Cisco Systems Inc. (Nasdaq: CSCO) reported better-than-anticipated fiscal 2024 fourth-quarter results. However, the company’s top line reflected a decline for the third successive quarter, paving the way for the first annual revenue decline in four years. The networking giant also revealed details of its restructuring plan, which involved laying off 7% of its employees worldwide.
The company similarly issued better-than-anticipated guidance for the current quarter (1Q 2025). The stock of Cisco ended Thursday’s trading session at $48.53, up 3.09%, or $680, from the previous close.
The company based in San Jose, California, reported fourth-quarter revenues totaling $13.64 billion, a decrease of 10% from $15.20 billion in the similar quarter of fiscal 2023.
For the fourth quarter, which ended on July 27, 2024, Cisco recorded net income of $2.16 billion, or $0.54 per share, down 45% from $3.96 billion, or $0.97 per share, in the quarter that ended on July 29, 2023.
Excluding share-based compensation expense, amortization of acquisition-related intangible assets, and acquisition-related/divestiture costs, among others, Cisco posted 4Q 2024 non-GAAP net income of $3.53 billion, or $0.87 per share, compared with $4.68 billion, or $1.14 per share in 4Q 2023.
Analysts polled by LSEG expected Cisco to report earnings of $0.87 per share on revenues of $13.54 billion.
Commenting on the quarterly results, Chuck Robbins, chair and CEO of Cisco, stated “We delivered a strong close to fiscal 2024. In our fourth quarter, we saw steady customer demand with order growth across the business as customers rely on Cisco to connect and protect all aspects of their organizations in the era of AI.”
Segment wise:
- Product revenues fell by 15.40% y-o-y to $9.86 billion.
- Services revenues were $3.78 billion, an increase of 6.40% from last year.
Based on the nature of business:
- Networking revenues were $6.80 billion, a decrease of 28% on a y-o-y basis.
- Security revenues surged 81% y-o-y to $1.79 billion. Specifically, Splunk, which was acquired for $28 billion in March, contributed revenues of $960 million.
- Collaboration revenues were $1.02 billion, almost unchanged from last year.
- Observability revenues were $248 million, up 41% from 4Q 2023.
Looking ahead, Cisco forecasts fiscal 2025 first-quarter revenues in the range of $13.65 billion to $13.85 billion. The company also expects Q1 non-GAAP earnings of between $0.86 and $0.88 per share. Analysts anticipate Cisco to report earnings of $0.85 per share on revenues of $13.74 billion.
Cisco announced in an SEC filing that it is initiating a restructuring plan projected to incur $1 billion in pretax costs. This initiative aims to enable investment in major growth areas and enhance business efficiencies. The enterprise indicated that $700 million to $800 million of these costs would be realized in the first quarter, with the remainder to be accounted for throughout fiscal 2025.
Cisco Systems plans to reduce its workforce by 7%, marking its second bout of workforce reduction this year. This move aligns with the company’s strategic shift towards swiftly growing sectors in technology, including artificial intelligence and cybersecurity. While the exact number of positions affected was not disclosed, Cisco had 84,900 staff as of July 2023, suggesting approximately 5,900 jobs would be eliminated.
This announcement follows a significant layoff earlier this year when Cisco reduced its workforce by 5%, equating to more than 4,000 jobs, as part of its February restructuring.
The quarterly earnings beat, restructuring plan, and upbeat Q1 outlook are expected to keep Cisco’s stock slightly bullish in the short term.
The historical price chart indicates that the stock of Cisco has broken the resistance at $47. The next major resistance is anticipated to be only near $52. Additionally, the stock is trading above its 50-day moving average, while the MACD indicator is showing a positive reading. Therefore, we anticipate Cisco’s stock to remain in an uptrend for the next few trading sessions.
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