Shares in Cisco Systems fell after the computer networking giant reported fiscal second-quarter earnings and revenue that fell from a year earlier but topped consensus estimates as product orders fell again. The company's guidance for CSCO stock in the current April-ending quarter missed expectations.
The company reported financial results after the market close on Wednesday. Cisco earnings fell 1% from a year earlier to 87 cents on an adjusted basis. Revenue fell 6% to $12.8 billion. Analysts estimated that Cisco would earn 84 cents on revenue of $12.71 billion, according to FactSet.
On the stock market today, Cisco stock fell more than 2% to 48.84 in early trading. The company plans to slash 5% of its workforce, roughly 4,200 jobs, in another round of cost-cutting.
"Cisco delivered a solid fiscal Q2 but forward guidance was lowered for the second consecutive quarter," said Barclays analyst Tim Long in a report.
"Fiscal Q2 product orders were down 12% year-over-year, above our estimate of a 17% decline and an improvement from the down 20% in the prior quarter. Service provider (telecom) and cloud orders fell 40% for the second quarter in a row as the demand market remains weak while customers digest inventory."
Heading into the Cisco earnings report, Wall Street analysts expected weakness in the "enterprise" market — corporate and government sales.
CSCO Stock: Revenue Outlook Light
For the April quarter of fiscal 2024, Cisco forecasts earnings of 85 cents at the midpoint of guidance vs. analyst estimates of 92 cents.
In addition, Cisco says it expects sales of $12.2 billion at the midpoint of its outlook. Analysts predicted that sales will fall 3.7% to $13.09 billion.
While Cisco has increased revenue from software and services, it still garners over two-thirds of revenue from computer networking gear, mainly switches and routers. While the enterprise market has weakened, Cisco's telecom customers also are spending less.
Analysts expect some upside in 2025 from cloud-computing giants hiking investments in artificial-intelligence infrastructure.
Cisco Stock: Splunk Deal
Heading into the Cisco earnings report, the company owned a weak Relative Strength Rating of 30 out of a best-possible 99, according to IBD Stock Checkup.
CSCO stock had retreated 2% in 2024, prior to Thursday's sell-off. Over the past year, CSCO stock has gained 3%.
In September, Cisco agreed to buy software company Splunk for $28 billion in cash. The Splunk deal is expected to close in nine to 12 months. With roots in data analytics software, Splunk has expanded into cybersecurity.
Follow Reinhardt Krause on X, formerly called Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
