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The company anticipates fourth-quarter fiscal 2024 revenues to be between $13.4 billion and $13.6 billion. Non-GAAP earnings are expected between 84 and 86 cents per share.
The Zacks Consensus Estimate for revenues is pegged at $13.52 billion, indicating a decline of 11.07% from the year-ago quarter’s reported figure. The consensus mark for earnings has been steady at 85 cents per share in the past 30 days.
CSCO’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 6.23%.
Let’s see how things are shaping up prior to this announcement.
Factors to Note
Cisco has been suffering from sluggish networking sales, primarily due to lackluster demand from telecommunication and cable services providers, as well as stiff competition. Excess inventory with customers has dragged down growth in the recent past.
In the third quarter of fiscal 2024, Cisco reported revenues of $12.7 billion, which declined 12.8% year over year, primarily due to an 18.6% decline in product revenues, which accounted for 71% of total revenues. Excluding Splunk (acquisition completed on Mar 18, 2024), product orders were unchanged year over year, reflecting sluggish demand.
Cisco’s prospects are further challenged in the AI-driven networking space due to stiffening competition aggravated by Hewlett Packard’s (HPE - Free Report) deal to acquire Juniper for roughly $14 billion.
Hewlett Packard’s multi-billion-dollar investment plan across expanding networking capabilities is noteworthy. It has linked AI, the Industrial Internet of Things (IIoT), and distributed computing with its fast-growing networking business arm, Aruba Networks.
The Zacks Consensus Estimate for fiscal fourth-quarter Networking revenues is currently pegged at $6.76 billion, suggesting a 16.8% year-over-year decline.
The consensus mark for Collaboration revenues is pegged at $1.02 billion, indicating a slight decline on a year-over-year basis.
However, Cisco is benefiting from strong security growth driven by robust demand for solutions like XDR, Secure Access and Multicloud Defense suites.
Acquisitions, including Splunk and Isovalent, have helped in strengthening the portfolio. The addition of Splunk enhances the recurring revenue base of CSCO. Annual Recurring Revenues surged 22% to $29.2 billion in the fiscal third quarter. The trend is expected to have continued in the to-be-reported quarter.
The Zacks Consensus Estimate for fiscal fourth-quarter Security revenues is currently pegged at $1.64 billion, suggesting strong 65.8% year-over-year growth.
CSCO Shares Underperform Sector, S&P 500
Cisco shares have declined 10%, underperforming the Zacks Computer & Technology sector’s gain of 14% and the S&P 500’s 11.7%.
Year-to-Date Performance Chart
Image Source: Zacks Investment Research
However, Cisco stock is not so cheap, as the Value Style Score of C suggests a stretched valuation at this moment.
In terms of the forward 12-month P/S ratio, CSCO is trading at 3.31X, higher than the Zacks IT Services industry’s 3.2X.
Price/Sales Ratio (TTM)
Image Source: Zacks Investment Research
CSCO Stock to Benefit From Innovative Portfolio
The increase in AI-related workload presents a strong long-term opportunity for Cisco, thanks to an innovative portfolio. CSCO currently has more than $800 million in AI orders from hyperscalers, with more than $1 billion in orders in the pipeline for fiscal 2025.
In the infrastructure domain, Cisco’s addressable market is currently pegged at $221 billion. CSCO has been benefiting from the growing usage of AI and cloud with the ongoing digital transformation happening at enterprises.
Security portfolio expansion initiatives are expected to drive growth. Cisco has unveiled new capabilities for its Security Cloud, designed to enhance its security architecture in the AI era. The Splunk acquisition is expected to further boost CSCO’s prospects in the domain, with addressable markets worth $118 billion.
Moreover, Cisco’s expanding partner base, including the likes of Microsoft, NVIDIA (NVDA - Free Report) , Lenovo and AT&T (T - Free Report) , deserves attention.
The Cisco-NVIDIA partnership has introduced the Cisco Nexus HyperFabric AI cluster solution, a new end-to-end infrastructure designed to scale generative AI workloads efficiently. Cisco is collaborating with AT&T to introduce a seamless digital buying experience for businesses, offering 5G Fixed Wireless Access through the Meraki MG52 and MG52E gateways.
Conclusion
Cisco’s near-term results are expected to benefit from sluggishness in the networking business.
However, an expanding portfolio, a growing footprint in the cybersecurity domain and a strong partner base are key catalysts that can help CSCO shares rebound in fiscal 2025.
Image: Bigstock
Should Cisco (CSCO) Stock be in Your Portfolio Pre-Q4 Earnings?
Cisco Systems (CSCO - Free Report) is set to release its fourth-quarter fiscal 2024 results on Aug 14.
