Cisco Systems, Inc. (CSCO) on Q1 2021 Results - Earnings Call Transcript

Operator: Welcome to Cisco’s First Quarter Fiscal Year 2021 Financial Results Conference Call. At the request of Cisco, today’s conference is being recorded. If you have any objections, you may disconnect. Now, I would like to introduce Marilyn Mora, Head of Investor Relations. Ma’am, you may begin. Marilyn Mora: Chuck Robbins: Thanks Marilyn. First, I want to start off by saying I hope everyone is safe and healthy. I also want to thank our employees for their dedication to our customers and their relentless focus on innovation. Cisco is off to a solid start in fiscal 2021. And I am proud of these results. Our teams are executing with excellence, and we continue to make steady progress on our shift to a software and subscription-driven model. We are encouraged by the signs of improvement in our business as we continue to navigate the pandemic and other macro uncertainties. Our focus is on winning with a differentiated innovation portfolio, long-term growth and being a trusted technology partner for our customers. Over the last few quarters, we've successfully adjusted to new demands by making necessary changes and shifts within our business. We remain closely aligned with our customers to provide them with the mission critical technology they need to stay resilient and move towards adopting new hybrid work models. Kelly Kramer: Thanks Chuck. I also want to congratulate Scott on his new role. I've had the chance to spend some time with him, and I am super excited. I think this is a very positive news for Cisco and he will be a great addition to the team. Also thanks to you, Chuck. It's been a great time working with you over the years. Now, let me provide a summary of our financial results for the quarter, followed by guidance for Q2. Our overall Q1 results reflect good execution with strong margins in a challenging environment. Total revenue was $11.9 billion, down 9% year-over-year. Our non-GAAP operating margin rate was 32.7%, down 0.9 points. Non-GAAP net income was $3.2 billion, down 11%, and non-GAAP EPS was $0.76, down 10%. Let me provide more detail on our Q1 revenue. Total product revenue was down 13% to $8.6 billion. Infrastructure Platforms was down 16%. As a reminder, this is a product area most impacted by the COVID environment. We saw declines across switching, routing, data center and wireless, driven primarily by the weakness we saw in the enterprise and commercial markets. We continue to see growth of the Cat 9K and the ramp of our Wi-Fi 6 products. Data center revenue declined, driven by servers. Applications was down 8%. We did continue to see strong growth in Webex with the importance of remote working. This was offset by declines and Unified Communications and TelePresence endpoints. Security was up 6%. Our cloud security portfolio performed well, with strong double-digit growth and continued momentum with our Duo and Umbrella offerings. Service revenue was up 2%, driven by growth in our maintenance business as well as support services. Marilyn Mora: Thanks Kelly. While the operator is queuing the line for Q&A, I'd like to remind the audience as I do every quarter that we ask you to address one question only so we have adequate time to take as many questions as possible. Michelle, I'll turn it over to you. Operator: Thank you. Ittai Kidron from Oppenheimer. You may go ahead. Ittai Kidron: Hey, guys. Good to see some stability in the business. I guess a couple of things for me. Chuck, when you look at the enterprise orders quite significantly down, should we gather from your tone that you think that reverses? Where is the bottom on order patterns? And as you look through the rest of the fiscal year, is this the sequential improvement that you're looking for? And then, Kelly, just clarification on RPO. Can you tell us if duration -- how duration is changing? It's hard to reconcile this if the duration is changing from quarter to quarter. Chuck Robbins: Hey, Ittai, thanks for the comments and the questions. So, on the enterprise side, I'm not too concerned about it, honestly. We had -- we did have some pretty significant compares from the year earlier, which contributed to that. But the thing that I would call out is, we saw a pretty significant improvement in our commercial orders. I think that we were minus 23 last quarter in the midst of the whole SMB meltdown that we knew was going on, and it was minus 8 this quarter. And I'll tell you, in the US, it was even a greater improvement from that. So, that gives us a fair amount of optimism. I think they enterprise thing is going to be fine. There is -- again, we just -- we had some compare issues that I think just resulted in the math, but I don't see anything that concerns me there. Kelly Kramer: And on RPO, Ittai, the duration hasn't changed much since we started reporting this over a year ago. About half -- slightly more than half of the total balance will get recognized in the next 12 months and the rest is longer term. Ittai Kidron: Very good. And it's been a pleasure, Kelly. Good luck going forward. Kelly Kramer: Thank you, Ittai, appreciate it. Marilyn Mora: Next question, please. Operator: Thank you. Paul Silverstein from Cowen & Co. You may go ahead, sir. Paul Silverstein: First of all, Kelly, I just wanted to thank you for your help over the years and wish you all good things going forward. In terms of questions, first off, Kelly, can you update us on what you're seeing in pricing environment? And the bigger question is, Chuck, the statements you just made in terms of improvement in commercial as well as enterprise, you've been talking for a while obviously about the benefit from remote work as well as the offset, the challenge presented by -- assuming we go back to the 21st century, there's