Cisco (CSCO, Financial) experienced a decline in its stock price, falling modestly despite surpassing third-quarter expectations and providing a positive revenue outlook for the fourth quarter. This follows a challenging second quarter, where extended timelines for inventory deployment led to conservative future guidance. The recent quarter, however, showed signs of recovery with management indicating progress in inventory management and demand stabilization.
Despite the initial positive reaction from investors, Cisco's stock retreated from its initial gains. CEO Charles Robbins highlighted ongoing cautious spending by customers due to tight IT budgets, which has influenced Cisco’s conservative guidance in the past and continues to temper investor enthusiasm.
- Cisco reported an adjusted EPS of $0.88, outperforming its forecast range of $0.84-0.86, and revenues of $12.7 billion, exceeding the expected $12.1-12.3 billion. Year-over-year, revenues fell by 12.8%, but showed no sequential decline, marking a significant improvement.
- Product orders grew 2% year-over-year, driven by strong performances in data center and campus switching, as well as in the Security and Collaboration sectors. The $28 billion acquisition of Splunk contributed positively, though excluding this, orders were flat.
- The adoption of AI technology is promoting stability in the industry, with Cisco expecting to achieve $1.0 billion in AI product orders by FY25, supported by increased demand from major hyperscalers.
- For Q4, Cisco anticipates adjusted EPS between $0.84 and $0.86 and projects revenues between $13.4 and $13.6 billion. The company expects improvements in the U.S. public sector demand and stable to increasing win rates.
Ultimately, while Cisco has shown improvement from the previous quarter and demonstrated resilience in its operations, the broader economic conditions and cautious IT spending continue to influence investor sentiment.
