Cisco Set to Report Q1 Earnings: Buy, Sell or Hold CSCO Stock?

Core Viewpoint - Cisco Systems (CSCO) is expected to report first-quarter fiscal 2025 results on November 13, with anticipated revenues between $13.65 billion and $13.85 billion and non-GAAP earnings between 86 and 88 cents per share [1]. Revenue and Earnings Estimates - The Zacks Consensus Estimate for revenues is $13.76 billion, reflecting a 6.17% decline from the previous year's quarter. The consensus for earnings is steady at 87 cents per share, indicating a year-over-year decline of 21.62% [2]. - Cisco's earnings have surpassed the Zacks Consensus Estimate in the last four quarters, with an average beat of 4.93% [2]. Key Factors Impacting Earnings - Cisco is facing sluggish networking sales due to weak demand from telecommunications and cable service providers, along with excess inventory affecting growth [4]. - In Q4 fiscal 2024, Cisco reported revenues of $13.64 billion, down 10.3% year-over-year, primarily due to a 15.4% decline in product revenues, which constituted 72.3% of total revenues [4]. Segment Performance - The Zacks Consensus Estimate for networking revenues is $6.909 billion, indicating a 21.7% year-over-year decline. Collaboration revenues are estimated at $1.065 billion, reflecting a 4.7% decline [5]. - Conversely, security revenues are expected to reach $1.816 billion, driven by strong demand for solutions like XDR, Secure Access, and Multicloud Defense [6][5]. Stock Performance - Cisco shares have increased 14.9% year-to-date, underperforming the Zacks Computer & Technology sector's 30.4% increase but outperforming the Computer Networking industry's 14.2% return [7]. - The current Price/Sales ratio for Cisco is 4.12, higher than the industry's 3.58, indicating a stretched valuation [7]. Growth Opportunities - The rise in AI-related workloads presents a significant growth opportunity for Cisco, with a total market opportunity of $950 billion and expected CAGRs of 6% in current markets and 16% in expansion markets from 2025 to 2027 [9]. - Cisco's investments in AI, cloud, and cybersecurity are notable, with over $1 billion in AI orders from hyperscalers and a similar amount in the pipeline for fiscal 2025 [10]. Security Segment Insights - The security segment is projected to grow with a CAGR of 8% in current markets and 14% in expansion markets from 2025 to 2027, bolstered by the Splunk acquisition [11]. - Cisco's addressable market in the infrastructure domain is estimated at $221 billion, benefiting from the increasing use of AI and cloud technologies [12]. Long-term Prospects - Recovery in networking demand is expected to enhance Cisco's long-term prospects, with innovations in switching, routing, security, and observability aiding customer automation [13]. - A strong partner base, including collaborations with Meta Platforms, Microsoft, NVIDIA, and AT&T, is crucial for Cisco's growth [14]. Conclusion - While near-term results may be impacted by sluggish networking business, Cisco's expanding portfolio, growth in cybersecurity, and strong partnerships are key catalysts for potential recovery in fiscal 2025 [17].