going to be organizations that leave a certain percentage of the workforce at home and with fewer or smaller offices, headquarters, branch and remote workers in those offices, one would think that would be a challenge for switching and enterprise routing and wireless LAN access points. Any insight you can offer on that particular dynamic from a longer-term perspective? Chuck Robbins: Yeah, let me take that first, and then, Kelly, can get to the pricing question. So, Paul, I think if you look at commercial, a lot of that recovery was actually driven by collaboration and security on a global basis. And so, we feel good about that. I think that we also talked about the Cat 9K continued to show strength with double-digit demand growth, and it -- and so, what we think is going to happen is when customers go back, they are going to ensure that they have robust infrastructure. They're going to need to deal with social distancing issues. We think that in our portfolio, you're going to see customers put high definition video in every conference room. We have technology that we've built in that I've actually seen working this week, where we have sensors in the units that -- not only will you have high definition video, but we have sensors in the units that actually monitor how many people are in a room and you get warnings if you're exceeding whatever capacity the company has defined for that room. And so, we think that the safety aspect of it will be helpful, too. So I think it's still TBD on what really happens in this space because I think 90 days to 120 days ago, there was this belief that we were going to shut down every headquarters building in the world. And now, I think people know that it's going to be a balance going back. So we've got the Cat 9K and Wi-Fi 6, which is the future modern platforms that the Company has been moving to that continue to show strength. And so, while we have to wait and see, we're optimistic about it. Paul Silverstein: And Kelly, prices? Kelly Kramer: Yeah, sure. On pricing -- and thanks for the kind words there, Paul. I appreciate it. On pricing, I'd say, our Q1 pricing is in our normal range from a product gross margin walk perspective. The rate impacts, the number that we usually talk about, it was down 1.8 points, which as you know, is in our normal kind of operating range. And just as a reminder, we've annualized all of the price increases we did a year ago for the list for tariffs. So now, this is kind of where we're stated. But I'm happy to see where we are this quarter on pricing. And even sequentially from Q4, it's better. So we're stable. Paul Silverstein: Thanks again. Kelly Kramer: Thank you. Marilyn Mora: Thanks Paul. Michelle, next question. Operator: Thank you. Rod Hall, you may go ahead -- from Goldman Sachs. Rod Hall: Thanks for the question. I wanted to start off with the mismatch, I guess, in the order rate and the guide. Even at the top end of the guide, revenue is flat, but orders are down 5%. So I'm wondering if you guys could just kind of connect those two dots for us, help us understand why that is. And then, I know, Chuck, you said you're not that concerned by the enterprise orders. They did deteriorate quite a bit. Could you go into a little bit more detail on that? What is that -- even though those have deteriorated, you think it's just a short-term effect or kind of what's going on within that enterprise segment would be great? Thanks a lot. Kelly Kramer: Yeah, the orders versus revenue, it's really just timing of when things are and whatnot. That's no different than I normally go through. We know what's coming off the balance sheet with all the software. We know what's in our backlog. So it's really just the year-over-year compares. So, I feel good about the guide and you're seeing that in there. Chuck Robbins: Yeah. On the enterprise front, I think the real thing that I would point out is, there are just a couple of significant transactions. And we see -- in our pipeline, we see a robust pipeline right now. We see large transactions showing up again in the funnel, which is positive. And so, if you look at across the core infrastructure, enterprises are going to upgrade their core infrastructure. They're going to build out a robust on-prem collaborate -- I mean, on-prem meaning hardware video units when they go back into the offices because everyone -- every meeting is going to have remote attendees and you're going to have to have it in virtually every conference room. So that's positive. Everybody is moving to this WAN re-architecture with SD-WAN and cloud security. So I think it's -- the short answer is, Rod, it's largely a couple of big deals a year ago and we see the funnel strengthening. So it's -- that's what gives me the optimism looking forward. Rod Hall: Okay. Thanks guys. Good working with you, Kelly. Kelly Kramer: Thanks, Rod. Marilyn Mora: Next question, please. Operator: Thank you. Meta Marshall from Morgan Stanley Investment Research. You may go ahead. Meta Marshall: Great, thanks. Chuck. I just wanted to ask maybe how linearity was during the quarter? You were pretty downtrodden on the initial earnings call, heading into fiscal Q1. Just when did you start to see that uptick? And then, maybe just are customers needing to be back in the office in order to start thinking about orders or if they just accommodated and are starting to make orders whilst still remote? Thanks. Chuck Robbins: Yeah. So I would say that when we did the last earnings call, we had seen actually good demand in the first couple of weeks of the quarter, but clearly it was a couple of weeks. And so, we -- it was not anything that would give us a trend. But it started -- the quarter started and it stayed -- it was very linear. It was not -- we saw decent performance from the beginning, and it stayed