Cisco Surges on Earnings Beat & Upbeat Guidance: ETFs in Focus

Core Insights - Cisco reported stronger-than-expected earnings and revenue for its fiscal first quarter, with adjusted earnings of $1 per share, a 10% year-over-year increase, surpassing the Zacks Consensus Estimate of $0.98 per share [1] - Revenues reached $14.88 billion, exceeding the Zacks Consensus Estimate by 0.71% and marking an 8% year-over-year growth, the fourth consecutive quarter of revenue growth after a period of declines [2] Networking Segment Performance - Cisco's core networking business generated $7.77 billion in revenues, a 15% increase from the previous year, outperforming analyst forecasts of $7.47 billion, driven by strong demand from hyperscale data centers and enterprises upgrading infrastructure for AI workloads [3] AI Demand as a Growth Driver - The company is positioning itself as a player in the AI space, with AI infrastructure orders from hyperscaler customers reaching $1.3 billion [4] Future Guidance - For the fiscal second quarter, Cisco expects revenue between $15 billion and $15.2 billion, above the Zacks Consensus Estimate of $14.65 billion, with adjusted earnings projected between $1.01 and $1.03 per share [5] - For the full fiscal year, revenue is anticipated between $60.2 billion and $61 billion, with earnings per share of $4.08 to $4.14, both exceeding Zacks Consensus Estimates [5] Underperformance in Other Segments - The security unit's sales declined 2% to $1.98 billion, missing the average estimate of $2.16 billion, while collaboration revenues fell 3% to $1.06 billion, below the forecast of $1.09 billion [6][7] Stock Performance and Valuation - Cisco's stock has risen 25.1% year-to-date, outperforming the SPDR S&P 500 ETF Trust's 16.9% gains, but it has a VGM score of D and trades at a forward P/E multiple of 18.06X, lower than its 5-year high [8] - The forward P/E multiple is also lower than the Computer – Networking industry's forward P/E of 21.42X [8] Strategic Outlook - Cisco's extensive partner base and strategy to integrate AI into its lagging Security and Collaboration platforms could provide significant growth opportunities [9] - The company's future performance will depend on its ability to leverage AI opportunities and maintain investor interest in broader AI investments [9] Investment Options - Investors may consider Cisco-heavy ETFs such as iShares U.S. Telecommunications ETF, First Trust NASDAQ Cybersecurity ETF, and Amplify Cybersecurity ETF to mitigate company-specific concentration risks [10]