Cisco Systems (NASDAQ: $CSCO) plans to release its Q4 earnings results on August 14, 2024, after markets close. During the earnings, the company is expected to announce a new round of layoffs.
Cisco Systems’ Transformation
A dominant player in the network equipment market, it has transformed its business into a subscription-based model for revenue growth. It is currently working to capitalize on the AI infrastructure sector.
Headwinds in 2024
In its third-quarter results, Cisco Systems reported a sharp decline in revenue. It blamed the decline on the delayed installation of purchased networking hardware. The company expects the weakness to continue into the fourth quarter results.
The company’s revenue dipped 13% to $12.7 billion in the third quarter, but it beat expectations. Net income fell 41% to $1.9 billion for an adjusted EPS of $0.88, a 12% decline, but beat Wall Street’s forecasts.
What To Expect
Analysts forecast that Cisco Systems will report an EPS of $0.85, a 21% YoY decline. Revenue is expected to drop 6.3% YoY to $13.54 billion, in line with the company’s forecast of $13.4-$13.6 billion.
Cisco’s revenue guidance includes up to $1 billion in revenue from Splunk, a software company it purchased at the start of 2024. In its third-quarter results, Cisco stated it was on track to generate around half of its revenue from subscriptions by next year.
It expects to generate around $1 billion in AI-related hardware orders by next year. At the start of 2024, the company partnered with Nvidia to build an integrated solution to help companies deploy AI applications easily via a combination of their hardware.
Cisco Lays Off Thousands of Employees
According to an exclusive Reuters report released on August 10, 2024, Cisco plans to lay off thousands of workers. It will be its second round of layoffs in 2024. According to Reuters, the number could be the same or slightly higher than the 4000 laid off in February 2024. The report stated that the layoffs would be announced during the fourth quarter results.
Cisco (CSCO) Stock Performance
CSCO stock has been trending downward for the past years. Recently, the stock fell to a nearly two-year low and has been below its 12-month average. The downward trend continued at the start of last week after the report on layoffs came out.
The stock has dipped 10.18% year to date and 15.79% over the past 12 months. As of Tuesday’s closing bell, its price of $45.37 is below its 50 DMA of $46.65 and the 200 DMA of $48.70.
Is Cisco Systems A Buy?
Analysts give CSCO stock a moderate buy consensus rating. They forecast an average share price of $54.60, a 21.71% upside. In the near term, CSCO stock is expected to remain depressed due to sluggish demand for networking hardware. However, the company’s growing portfolio in the cybersecurity world and its switch to a subscription-based model could have huge rewards in 2025 and beyond.
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