pretty consistent throughout. So, that was a good sign for us. And the -- I'm sorry, what was the second question? Meta Marshall: In terms of whether people were needing to physically be in the office in order to start thinking about orders. Chuck Robbins: What I think has happened is, I think customers have come to grips with the fact that this thing is going to be with us for some period of time. Obviously, we're optimistic, like everybody else, some of the vaccines and some of the therapeutics and all will ultimately help. We're balancing that obviously with the current peaks that we're seeing all around the world. But I think customers just basically said, we're not sure when it's going to get better, but it's going to get better. And I can't sit around and do nothing. What I kind of was hopeful was going to happen, which I think we did see, is that we had customers who were super-focused on getting their employees working from home productively and getting their security set up. I think everyone raced to do that. And then, I think they took a pause, which is what we felt in our last quarter in orders. And then, I think they re-prioritized what they were going to be spending money on, and I think we started seeing some of that come back. And it's sort of exactly what I expected, but we needed to see it and we'll see if it continues. But we're all dealing with the same macro environment, everybody is, relative to this virus, but that's sort of how it played out. Any comments, Kelly, on the linearity? Kelly Kramer: Yeah, very good linearity. Meta Marshall: Great, thanks. And nice working with you, Kelly. Kelly Kramer: Thanks. Marilyn Mora: Thanks Chuck. Thanks Kelly. Next question? Operator: Thank you. Tim Long from Barclays. You may go ahead. Tim Long: Thank you. I'll offer good luck to you, Kelly, as well. Just wanted to ask on the cloud vertical. Chuck, you mentioned kind of fourth quarter strong. Can you just talk a little bit about what products you're seeing strength there and what kind of breadth across that customer base you're seeing that strength? And then just a quick follow-up, if you could, on the public sector being up. Anything specific or more sustainable to that vertical being one of the better performers? Thank you. Chuck Robbins: Thanks Tim. Yeah, in the cloud vertical, the web scale space, I think what I've said historically is that we've been rebuilding these relationships and we began to see them buying our broader portfolio as a result of them believing in both the fact that we're going to be there with them and that we were investing in technology that was being built the way that they want to consume it and aligned to the architectures that they want to build. What I will tell you now is that last December, we had a launch where we talked about disaggregating our software, our hardware and that we would sell our silicon, our optics, we would sell our software stand-alone. We would sell integrated systems, whatever our customers wanted. And I can tell you that we had now won in the web scale space across every one of those facets. And so, we've seen really good progress. And I would say now, some of the new technologies that we built and had been testing and positioning are starting to show up very well in the accounts. So we're very pleased with that. On the -- and the pipeline looks very strong. So on the -- in fact, one of the comment on that, in the US, we saw service provider flat and that -- and a lot of that was strength in the MSDC web scale space. And in Europe, we saw high-teens growth and we saw really good MSDC web scale strength there as well. On the public sector, that was reasonably consistent around the world, and a lot of it was -- there was a lot of stimulus that was put in the system by lots of governments around the world. Our federal -- federal spending in the US was strong. We saw K through 12 building out a lot of infrastructure for -- while students were not there. And E-rate was strong for sure, and we think that will stay strong. And then, we saw some spending from the CARES Act in the local and municipal governments. But -- and the teams, we spent some time with the leader, particularly in US, this week. And I think he remains fairly bullish. Tim Long: Thank you. Marilyn Mora: Next question, please. Operator: Thank you. Jim Suva from Citigroup Investment Research. You may go ahead, sir. Jim Suva: Thank you. And Kelly, you will truly be missed. Please keep in touch. For either Chuck or Kelly, can you help us reconcile or bridge the gap between -- public sector orders were up 5%. Enterprise was down 15%. Why would one be so much stronger than the other? So I look back on the year-over-year comps, and last year, enterprise orders were down 7% and public sector was flattish. So we actually have comps that don't explain it either. So can you just explain, are there different purchasing decisions because everyone has been affected in the world by COVID. So if you can just help us kind of reconcile that a little bit, that'd be great. Chuck Robbins: Well, I think a lot of it's what I just described, right? Public sector around the world saw a lot of stimulus. And in the US in particular, we saw strength and we saw everything from Department of Defense spending to the local municipal spending. States were slightly weak, but the federal government was good. Local was good. E-rate kicked in. The new E-rate program kicked in, Jim, which contributes a lot when that gets going. And that's sort of early in its next wave. And so -- and then, we just had -- there was strength in public sector in Germany. And so, I think it was just more consistency basically. And outside the US, obviously, some healthcare. Inside the US too, there's a lot of healthcare in there in public sector, particularly outside