Cisco (CSCO) Up 1.6% Since Last Earnings Report: Can It Continue?

Core Viewpoint - Cisco Systems reported mixed results in its recent earnings report, with earnings exceeding estimates but revenues declining year-over-year, raising questions about future performance and market demand [2][3]. Financial Performance - Cisco's Q1 fiscal 2025 non-GAAP earnings were 91 cents per share, beating estimates by 4.6%, but down 18% year-over-year [2]. - Revenues totaled $13.8 billion, surpassing estimates by 0.57%, yet reflecting a 5.6% decline from the previous year [2]. - Networking revenues fell significantly by 23% year-over-year to $6.75 billion, attributed to weak demand from telecommunications and cable service providers [3]. - Collaboration revenues decreased by 3% year-over-year to $1.09 billion, impacted by declines in on-prem Webex Suite and collaboration devices [5]. - Security revenues doubled year-over-year to $2.02 billion, driven by strong demand for threat intelligence and response solutions [6]. Revenue Breakdown - Total product revenues were $10.11 billion, accounting for 73.1% of total revenues, down 9.2% year-over-year [6]. - Service revenues increased by 5.6% year-over-year to $3.7 billion, making up 26.9% of total revenues [6]. - Annualized Recurring Revenues (ARR) reached $29.9 billion, up 22% year-over-year, with product ARR growth of 42% [7]. Operating Expenses - Non-GAAP gross margin contracted to 69.3%, down 2.6% year-over-year, with product gross margin decreasing by 590 basis points to 50.4% [9]. - Total non-GAAP operating expenses rose by 9% year-over-year to $4.87 billion, representing 35.2% of revenues [9]. - R&D expenses increased by 19.5% year-over-year to $2.29 billion, while sales and marketing expenses rose by 9.8% to $2.75 billion [10]. Balance Sheet and Shareholder Returns - As of October 26, 2024, cash and cash equivalents totaled $18.67 billion, up from $17.85 billion [12]. - Total debt increased to $31.99 billion from $30.96 billion [13]. - Cisco returned $3.6 billion to shareholders through buybacks and dividends, repurchasing approximately 40 million shares for $2 billion [14]. Guidance and Market Outlook - For Q2 fiscal 2025, Cisco expects non-GAAP earnings between 89 cents and 91 cents per share, with revenues projected between $13.75 billion and $13.95 billion [15][16]. - The Zacks Consensus Estimate for Q2 revenues is $13.66 billion, indicating a year-over-year growth of 6.81% [17]. - Estimates for Cisco have trended upward recently, with a Zacks Rank of 3 (Hold), suggesting an in-line return in the coming months [20].