The company anticipates fourth-quarter fiscal 2024 revenues to be between $13.4 billion and $13.6 billion. Non-GAAP earnings are expected between 84 and 86 cents per share.
The Zacks Consensus Estimate for revenues is pegged at $13.52 billion, indicating a decline of 11.07% from the year-ago quarter’s reported figure. The consensus mark for earnings has been steady at 85 cents per share in the past 30 days.
CSCO’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 6.23%.
Cisco Systems, Inc. Price and EPS Surprise
Cisco Systems, Inc. price-eps-surprise | Cisco Systems, Inc. Quote
Let’s see how things are shaping up prior to this announcement.
Factors to Note
Cisco has been suffering from sluggish networking sales, primarily due to lackluster demand from telecommunication and cable services providers, as well as stiff competition. Excess inventory with customers has dragged down growth in the recent past.
In the third quarter of fiscal 2024, Cisco reported revenues of $12.7 billion, which declined 12.8% year over year, primarily due to an 18.6% decline in product revenues, which accounted for 71% of total revenues. Excluding Splunk (acquisition completed on Mar 18, 2024), product orders were unchanged year over year, reflecting sluggish demand.
Cisco’s prospects are further challenged in the AI-driven networking space due to stiffening competition aggravated by Hewlett Packard’s (HPE - Free Report) deal to acquire Juniper for roughly $14 billion.
Hewlett Packard’s multi-billion-dollar investment plan across expanding networking capabilities is noteworthy. It has linked AI, the Industrial Internet of Things (IIoT), and distributed computing with its fast-growing networking business arm, Aruba Networks.
The Zacks Consensus Estimate for fiscal fourth-quarter Networking revenues is currently pegged at $6.76 billion, suggesting a 16.8% year-over-year decline.
The consensus mark for Collaboration revenues is pegged at $1.02 billion, indicating a slight decline on a year-over-year basis.
However, Cisco is benefiting from strong security growth driven by robust demand for solutions like XDR, Secure Access and Multicloud Defense suites.
Acquisitions, including Splunk and Isovalent, have helped in strengthening the portfolio. The addition of Splunk enhances the recurring revenue base of CSCO. Annual Recurring Revenues surged 22% to $29.2 billion in the fiscal third quarter. The trend is expected to have continued in the to-be-reported quarter.
The Zacks Consensus Estimate for fiscal fourth-quarter Security revenues is currently pegged at $1.64 billion, suggesting strong 65.8% year-over-year growth.
CSCO Shares Underperform Sector, S&P 500
Cisco shares have declined 10%, underperforming the Zacks Computer & Technology sector’s gain of 14% and the S&P 500’s 11.7%.
Year-to-Date Performance Chart
Image Source: Zacks Investment Research
However, Cisco stock is not so cheap, as the Value Style Score of C suggests a stretched valuation at this moment.
In terms of the forward 12-month P/S ratio, CSCO is trading at 3.31X, higher than the Zacks IT Services industry’s 3.2X.
Price/Sales Ratio (TTM)
Image Source: Zacks Investment Research
CSCO Stock to Benefit From Innovative Portfolio
The increase in AI-related workload presents a strong long-term opportunity for Cisco, thanks to an innovative portfolio. CSCO currently has more than $800 million in AI orders from hyperscalers, with more than $1 billion in orders in the pipeline for fiscal 2025.
In the infrastructure domain, Cisco’s addressable market is currently pegged at $221 billion. CSCO has been benefiting from the growing usage of AI and cloud with the ongoing digital transformation happening at enterprises.
Security portfolio expansion initiatives are expected to drive growth. Cisco has unveiled new capabilities for its Security Cloud, designed to enhance its security architecture in the AI era. The Splunk acquisition is expected to further boost CSCO’s prospects in the domain, with addressable markets worth $118 billion.
Moreover, Cisco’s expanding partner base, including the likes of Microsoft, NVIDIA (NVDA - Free Report) , Lenovo and AT&T (T - Free Report) , deserves attention.
The Cisco-NVIDIA partnership has introduced the Cisco Nexus HyperFabric AI cluster solution, a new end-to-end infrastructure designed to scale generative AI workloads efficiently. Cisco is collaborating with AT&T to introduce a seamless digital buying experience for businesses, offering 5G Fixed Wireless Access through the Meraki MG52 and MG52E gateways.
Conclusion
Cisco’s near-term results are expected to benefit from sluggishness in the networking business.
However, an expanding portfolio, a growing footprint in the cybersecurity domain and a strong partner base are key catalysts that can help CSCO shares rebound in fiscal 2025.
Cisco currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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