Cisco Earnings Beat: Cisco Systems (CSCO) reported fiscal fourth-quarter earnings and revenue that, while falling from the previous year, surpassed Wall Street estimates, signaling a potential rebound in its core computer networking business. The company’s stock rose 7.6% to $48.90 in early trading following the announcement. This positive market response reflects growing optimism around Cisco’s strategic shifts and its latest financial results.
Financial Highlights
For the quarter ending July 27, Cisco’s earnings fell 24% to 87 cents per share, while revenue declined 10% to $13.6 billion. These figures beat analyst expectations, which had projected earnings of 85 cents per share on revenue of $13.5 billion, according to FactSet. This marks the third consecutive quarter of declining earnings and revenue for the company.
Despite these declines, the company demonstrated signs of stabilization, with a 6% organic growth in orders. This growth was particularly evident across data center switching, routing, and wireless sectors, suggesting that networking demand may have reached its lowest point, paving the way for a recovery in fiscal 2025.
Workforce and Restructuring
As part of a broader restructuring effort, Cisco announced plans to reduce its workforce by about 7%, which will result in up to $1 billion in pretax charges. This move is aimed at streamlining operations and positioning the company for future growth amid ongoing challenges in the networking industry and broader economic headwinds.
Future Outlook
Looking ahead, Cisco provided guidance for the first quarter of fiscal 2025, forecasting sales of $13.75 billion at the midpoint of its outlook. This is slightly above analyst predictions of $13.7 billion, indicating a continued focus on stabilizing and growing its business.
Cisco also outlined its revenue growth projections, anticipating “low to mid single-digit growth” in fiscal 2025, followed by 4% to 6% growth in fiscal 2026 and fiscal 2027. These forecasts align with the company’s efforts to diversify its revenue streams through strategic acquisitions and an increased emphasis on software and services.
Strategic Shifts
In line with its strategic shift away from its traditional focus on network switches and routers, Cisco recently completed the acquisition of software company Splunk for $25 billion in cash. Splunk, known for its data analytics software, has also expanded into cybersecurity, a move that enhances Cisco’s capabilities in this crucial area and aligns with its goal of increasing revenue from software and services.
