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Here's How Cisco (CSCO) Looks Ahead of Q2 Earnings Release

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Cisco Systems, Inc. (CSCO - Free Report) is scheduled to release second-quarter fiscal 2021 results on Feb 9.

The company anticipates second-quarter fiscal 2021 revenues to improve in the range of 0-(2%) on a year-over-year basis. The Zacks Consensus Estimate for revenues is pegged at $11.92 billion, indicating a decline of 0.7% over the year-ago reported figure.

Non-GAAP earnings are anticipated between 74 cents and 76 cents per share. The Zacks Consensus Estimate for earnings stands at 76 cents per share, stable in the past 30 days. The figure suggests a decline of 1.3% from the prior-year quarter.

Cisco Systems, Inc. Price and EPS Surprise

Cisco Systems, Inc. Price and EPS Surprise

Cisco Systems, Inc. price-eps-surprise | Cisco Systems, Inc. Quote

Factors to Note

Cisco’s fiscal second-quarter results are likely to reflect solid momentum in web security, unified threat, and network security and advanced threat offerings, courtesy of spending on cybersecurity as employees work remotely and surge in Internet traffic.

Moreover, solid uptick in cloud-based solutions, including Duo and Umbrella, bodes well. The company’s differentiated end-to-end approach across the network, cloud and endpoints is expected to have helped it expand clientele.

Likewise, robust implementation of latest SecureX offering — a comprehensive cloud-based security platform — to strengthen enterprise security infrastructure with unified visibility, automation and security capabilities across network endpoints, applications, and the cloud, might have contributed to the to-be-reported quarter’s performance.

Meanwhile, incremental adoption of Secure Remote Worker, which leverages Zero Trust Architecture, combined with robust endpoint security portfolio of AnyConnect, Umbrella, Duo and AMP for Endpoints, may have favored the top line in the quarter under review.

Besides, growing clout of Webex Meetings, Webex Devices and Webex Teams, triggered by coronavirus crisis induced work-from-home wave and demand for telehealth services is expected to have contributed to the fiscal second-quarter performance. Moreover, the transformation of free trials into paid subscriptions might have acted as a tailwind.

Further, the company updates its Webex portfolio on a monthly basis to aid users enhance productivity with advancements in video conferencing. During the quarter under review, Cisco announced the acquisition of Slido s.r.o. for an undisclosed amount to augment Webex experience.

Also, integration of advanced AI and ML (or machine learning) capabilities is expected to have bolstered engagement and driven adoption. This, in turn, may get reflected in the to-be-reported quarter’s results.

Moreover, the company is expected to have gained from the roll out of Wide Area Networking (WAN) edge platform to enable organizations to swiftly migrate to cloud. Notably, the WAN edge platform will provide improved connectivity for cloud and edge applications, and datacenter applications.

Furthermore, strength in company’s Catalyst 9000 switch solutions might have driven growth in infrastructure domain. Accelerated deployment of 5G and growing adoption of Wi-Fi 6 compliant devices may have bolstered demand for Meraki solutions in the quarter to be reported.

However, increasing investments on portfolio expansion, product enhancements and acquisitions amid stiff competition from Arista (ANET - Free Report) and Juniper in networking infrastructure market may have impeded margin expansion in the fiscal second quarter.

Notably, non-GAAP gross margin is expected to be 64-65%, while the reported figure in fiscal first quarter was 65.8%.

Further, decline in IT spending and coronavirus pandemic induced broader macroeconomic weakness across small and medium sized businesses might have weighed on the fiscal second-quarter top-line performance.

Key Acquisition Deals in Q2

During the fiscal second quarter, Cisco announced its intent to acquire Dashbase, which is an enterprise software provider. Dashbase technology will be combined with its AppDynamics platform to ramp up digital acceleration for customers.

The company also disclosed its plans to acquire U.K.-based IMImobile PLC, in a deal worth $730 million, to boost its Customer Experience as a Service (CXaaS) offerings.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Cisco this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Cisco has an Earnings ESP of +2.90% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks that Warrant a Look

Here are some other stocks worth considering as our proven model shows that these too have the right combination of elements to beat on earnings this season.

Take Two interactive (TTWO - Free Report) currently has an Earnings ESP of +16.11% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

CDW Corporation (CDW - Free Report) has an Earnings ESP of +6.74% and a Zacks Rank of 2 currently.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

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