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Mayank Marwah
Mayank Marwah
Articles (992) 

What's Behind Cisco's Splendid 1st-Quarter Performance?

Strong security and services revenue boosted results

Cisco Systems (NASDAQ:CSCO) released its earnings for its first quarter of fiscal 2021 on Nov. 12 after the market closed. Earnings and revenue beat estimates thanks to strong security and services revenue.

The key numbers

The U.S. multinational technology conglomerate posted adjusted earnings per share of 76 cents, down from 84 cents reported the year before. Wall Street had predicted EPS of 70 cents.

Revenue of $11.93 billion was down 9% on a year-over-year basis but beat analyst expectations of $11.85 billion.

CEO and Chairman Chuck Robbins said:

"Cisco is off to a solid start in fiscal 2021 and we are encouraged by the signs of improvement in our business as we continue to navigate the pandemic and other macro uncertainties. Our focus is on winning with a differentiated innovative portfolio, long-term growth and being a trusted technology partner offering choice and flexibility to our customers. We see many great opportunities ahead as every company in every industry is accelerating its digital-first strategy."

Segment results

Infrastructure Platforms, which consists of core networking offerings such as switching, NGN routing, wireless and data centre, generated revenue of $6.34 billion in the first quarter. This was a decline of 16% over the past year. Analysts projected revenue of $6.45 billion for the segment.

The application segment, which consists of inter alia (the WebEx video calling service), recorded revenue of $1.38 billion, which represented a decline of 8% from the same quarter last year. This was also below analysts' expectations of $1.40 billion. The decline was mitigated thanks to robust use of Webex video conferencing as well as business efficiency efforts amid the pandemic.

Security revenue of $861 million was up 6% in the reported quarter. This was due to strong demand for identity and access management and unified threat management solutions. Services revenue improved 2% year-over-year to $3.34 billion.

Revenue tumbled 56% to $5 million for other products, which include service provider video, cloud and system management and emerging technology.

Partnerships and acquisitions

Cisco and Microsoft's (NASDAQ:MSFT) Azure virtual van integration with Office 365, together with strong collaboration with Amazon (NASDAQ:AMZN) web services, has helped Cisco in providing secured end-to-end connectivity and improved application performance. In addition, the company has also partnered with Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) Google Cloud. These partnerships are expected to help sell more SD-Wan solutions, given that the customers are moving more applications to the cloud.

In April, the company announced its intension of expanding its Industrial Internet of Things (IoT) portfolio by acquiring Fluidmesh Network, which is a global leader in wireless systems for security, industrial and business-critical operations. In July, the company completed the acquisition. The acquisition will help Cisco cater to the budding demand for IoT-based solutions in the market.

Company appoints new CFO

Cisco appointed Scott Herren as the new chief financial officer. He had served Autodesk (NASDAQ:ADSK) as CFO and executive vice president since Nov. 2019. He will replace retiring Kelly Kramer who had served nine years with Cisco.


Cisco has provided guidance for the fiscal second quarter. The company projects adjusted EPS to fall within the range of 74 cents to 76 cents. Revenue is expected to decline in the 0% to 2% range.

Disclosure: I do not hold any positions in the stocks mentioned.

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About the author:

Mayank Marwah
A seasoned writer with keen interest in the automotive, technology, telecommunication, retail and aerospace sectors.

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