the US. Jim Suva: Thank you so much for the details and clarifications, Chuck, and bye-bye, Kelly. Thank you. Kelly Kramer: Thanks, Jim. Chuck Robbins: Thanks, Jim. Marilyn Mora: Thanks Jim. Next question, please. Operator: Thank you. Tal Liani from Bank of America. You may go ahead, sir. Analyst Tal Liani: Hi guys. I'm trying to reconcile your comments to your numbers. Last quarter, you sounded pretty downbeat, highlighting some issues. This quarter, you sound a lot better. But on the -- and you talk about growth initiatives. On the other hand, I look at your numbers, infrastructure platforms are down 16% year-over-year, 15.9%, let's say 16%. And it's worse than all of your competitors. If I just look at switching and routing and Juniper and Arista, on a global basis, without getting into details of the composition, you're down more than they are. And the question is, why is it down so much versus competition? Do you feel that there is also share issues, market share shift issues? Can you give us some context about areas where you feel that you're growing share, maintaining share and areas where you see some challenges? Chuck Robbins: Yeah, I'll give you my quick perspective, Tal, and then Kelly can add to it. If you look at what really drove that, it was compute, and a lot of it is sort of the pricing that came through compute, which neither of those competitors you mentioned have. Also just the exposure to data center campuses this past quarter we talked about, the broader exposure we have I think would be the two things that I would call out. Kelly, you have anything to add? Kelly Kramer: The only other thing I would call it is some of those companies that you mentioned have different compares than we do from a year ago as well. But Chuck hit it right. Again, data center or the compute business has a big impact due to the DRAM pricing pricing down, and that hurts, and then again the campus stuff. Tal Liani: Thank you. Marilyn Mora: Thanks Tal. Next question, please. Operator: Thank you. Amit Daryanani from Evercore. You make good, sir. Amit Daryanani: Yeah. Thanks for taking my question, guys. I guess, my question is really on the top line guide. And Chuck, as I think about the Jan. quarter expectation of sales being flat year-over-year versus I think what you've seen in the last few quarters of down 10%, 11%, I think skeptics would say, well, your compares are easy, which mathematically they are, but it would be helpful to understand what do you think are the top two, three vectors that's driving this improved revenue trajectory in Jan. and to the extent you can touch on the durability of these metrics as we go forward, that would be helpful. Chuck Robbins: Do you want it, Kelly? Kelly Kramer: Yeah, I'll start and you can add. I'd just say this, again, back to the earlier point, we have been consistently shifting the revenue mix. So, as you see every quarter and you can see it in our RPO, we are getting more and more of our revenue coming off the balance sheet with the software mix. We have continued to make progress, as you can see, on the services side. For services, it's still growing for us. And software and services together have become a much bigger part of our portfolio. So, that benefits us on the revenue guide. In terms of strength that we see, yes, this Q1 revenue, though it'd still a tough Q1, we feel better about what we see in the orders profile. And again, the growth drivers are the same growth that Chuck talked about. We see real momentum and collaboration on the Webex side. We see real momentum in security. And we're just -- I mean, that's kind of what is driving. I don't know, Chuck would add anything else. Chuck Robbins: And I think also the web scale and the service provider, 5G build-outs, we feel like those are going to continue. But the short-term guide is a combination of what's coming off -- out of the RPO, what's in backlog and then we obviously assess the forecasts that the teams put forward and then we put the Kelly and Chuck factor on it. So it is -- and it is math to some extent, but I think that some of the things that we talked about earlier, the things that have given us -- it's hard to say super-optimistic because the numbers still aren't where we want them to be. But relative to where we were 90 days ago and how we felt or the uncertainty that we felt, we certainly feel like we have a little more visibility now. Amit Daryanani: Perfect. Thanks on a nice quarter, guys. And best of luck. Kelly. Kelly Kramer: Thank you very much. Marilyn Mora: Next question please. Operator: Thank you. Samik Chatterjee from JPMorgan. You may go ahead. Samik Chatterjee: Hi, thanks for taking the question. Chuck, in your prepared remarks, you outlined kind of six focus areas as you align the business to where you're seeing customer demand come back. If you can share how you're thinking about it relative to kind of investing organically versus where you might kind of need M&A to fill in those priorities? And just, I didn't hear in your prepared remarks anything in relation to plans about like having hardware as a service, as some of your peers are trying. So like what are your updated thoughts? What are you seeing in terms of customer demand for those kind of models? Chuck Robbins: That's a great question. So I think on the organic versus inorganic, I should probably clarify that our strategy there hasn't changed. And I think my comments were either misstated or misconstrued last time and some folks thought that we were thinking about some significantly larger acquisition strategy. Our acquisition strategy hasn't changed, just to be clear. But we'll use a combination. I would say that right now, there -- we are probably at the peak of internal innovation that we've -- that I've seen for a long time. If you look at the