of 4.5% to 6.5%–or $13.34 billion in revenue at the mid-point of that projection. Wall Street has forecast $13.29 billion in revenue for that quarter.

So why the big 6.6% pop on May 16 on such modestly positive results?

Well, partly because the results weren’t worse. Much worse. And they could have been with the U.S.-China trade war challenging technology supply chains and putting a crimp in customer purchases. Cisco not only managed to not get hit by that development but assured investors going forward that only about 3% of the company’s revenue comes from China. Some of Cisco’s switches and routers are made in China but management noted that it has reworked its supply chain (and continues to do so) to minimize exposure to the U.S.-China trade war. Management said that it had anticipated the recent tariff increase to 25% from 10% and that increase was already baked into guidance.

And second because the company looks well positioned to participate in growth in AI, the Internet of Things, multi-cloud storage, security, and Wi-Fi 6 in the relatively near term. For example, Cisco’s security segment revenue climbed 21% year over year. The company picked up growth in this segment from the acquisition of Duo Security in October 2018. Duo focuses on two-factor authentication tools that let employees securely access applications and platforms though mobile devices. Cisco said that Duo contributed about 40 basis points to growth in the quarter. Impressive given how hard it is to move the needle at a company with $50 billion in revenue. Looking a little further out, Cisco looks positioned to benefit from the transition to 5G wireless.

Cisco Systems is a member of my 50 Best Stocks Portfolio. The position is up 247.2% since I added it to the portfolio on December 30, 2008.