What to look for when Cisco Systems (CSCO) reports Q3 results

Cisco Systems Inc. (NASDAQ: CSCO) is all set to publish third-quarter results next week amid expectations for a decline in adjusted earnings. Of late, the company’s investments are focused on boosting its AI capabilities across the portfolio and enhancing customer experience. The tech firm’s revenue performance has not been very impressive lately, due to cautious customer spending amid delayed inventory consumption.

The stock is currently trading at the lowest level in about a year, extending the weakness experienced since the beginning of the year. CSCO has lost around 11% in the past six months. Earlier, the stock suffered after Cisco lowered its full-year revenue guidance, despite reporting positive quarterly numbers. Another factor that weighed on investor sentiment is the company’s decision to reduce around 5% of its global workforce in February, as part of a restructuring plan.

Q3 Report on Tap

The San Jose-headquartered network gear maker is preparing to report third-quarter 2024 earnings on Wednesday, May 15, at 4:05 p.m. ET. Analysts’ consensus earnings estimate is $0.77 per share for the April quarter, excluding special items, compared to $1.0 per share a year earlier. The revenue forecast for the third quarter is $11.6 billion.

It is worth noting that the company has an impressive track record of delivering stronger-than-expected quarterly earnings, consistently exceeding, or meeting, estimates for more than a decade. Meanwhile, the management calls for revenues in the range of $12.1 billion to $12.3 billion for the quarter. It is looking for Q3 earnings of $0.51-$0.56 per share and adjusted earnings in the range of $0.84 per share to $0.86 per share.

From Cisco’s Q2 2024 earnings call:

“Given the trust our customers place in us and the criticality of our technologies to the outcomes our customers are seeking, I am confident about the foundational strength of our portfolio and our future growth opportunities. With our innovation, we deliver and enable our customers to deploy next-generation applications in a highly secure manner. As part of this, we help facilitate their growth through our products and services so that when our customers adopt new technologies, we grow alongside them.“

Expansion

Recently, Cisco acquired data analytics company Splunk for $28 billion to strengthen its cybersecurity portfolio and boost generative AI capabilities to better serve customers. On the heels of the buyout, the company launched HyperShield, an AI-supported security product to protect various IT environments like devices, data centers, clouds, and applications. The initiative is expected to enable the company to effectively compete with tech majors like Google and Microsoft in the AI space.

In the second quarter, adjusted earnings decreased to $0.87 per share from $0.88 per share in the same period of 2023, but topped expectations. Unadjusted net income was $2.63 billion or $0.65 per share in Q2, compared to last year’s profit of $2.77 billion or $0.67 per share. At $12.79 billion, second-quarter revenues were down 6% year-over-year.

Cisco’s shares traded slightly higher in the early hours of Tuesday’s session. Their value has stayed below the 12-month average in the past three months.