platform play, the work that our service provider, Mass-Scale Infrastructure Group, is doing and some of the wins we're seeing there, the 5G backhaul and packet core wins that we're seeing and the, at least, architectural progress we're making whenever our service provider customers start building out their 5G core standalone infrastructure, we feel good about where we are. So it'll be a combination of both and -- but again, it hasn't changed. As you think about it as a service, I do want to delineate between this because there is this offer in the marketplace today from some of our competitors around consumption-based as a service, and that's largely around compute. And so, you'll see us with a similar offer, but more of what I'm talking about is looking at what aspects of our intellectual property, can we pull, can we integrate together and can we deliver as a cloud service? So I'm not necessarily talking about selling Ethernet switch ports one port at a time. We're really talking about delivering our core intellectual property. Example, take SD-WAN, cloud security, secure Internet Gateway and deliver that capability for our customers as a service in the future, which is high value, very differentiated, those are kinds of things we're thinking -- that we're working through right now. And you'll see those kind of offers come out from us over the next 3, 6, 9, 12 months. Samik Chatterjee: Okay, got it. Very helpful. Thank you. Marilyn Mora: Thanks Chuck. Next question? Operator: Thank you. Aaron Rakers from Wells Fargo. You may go ahead. Marilyn Mora: Aaron, we can't hear you. Aaron Rakers: Sorry about that. I was on mute. Congrats on the quarter, and also good luck, Kelly. I guess my question is building on the last question. As we think about the CFO announcements and we think about subscription now being 78% of the software revenue, how do we think about the progression of deepening subscription across the product portfolio? And how do we think about the renewal cycle of those subscriptions as we move forward? Thank you. A - Chuck Robbins It's a good question. So I think you're going to see us continue to add more software assets, both organically and inorganically as -- and most all of those solutions are sold as a service. So I think you'll see increases from that perspective. I think that you'll see -- on the renewal front, we have a focused effort right now. I think if you look at our core portfolio where we drove mandatory subscriptions, the first meaningful renewal cycle comes about a year from now or middle of next year, and our teams are working on that right now as we speak. We currently have renewal motions in place across collab and across security, etc. So I think what I would say is that we'll be looking at more and more of our technology being delivered from the cloud and as a service. So you'll see that contribute to it as well. And we're just going to continue to move forward, and I would say, you're going to continue to see software and services tick up as a percentage of our overall business going forward. Marilyn Mora: Thanks Aaron. Next question, please. Operator: Thank you. Simon Leopold from Raymond James & Associates. You may go ahead, sir. Simon Leopold: Thank you much for taking the question. Kelly, also send my congratulations on wherever you go next, and thanks for the help. In terms of question, I wanted to see if you could talk a little bit about the maturity of the campus refresh in terms of the opportunity in front of you for the Cat 9K, as well as whether you're seeing a benefit from renewals on DNA subscriptions. I assume you're sort of coming up on that first round of three-year subscriptions coming due. If you could elaborate on those two? Thanks. Chuck Robbins: Yeah. Thanks Simon. I would say on the campus refresh, when you look at Wi-Fi 6, you look at the Cat 9K stuff, we're still early on, honestly. And there is -- we have a large installed base out there. And so, that's a multi-year transition that we expect will go on for some period of time going forward. On the DNA renewal stuff, that's what I was telling Meta earlier that really it is -- the first real wave of it hits sometime in '21 because if you remember, we launched that in -- I think we announced that in the summer of 2017. Kelly, is that right? And so that was a beginning of fiscal '18. Kelly Kramer: Yes. Chuck Robbins: And so, when we get to the end of fiscal '21 -- and you had a lot of early adopters, and we didn't hit scale till sort of the middle of next year. So, you're really talking about getting into FY '22 when we'll start to see that come about. Simon Leopold: Great, that's helpful. Thank you. Marilyn Mora: Next question, please. Operator: Thank you, James Fish from Piper Sandler. You may go ahead, sir. James Fish: Thanks for the question, and congrats again on the retirement, Kelly. We're starting to see signs of 5G core spending and, Chuck, you alluded to it on the call and also more about the desire for OpenRAN. Hoping Cisco enable more the OpenRAN infrastructure, what are you guys hearing about timing for 5G core spending in terms of materiality, now that the first mid-band spectrum auction is through and the second is coming up? And how are you feeling about the products set across infrastructure competitively for 5G? Thanks. Chuck Robbins: Well, Jim, I would say the active ORAN projects around the world, we are deeply in the middle of and have actually seen a lot of benefit from one in Japan and there is a couple of others going on in other places. And we're in the midst -- we're in the middle of the packet core side of it. We're in the middle of backhaul. We're in the middle of infrastructure to support it. We're in the middle of orchestration layers. And so our teams continue to work on building out our overall stack for