By Jon Fortt
November 5, 2009

Cisco’s growing again, and CEO John Chambers has called the beginning of a tech recovery. But don’t assume this is the proverbial rising tide that’s going to lift all boats.

First the good news: Cisco (CSCO) turned in a bang-up quarter. For the three months that ended on October 29, the seller of networking gear managed $9 billion in sales and 35 cents per share in profit, both of which outpaced even the most optimistic analyst expectations. Even better, Chambers said the current quarter will also shape up nicely – a promise that sent Cisco stock up a healthy 3% after hours.

But even in Cisco’s celebration, there were hints of caution. Though he signaled good results for this quarter, Chambers wasn’t willing to set sales and earnings targets for the rest of fiscal 2010, saying it’s too soon to assume that this recovery has legs. He asked analysts to maintain their ho-hum expectations for Cisco’s financial performance, despite his apparent optimism – basically requesting that they keep the bar low, even though he feels more confident that he can clear it.

That’s the most important takeaway for anyone who might be tempted to read a full-blown tech recovery into Cisco’s good numbers. Yes, Cisco is doing well. For the entire tech sector to have a strong 2010 – and for Cisco to sustain its winning streak – we’ll need to see a convincing turnaround in fundamentals like U.S. unemployment and consumer spending. The jury’s still out on those, and will be until well after the receipts are in from the holiday shopping season.

Even Cisco’s blowout quarterly results revealed signs that things are still rough out there. Not every customer group is bouncing back; governments awash with stimulus cash and enterprises that had postponed purchases proved to be big spenders during the quarter, but plenty of other key groups still looked weak.

For example, the phone and cable companies who buy Cisco routers spent nearly 10% less than a year ago. Retailers and other businesses also spent less. In Asia, non-government accounts remained soft. And orders in developing economies were down nearly 30% from last year.

In an interview after the earnings call, Cisco Chief Financial Officer Frank Calderoni told Fortune he feels very confident in Cisco’s ability to meet its financial targets, and said he was particularly encouraged by the rebound in enterprise spending; since it was among the first categories to suffer in the downturn, he’s hopeful that its return signals a full recovery. But he’s not letting himself get too worked up about it just yet. “Many outside of Cisco are seeing some challenges, talking about a mixed environment,” he said. “Because everybody’s not seeing improvement, we just want to focus on the current quarter where we have visibility.”

Translation: it’s still foggy, so Cisco is treading cautiously. Investors would be wise to do the same.

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