📉 Cisco: declining revenue but future potential with AI and security
Cisco Systems, Inc. is a California-based technology company that specializes in the design, manufacture, and sale of networking technology and software. The company is best known for its products in computer networking, security solutions, collaboration tools, and cloud infrastructure.
The company posted its fourth straight quarter of declining revenue, but its results announced last Wednesday beat analysts' estimates.
📊Highlights:
Earnings per share (adjusted): 91 cents (Expectations: 87 cents)
Revenue: $13.84 billion (Expectations: $13.77 billion)
Year-on-year revenue decline: by 6 % (from $14.7 billion to $13.84 billion)
Net profit: USD 2.71 billion (up from $3.64 billion a year ago)
Segment performance:
Network Services: The largest decline - by 23 % to $6.75 billion, slightly below expectations.
Security: The bright spot - an increase of 100 % to $2.02 billion, well above estimates.
Collaboration: US$1.09 billion, slightly above analysts' expectations.
CEO Chuck Robbins highlighted the growing role of AI on the earnings call : AI infrastructure orders reached USD 300 million in the last quarter alone. The goal is to surpass that by the end of the year. USD 1 billion by the end of the year. of orders for technology related to AI. Cisco is working with Nvidia on hardware for AI applications and expects massive deployment of these solutions in 2025. In particular, enterprises are now upgrading their data centre infrastructure to prepare for wider use of AI. This trend will play a key role in company growth Cisco in the coming years.
The company raised its full-year outlook:
Earnings per share: $3.60-$3.66 (vs. previous estimate of $3.52-$3.58)
Revenue: $55.3-56.3 billion (previous estimate: USD 55-56.2 billion)
This indicates an expected revenue growth of around 3,3 %
📈 Since the beginning of the year, Cisco stock is up more than 13%.
Cisco faces pressure in traditional segments like network services, but is also proving responsive to trends like AI or cybersecurity. The company has strong fundamentals, growing opportunities in AI and ample capital for acquisitions (e.g. the recent purchase of startups DeepFactor a Robust Intelligence).
Therefore Cisco an interesting player that combines stability and new growth opportunities.
What do you think about the future of Cisco? Does the company have the potential to grow again, or is it facing a more difficult period?