how we're playing that OpenRAN space over time. As it relates to the 5G stuff, you're right, where we are seeing benefit today is we're winning a lot of backhaul opportunities. We're winning a lot of packet core. I think we had seven more wins between those two in the last quarter. And I would say, the core standalone build-outs are going to largely be dependent upon the enterprise service delivery that we've talked about historically, and I still think that's probably -- I think we're starting to see some early stuff going on around the world. But I think in earnest, I would say that's going to be -- notwithstanding pandemic and everything else, it's probably going to be starting middle of next year, and it will take several years. But again, there's a lot of variables that can move that either way. James Fish: Understood. Thanks Chuck. Marilyn Mora: Okay. We have time for one more question. Michelle, can you the last question? Operator: Thank you. Sami Badri from Credit Suisse. You may go ahead. Sami Badri: Thank you very much for fitting me in. I just wanted to touch up a little bit on the public sector order strength. Is this something that can consistently be growing from a product orders and strength perspective in at least the upcoming quarter? Or was it just strong this quarter because the government's fiscal year closed in the September quarter, and therefore, there was a big uptick offsetting some of the dynamics? And then just as a kind of a follow-up here, is there -- have you guys been able to go through the commercial and the federal segments and determine whether CARES funding or stimulus funding was able to fund some of the reversals and dynamics that you guys saw in the quarter, and then that essentially lead to a better guide than what consensus was modeling? If your could fit those two questions in, that will be great thanks. Chuck Robbins: Thanks Sami. I'd say on public sector, we feel pretty good about it actually. And when we talk to our leaders around the world, that is one area that is pretty consistent that most of them feel pretty good about and particularly in the US where it's a big piece of the business regardless of administration. It's -- there's different priorities, but they're all dependent upon tech, and so that's good. On the commercial and federal segments, I think what I would say is it -- I would say in commercial, I would assume that there was some aspect of that. But I think looking at the collaboration and security spending. I think just a lot of those mid-size enterprises were really just putting themselves in a position to continue operating in this new world we're living in right now as much as anything. I'm not sure it's significant. I'll let Kelly comments if she thinks, but we did have a comment that I made earlier that our federal team did say that the stimulus was positive, E-rate was positive. And then we saw some local muni buying that was -- they felt like was -- and the customers were telling was connected to the CARES Act, and that's probably the extent of what I've heard on this. Kelly Kramer: And we heard -- we also heard that, from the European team, they've got a lot of benefit from the stimulus. And again, when I look at the orders within public sector globally, again, a ton of it is in getting this -- it's in securities and collaborations are working from home, doing school from home and like Chuck said, the K through 12 education globally is very favorable. Sami Badri: Got it. Thank you. Chuck Robbins: Thank you. Marilyn Mora: Thanks Sami. Chuck, I'll turn it over to you for last comments. Chuck Robbins: Yeah, I think, first thing I'll say is that I'm really proud of our team and how hard they're working and how committed they are to our customers and making sure that we're taking care of them during these complex times. And obviously, we're trying to take care of our employees during these complex times. But I really want to just focus on thanking Kelly. It's been an incredible partnership. We've had a lot of fun, and I think that there's a lot of love in the investor community for you. We're going to miss you. But we are excited about Scott. But Kelly, thanks for everything you've done. Kelly Kramer: I appreciate it, Chuck. It's been great working with you. And again, I do appreciate everybody in this industry and it's been a great relationship. But. Scott, I think it's great that Scott coming. He is going to be fantastic for the Company. But thanks for everything, Chuck. Chuck Robbins: And Kelly actually helped us make that choice. So you guys can feel good that she helped us with the candidates and was very very supportive on Scott's -- on the decision for Scott. So thank you all for joining us today and we'll look forward to talking to you again next quarter. Marilyn Mora: Thanks Chuck. Thanks Kelly. So in closing, Cisco's next quarterly earnings conference call, which will reflect our fiscal 2021 second quarter results, will be on Tuesday, February 9, 2021 at 1:30 PM Pacific Time, 4:30 PM Eastern Time. Again, I'd like to remind the audience that in light of Regulation FD, Cisco's policy is not to comment on its financial guidance during the quarter, unless it is done through an explicit public disclosure. We now plan to close the call. But if you have any further questions, feel free is always to reach out to the Investor Relations team. And we thank you very much for joining the call. Operator: And thank you for participating on today's conference call. If you would like to listen to the call in its entirety, you may call 800-879-5193. For participants dialling from outside the US, please dial 203-369-3562. This concludes today's call. You may disconnect at this time.
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Cisco Shares Surge on Earnings Beat and Job Cuts

