Cisco reports better-than-expected results even as revenue suffers steepest drop in 15 years

Chuck Robbins, chief executive officer of Cisco, participates in a Bloomberg interview at the World Economic Forum in Davos, Switzerland, on Jan. 17, 2024.

Stefan Wermuth | Bloomberg | Getty Images

Cisco reported earnings and revenue for the fiscal third quarter that topped Wall Street’s estimates, even with sales dropping from a year earlier. The stock rose as much as 8% in extended trading.

Here’s how the company did in comparison with LSEG consensus:

Earnings per share: 88 cents adjusted vs. 82 cents expectedRevenue: $12.7 billion vs. $12.53 billion expected

Cisco’s revenue declined by about 13% year over year in the quarter, which ended on April 27, according to a statement. That’s the steepest slide since 2009. Net income fell 41% to $1.89 billion, or 46 cents per share, from $3.21 billion, or 78 cents per share, a year earlier.

The weakening performance stems from clients setting up the equipment they received in recent quarters, according to the statement. Cisco offered similar commentary in its previous earnings report.

“We currently expect customers to complete the installation of the majority of their inventory by the end of our fiscal year in July,” Cisco CEO Chuck Robbins said on a conference call with analysts. He said he was happy Cisco is approaching the end of supply chain challenges it has faced for years.

Cisco’s public sector business was weaker in the U.S. than in other regions.

“We believe this has since cleared with the subsequent signing of the most recent U.S. federal government funding,” Robbins said.

Networking revenue, at $6.52 billion, slipped 27%. The category, which includes data center switches, continues to represent a majority of overall revenue.

During the quarter, Cisco completed its $28 billion acquisition of security software maker Splunk. The deal lowered Cisco’s adjusted earnings per share by a penny but provided $413 million in additional revenue.

“Upon closing the deal, we identified 5,000 existing Cisco customers who have the potential to become meaningful Splunk customers and our sales teams are already making those connections,” Robbins said. Cisco will be able to reduce costs over time, finance chief Scott Herren said.

Cisco bumped up its fiscal 2024 revenue guidance to a range of $53.6 billion to $53.8 billion, from $51.5 billion to $52.5 billion in February. Analysts polled by LSEG had expected $53.14 billion.

The company narrowed its full-year adjusted earnings forecast. It’s now $3.69 to $3.71, compared with $3.68 to $3.74 in February. The LSEG consensus was $3.67.

Herren called for fiscal 2025 revenue growth in the low- to mid-single digits.

Prior to Wednesday’s announcement, shares were down 2% in 2024, while the S&P 500 index was up 11%.

Cisco said Gary Steele, who had been Splunk’s CEO, is becoming the parent company’s president of go to market, effective immediately. Jeff Sharritts, Cisco’s chief customer and partner officer, will leave.

WATCH: Cisco CEO Chuck Robbins: $28 billion Splunk deal will be a significant financial growth driver