Cisco recently reported its earnings and revenue for the fiscal third quarter, exceeding Wall Street’s expectations despite a decrease in sales compared to the previous year. The company’s stock surged by 8% in after-hours trading following the announcement. In terms of performance metrics, Cisco’s earnings per share of 88 cents surpassed the analyst consensus of 82 cents. Additionally, the revenue of $12.7 billion exceeded the expected $12.53 billion.
The revenue decline of about 13% year over year in the quarter, which ended on April 27, marked the sharpest slide since 2009 for Cisco. Net income also experienced a significant drop of 41% to $1.89 billion or 46 cents per share, compared to $3.21 billion or 78 cents per share in the previous year. This decline was attributed to customers completing the installation of equipment received in previous quarters, as mentioned in the company’s statement.
During a conference call with analysts, Cisco CEO Chuck Robbins acknowledged the challenges faced by the company due to supply chain issues. However, he expressed optimism about the improvement in performance as customers near the completion of their inventory installation by the end of the fiscal year in July. Robbins also highlighted the positive outlook for the company, mentioning the resolution of public sector business weaknesses in the U.S. and the opportunities presented by recent federal government funding.
In an effort to enhance its portfolio, Cisco completed a $28 billion acquisition of security software maker Splunk during the quarter. While this acquisition had a minor impact on Cisco’s adjusted earnings per share, it contributed $413 million in additional revenue. Robbins mentioned the potential for existing Cisco customers to transition to Splunk offerings, which is expected to drive growth. The company anticipates cost reductions over time as a result of this acquisition.
Cisco revised its fiscal 2024 revenue guidance to a range of $53.6 billion to $53.8 billion, an increase from the previous estimate of $51.5 billion to $52.5 billion. Analysts polled by LSEG had expected revenue of $53.14 billion, indicating a positive outlook for the company’s financial performance. Additionally, Cisco narrowed its full-year adjusted earnings forecast to $3.69 to $3.71, compared to the previous range of $3.68 to $3.74. The company anticipates revenue growth in the low- to mid-single digits for fiscal 2025.
Following the acquisition of Splunk, Gary Steele, the former CEO of Splunk, has been appointed as the president of go-to-market at Cisco. This transition is expected to enhance the company’s market presence and drive customer engagement. Meanwhile, Jeff Sharritts, Cisco’s chief customer and partner officer, is set to depart from the company, indicating a shift in leadership dynamics.
Cisco’s financial performance in the third quarter demonstrated resilience in the face of challenges, with strategic acquisitions and revised projections pointing towards a favorable outlook for the future. The leadership changes within the company also reflect a focus on driving growth and innovation in the competitive market landscape. Cisco’s ability to adapt to changing market dynamics and customer needs will be crucial in maintaining its position as a leading technology provider.