Cisco Shares Surge on Earnings Beat and Job Cuts

Cisco's Strong Earnings Performance

Cisco Systems has recently seen a significant boost in its share price, driven by a strong earnings report and strategic job cuts. The company’s latest financial results exceeded expectations, contributing to a surge in its stock value.

Key Highlights from Cisco’s Earnings Report

  1. Earnings Beat Expectations: Cisco reported earnings that surpassed analyst forecasts, reflecting robust financial performance and operational efficiency. This positive surprise has fueled investor confidence and led to a notable increase in Cisco's share price.

  2. Strategic Job Cuts: In addition to the strong earnings report, Cisco announced a series of job cuts aimed at streamlining operations and improving cost efficiency. These strategic reductions are expected to enhance the company’s profitability and operational focus.

Implications for Investors

Short-Term Market Reactions

The combination of a better-than-expected earnings report and job cuts has led to a surge in Cisco’s share price. Investors are likely to respond positively to these developments, potentially leading to further gains in the short term.

Long-Term Considerations

Long-term implications of Cisco’s strong earnings and cost-cutting measures may include improved financial stability and sustained growth. Investors should monitor the company's ongoing performance and strategic initiatives to assess its future prospects.

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Conclusion

Cisco’s impressive earnings performance and strategic job cuts have driven a surge in its share price. Investors should consider these developments when evaluating Cisco’s stock and use tools like FMP’s Market Index API to stay informed and make strategic investment decisions.

Cisco Raises Annual Revenue Guidance After Strong Q3 Performance

Cisco Systems (NASDAQ:CSCO) has raised its annual revenue forecast following better-than-expected fiscal third-quarter results, where improved margins helped counter a revenue decline.

For Q3, Cisco reported adjusted earnings per diluted share of $0.98, down from $1.00 the previous year, on revenue of $12.7 billion, a 13% decrease year-over-year. Despite the revenue drop, these figures surpassed Wall Street expectations of $0.83 EPS on $12.48 billion revenue. The gross margin increased to 65.1% from 63.4% a year ago.

Looking forward, Cisco now projects its annual revenue to be between $53.6 billion and $53.8 billion, up from the previous range of $51.5 billion to $52.5 billion. The full-year adjusted EPS is expected to be between $3.69 and $3.71, slightly revised from February's forecast of $3.68 to $3.74.

Cisco Systems, Inc. Q3 Fiscal 2024 Earnings Preview

  • Cisco Systems, Inc. is set to release its third-quarter fiscal 2024 earnings on May 15, 2024, with Wall Street analysts projecting an EPS of $0.83 and revenue of $12.5 billion.
  • The company's own forecasts suggest third-quarter revenues between $12.1 billion and $12.3 billion, with non-GAAP earnings per share expected to be between 84 and 86 cents.
  • Despite a challenging macroeconomic environment, Cisco has consistently outperformed the Zacks Consensus Estimate in the trailing four quarters, boasting an average earnings surprise of 5.50%.

Cisco Systems, Inc. (NASDAQ:CSCO) is gearing up for its third-quarter fiscal 2024 earnings release on May 15, 2024, after the market closes. This event is highly anticipated by investors and analysts alike, given the company's position as a leading player in the networking and communications industry. Cisco's performance is often seen as a bellwether for the broader technology sector, making its quarterly financial results a matter of keen interest. The company faces stiff competition from other tech giants, but it has managed to maintain a strong market presence through innovation and strategic acquisitions.

Wall Street analysts have set the earnings per share (EPS) estimate at $0.83 for the quarter, with projected revenue reaching $12.5 billion. These figures are closely aligned with Cisco's own projections, which anticipate third-quarter revenues to range between $12.1 billion and $12.3 billion, with non-GAAP earnings expected to be between 84 and 86 cents per share. This forecast is set against a backdrop of challenging macroeconomic conditions and excess inventory issues within Cisco's customer base in the networking domain. The company's guidance reflects a cautious outlook, likely influenced by heightened scrutiny of deals by customers and delays in product deliveries.

Despite the challenging environment, Cisco has a track record of exceeding expectations. The company has outperformed the Zacks Consensus Estimate in all of the trailing four quarters, with an average earnings surprise of 5.50%. However, the anticipated fiscal third-quarter results are expected to reflect the impact of a cautious economic environment. This includes the potential effects of a slowdown in customer spending and logistical challenges, which could influence the company's performance.

The significance of changes in earnings estimates is crucial for investors to consider. The consensus earnings per share (EPS) estimate for Cisco has been revised downward by 1.5% over the past 30 days, indicating a reevaluation of initial projections by analysts. This adjustment, along with the projected 17% decrease in earnings per share from the same period last year and a 14.4% decline in revenue year over year, highlights the analysts' cautious stance on Cisco's upcoming financial performance.

Cisco's financial health and market valuation are also key factors for investors. The company exhibits a price-to-earnings (P/E) ratio of approximately 14.69, suggesting a moderate valuation relative to its earnings. Additionally, the price-to-sales (P/S) ratio stands at about 3.44, and the enterprise value-to-sales (EV/Sales) ratio is roughly 3.42, indicating the market's valuation of the company in relation to its sales revenue. These metrics, along with Cisco's conservative use of debt and healthy balance between assets and liabilities, provide a comprehensive view of the company's financial stability and market position ahead of its earnings announcement.

Cisco Systems Earns an Upgrade at BofA Securities

BofA Securities upgraded Cisco Systems (NASDAQ:CSCO) to Buy from Neutral, raising their price target to $60 from $55 per share. They outlined three primary growth drivers for Cisco, emphasizing the potential in Splunk, Security, and artificial intelligence to counterbalance weaknesses in networking. Analysts predict that networking will normalize, projecting growth spurred by Cisco's market share gains in Ethernet-based AI infrastructure expansions by major cloud service providers.

The bank also anticipates an acceleration in Cisco's security segment, supported by stabilization in firewall performance and recent product launches. They further noted the positive growth synergies expected from the acquisition of Splunk.

While acknowledging that Cisco may face challenges in the upcoming quarters, Bank of America believes these pressures are already accounted for in current market expectations and that Cisco's guidance remains conservatively realistic. The bank views the current setup for Cisco's stock as favorable, with improved fundamentals likely to drive growth moving forward.

