Cisco Systems Inc. is set to release its earnings report after the closing bell on Wednesday. While the company is expected to report an increase in revenue, much of that growth is projected to come from equipment sales rather than software sales.

Analyst Projections

Analysts anticipate that improvements in Cisco's supply chain will help drive product inventory, leading to an 8% increase in annual recurring revenue (ARR) from the previous year. ARR, a commonly used metric for software-as-a-service companies, reflects the expected revenue based on subscriptions. For Cisco, ARR is expected to reach $24.51 billion, bolstered by software sales.

According to a FactSet survey, analysts have provided the following estimates for Cisco's fiscal fourth-quarter earnings:

  • Earnings per share (EPS) of $1.06
  • Revenue of $15.05 billion

Compared to the previous year, revenue is projected to grow by 15%. Additionally, analysts expect the following increases in specific revenue segments:

  • Product revenue: Over 18% increase to $11.49 billion
  • Secure, Agile Networks revenue: 27% increase to $7.74 billion
  • Internet for the Future revenue: 13.5% increase to $1.43 billion
  • End-to-End Security revenue: 3% increase to $1.01 billion

Service revenue is also expected to rise by 3.5% to $3.53 billion.

Future Outlook

Looking ahead, Wall Street analysts have provided the following average estimates for Cisco's fiscal first-quarter earnings and full-year performance:

  • Q1 EPS: $1.00
  • Q1 revenue: $14.63 billion
  • Full-year EPS: $4.05
  • Full-year revenue: $58.38 billion

Analyst Recommendations

Out of the 27 analysts covering Cisco, 11 have given buy-grade ratings, 15 have hold ratings, and one has a sell rating. The average target price for Cisco's stock is $55.84.

Stock Performance

Year to date, Cisco shares have gained over 12%, outperforming the Dow Jones Industrial Average (DJIA) which has risen by nearly 6%. In comparison, the S&P 500 index (SPX) has seen a 16% increase, while the tech-heavy Nasdaq Composite (COMP) has rallied by 31% over the same period.

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