Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cisco Systems Inc (CSCO, Financial) delivered $13.8 billion in revenue for Q1, reaching the high end of their guidance range.
- Non-GAAP EPS of $0.91 exceeded expectations, driven by the highest non-GAAP gross margin in over 20 years.
- Product orders grew 20% year-over-year, with strong performance in the Americas and EMEA.
- Security orders more than doubled year-over-year, driven by advanced threat intelligence capabilities from Splunk.
- Cisco Systems Inc (CSCO) returned $3.6 billion to shareholders through share repurchases and cash dividends.
Negative Points
- Total revenue was down 6% year-over-year, primarily due to elevated backlog shipments in the previous year.
- Networking revenue declined by 23%, impacted by the elevated level of shipments from the prior year.
- Public sector orders were up only 2% year-over-year, with US Federal spending lower due to budgetary constraints.
- Collaboration revenue decreased by 3%, driven by declines in on-prem Webex suite and collaboration devices.
- The US Federal market faced delays due to continuing resolutions and fiscal responsibility discussions, impacting order growth.
Q & A Highlights
Q: Cloud orders grew significantly this quarter. What is driving this growth, and can you elaborate on the areas where Cisco participates in the cloud market?
A: Charles Robbins, CEO: The growth in cloud orders, particularly from web-scale customers, was driven by a broad range of products including routing, switching, and optical. Four of the six largest cloud players showed triple-digit growth. AI infrastructure orders were a significant part of this, but traditional cloud services also contributed. Our strategy to offer both silicon and systems is proving advantageous.
Q: How has the macroeconomic environment evolved, and is there any impact from the upcoming US elections on buying behavior?
A: Charles Robbins, CEO: The macro environment showed balanced strength globally, with the exception of US Federal, which was impacted by continuing resolution pressures. We haven't seen any election-related impacts on buying behavior yet. Scott Herren, CFO, added that delays in US Federal spending are expected to resolve once a budget is in place.
Q: Can you provide more details on the security segment's performance, particularly the impact of Splunk and organic growth?
A: Charles Robbins, CEO: Security orders doubled year-over-year, including Splunk. Organically, excluding US Federal, security orders grew in the mid- to high-teens. New products like XDR and Secure Access are gaining traction, with over 1,000 customers deploying them.
Q: What is driving the strong order growth in data center switching, and how does it relate to AI deployments?
A: Charles Robbins, CEO: The growth in data center switching is due to customers modernizing their infrastructure in preparation for AI. While some are already preparing for AI deployments, the majority of the build-out is still ahead. AI orders are expected to drive revenue more in the second half of the fiscal year.
Q: How is the partnership with NVIDIA progressing, and what is the status of the Splunk integration?
A: Charles Robbins, CEO: The NVIDIA partnership is still early, with new AI compute platforms announced. Splunk integration is progressing well, with hundreds of Cisco partners now trained on Splunk. Scott Herren, CFO, noted that Splunk is performing in line with expectations on revenue and ahead on profitability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
