What to expect when Cisco Systems (CSCO) reports Q4 2024 earnings

Technology company Cisco Systems, Inc. (NASDAQ: CSCO) is preparing to report fourth-quarter earnings next week. The company, which has dominated the network gear market for quite some time, has successfully transformed its business by adopting a subscription-based revenue model. Currently, it is working to capitalize on the massive opportunity in the AI infrastructure market.

Cisco’s stock has been in a downward spiral for over a year. Recently, the price slipped to a near-two-year low and stayed below the 12-month average. While the downtrend continued early this week, the shares traded higher on Thursday, indicating a recovery ahead of the earnings.    

When Cisco reports its fourth-quarter numbers on August 14, after the closing bell, the market will be expecting earnings of $0.85 per share, which is 21% lower than the $1.08/share profit generated in the year-ago quarter. The estimate aligns with the EPS guidance issued by the company a few months ago. The consensus revenue estimate for Q4 is $13.54 billion, which represents a 6.3% year-over-year decrease. That almost matches the management’s revenue forecast of $13.4-13.6 billion, with the mid-point at $13.5.

Estimates

The guidance includes up to $1 billion of revenue contribution from Splunk, the enterprise software company that was acquired by Cisco earlier this year to expedite AI integration. The company said it is on track to achieve the target of generating about 50% of its revenue from subscriptions by 2025. With major clients deploying Cisco’s AI-based solutions on a large scale, the company is optimistic about achieving the goal of securing $1 billion of AI product orders in fiscal 2025. Earlier this year, Cisco entered into a partnership with Nvidia to build an integrated solution to help enterprise customers deploy AI applications with ease, through a combination of their technologies. 

Cisco’s CEO Chuck Robbins said at the Q3 earnings call, “While our core product portfolio is trending toward normalization as we continue to see customer deployments of shipped equipment progress, we are pleased that our security and observability portfolios have continued to grow and are significantly enhanced by the acquisitions of Splunk and Isovalent. As our customers adopt and deploy AI, they need the infrastructure to power it, the data to develop it, and the security to protect it. And we believe only Cisco can deliver and integrate all three.”

Revenue Dips

In the third quarter, the top line dropped 13% annually to $12.7 billion, hurt by a sharp fall in Networking revenues, which contributes more than half of the total. Revenue declined across all geographical segments. However, the latest number topped expectations. Q3 net income decreased 41% from last year to $1.9 billion or $0.46 per share. Adjusted earnings per share fell 12% to $0.88 but surpassed Wall Street’s projection. The company has an impressive track record of delivering better-than-expected results, with quarterly earnings either beating or matching estimates consistently for over a decade.

CSCO has lost about 10% in the past seven months. On Thursday, the stock opened slightly above $45.0 and trended upward for most of the session.