Cisco Systems Announces Dividend - A Sign of Financial Strength

Cisco Systems, Inc. Announces Dividend, Signaling Strong Financial Health

On April 3, 2024, Cisco Systems, Inc. (CSCO) announced a dividend of $0.4 per share, marking a significant event for investors and shareholders. This announcement came after the company declared the dividend on February 14, 2024, setting the record date for April 3, 2024, and scheduling the payment for April 24, 2024. This move by Cisco highlights its commitment to returning value to its shareholders and underscores the company's financial health and confidence in its future prospects.

Cisco Systems, Inc. (CSCO) has been a focal point for investors, drawing significant attention as one of the most searched-for stocks on Zacks.com. This heightened interest comes in the wake of Cisco's shares experiencing a modest increase of 1.9% over the past month. Although this growth is competitive, it slightly lags behind the Zacks S&P 500 composite's growth of 2.2% and the 3.4% gain in the Zacks Computer - Networking industry. This performance sets the stage for a closer examination of Cisco's future direction, especially in light of the recent dividend announcement.

The company's financial metrics provide a deeper insight into its valuation and financial health. With a price-to-earnings (P/E) ratio of approximately 14.74 for the trailing twelve months (TTM), Cisco presents a moderate valuation relative to its earnings. The price-to-sales (P/S) ratio of about 3.46 TTM suggests that the market values each dollar of Cisco's sales at over three times, indicating a solid market valuation. Additionally, the enterprise value to sales (EV/Sales) ratio close to 3.43 TTM and the enterprise value to operating cash flow (EV/OCF) ratio of around 13.66 TTM highlight the company's efficiency in generating cash flow relative to its valuation.

Moreover, Cisco's recent product launches, including the Board Pro G2 and the Desk Phone 9800 Series, demonstrate the company's strategic focus on enhancing its position in the hybrid workplace market. These products, designed to meet the evolving needs of today's workforce, underscore Cisco's commitment to facilitating seamless collaboration in hybrid work environments. This move not only strengthens Cisco's product portfolio but also aligns with the company's growth strategy in a rapidly changing work landscape.

In conclusion, Cisco Systems, Inc. (CSCO) stands at a pivotal point, with its recent dividend announcement reflecting a strong financial position and commitment to shareholder value. The company's performance, product innovation, and financial metrics paint a comprehensive picture of its current standing and future prospects. As Cisco continues to navigate the challenges and opportunities ahead, investors and stakeholders will be keenly watching its progress and the potential impact on its stock performance.

Cisco Drops 3% on Guidance Cut

Cisco Systems (NASDAQ:CSCO) announced on Wednesday a reduction in its full-year forecast and provided weaker guidance for the current quarter, alongside revealing a restructuring plan that includes eliminating 5% of its global workforce. As a consequence, the company’s shares dropped more than 3% pre-market on Thursday.

The revised full-year outlook now anticipates adjusted earnings per share (EPS) between $3.68 and $3.74, with revenue projections between $51.5 billion and $52.5 billion. This adjustment is a downturn from previous forecasts, which expected an adjusted EPS between $3.87 and $3.93 on revenue ranging from $53.8 billion to $55.0 billion.

For fiscal Q2, Cisco reported an adjusted EPS of $0.87 on revenue of $12.8 billion, slightly above the expectations of analysts, who had predicted an EPS of $0.84 on revenue of $12.71 billion.

The company saw a 9% year-over-year decline in product revenue, which constitutes the majority of its total revenue, while service revenue experienced a 4% increase.

For the upcoming fiscal Q3, Cisco is forecasting an adjusted EPS between $0.84 and $0.86, with revenue expected to be in the range of $12.1 billion to $12.3 billion. These figures fall short of analyst expectations, which were set at an EPS of $0.91 and revenue of $13.13 billion.

Cisco Shares Plunge 11% on Annual Guidance Cut

Cisco (NASDAQ:CSCO) announced a reduction in its annual forecast on Wednesday, despite reporting fiscal first-quarter results that exceeded expectations. This adjustment comes in the wake of indications that demand for new orders of network hardware is decelerating. The company's shares experienced a significant of more than 11% intra-day today.

Despite expectations of order growth resuming in the second half of the year, the California-based firm has revised its full-year 2024 guidance. Cisco now projects adjusted earnings per share (EPS) to be between $3.87 and $3.93, with revenue forecasts ranging from $53.8 billion to $55.0 billion. This updated guidance contrasts with the previous forecast, which predicted per-share earnings of $4.01 to $4.08 and revenue between $57 billion and $58.2 billion.

The company attributes the slowdown in new product orders to customers currently prioritizing the installation and implementation of products, following a period of exceptionally strong product delivery in the past three quarters. For the first quarter, Cisco reported an adjusted EPS of $1.11 on revenue of $14.7 billion, surpassing the analysts' expectations of $1.03 in EPS and $14.62 billion in revenue.