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The company anticipates third-quarter fiscal 2024 revenues to be between $12.1 billion and $12.3 billion. Non-GAAP earnings are expected between 84 and 86 cents per share.
The Zacks Consensus Estimate for revenues is pegged at $12.47 billion, indicating a decline of 14.4% from the year-ago quarter’s reported figure.
The consensus mark for earnings has decreased by a couple of cents in the past 30 days to 83 cents per share.
CSCO’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 5.50%.
However, fiscal third-quarter results are expected to have suffered from challenges associated with a cautious economic environment, including heightened scrutiny of deals by customers, delayed product deployments and reduced overall demand.
These factors are expected to have been more than enough to fully offset strong momentum across software subscriptions and CSCO’s solid stream of annual recurring revenues.
Year to date, Cisco shares have declined 4.9%, underperforming the Zacks Computer & Technology sector’s growth of 12.3%. We believe it would be prudent for investors to have a cautious approach toward Cisco, given the near-term challenges.
Sluggish Demand Hurts Prospect
Cisco’s near-term prospects suffer from a sluggish demand environment with ongoing weakness at enterprise, as well as service providers and cloud end-markets. Inventory destocking at customers in its core networking domain is expected to continue over the next couple of quarters (at least through the end of Cisco’s fiscal 2024), thereby hurting top-line growth.
Cisco now expects both service providers, including telecommunication and cable service providers, to start reinvesting in fiscal 2025 instead of the previous expectation of the second half of fiscal 2024. Moreover, it has witnessed sluggish demand in certain countries of the APJC and Europe. Both these factors are expected to hurt top-line growth in the near term.
The Zacks Consensus Estimate for fiscal third-quarter Networking revenues is currently pegged at $6.57 billion, suggesting a 13% year-over-year decline.
Cisco’s prospects are further challenged in the AI-driven networking space due to stiffening competition aggravated by Hewlett Packard’s (HPE - Free Report) deal to acquire Juniper for roughly $14 billion.
Hewlett Packard’s multi-billion-dollar investment plan across expanding networking capabilities is noteworthy. It has linked AI, Industrial Internet of Things, and distributed computing with its fast-growing networking business arm, Aruba Networks.
Although the increase in AI-related workload presents a strong long-term opportunity for Cisco, HPE’s expanding footprint, thanks to the Juniper acquisition, is noteworthy for investors.
These negative factors keep us on the sidelines. However, we acknowledge that Cisco’s long-term growth trajectory benefits from an expanding partner base that now includes NVIDIA (NVDA - Free Report) , a strong security portfolio and acquisitions, including Splunk and Isovalent.
Security portfolio expansion with solutions like XDR, Secure Access and Multicloud Defense suites are winning customers. Innovative product pipeline is a key catalyst for this segment.
In fact, Cisco is expected to witness growth in the Security business thanks to its portfolio strength in the fiscal third quarter. The Zacks Consensus Estimate for Security revenues is currently pegged at $1.03 billion, indicating 7.8% year-over-year growth.
Cisco’s partnership with NVIDIA is expected to boost its footprint in the AI space. The partnership combines Cisco’s expertise in Ethernet networking with NVIDIA’s GPU technology. It aims to provide enterprises with easily deployable and manageable solutions for the evolving AI landscape.
Although these positive factors present a solid investment opportunity, we believe investors should refrain from making any bets on Cisco in the current environment. Instead, a wait-and-see approach is advisable.
What Our Model Says
Per the Zacks model, 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. But that’s not the case here.
Cisco has an Earnings ESP of -3.28% and currently carries a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
A Stock to Consider
Here is a company you may want to consider, as our model shows that it has the right combination of elements to post an earnings beat in its upcoming release:
Image: Bigstock
Should You Stay Away From Cisco (CSCO) Ahead of Q3 Earnings?
Cisco Systems (CSCO - Free Report) is set to release its third-quarter fiscal 2024 results on May 15.
The company anticipates third-quarter fiscal 2024 revenues to be between $12.1 billion and $12.3 billion. Non-GAAP earnings are expected between 84 and 86 cents per share.
The Zacks Consensus Estimate for revenues is pegged at $12.47 billion, indicating a decline of 14.4% from the year-ago quarter’s reported figure.
The consensus mark for earnings has decreased by a couple of cents in the past 30 days to 83 cents per share.
CSCO’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 5.50%.
Cisco Systems, Inc. Price and EPS Surprise
Cisco Systems, Inc. price-eps-surprise | Cisco Systems, Inc. Quote
However, fiscal third-quarter results are expected to have suffered from challenges associated with a cautious economic environment, including heightened scrutiny of deals by customers, delayed product deployments and reduced overall demand.
These factors are expected to have been more than enough to fully offset strong momentum across software subscriptions and CSCO’s solid stream of annual recurring revenues.
Year to date, Cisco shares have declined 4.9%, underperforming the Zacks Computer & Technology sector’s growth of 12.3%. We believe it would be prudent for investors to have a cautious approach toward Cisco, given the near-term challenges.
Sluggish Demand Hurts Prospect
Cisco’s near-term prospects suffer from a sluggish demand environment with ongoing weakness at enterprise, as well as service providers and cloud end-markets. Inventory destocking at customers in its core networking domain is expected to continue over the next couple of quarters (at least through the end of Cisco’s fiscal 2024), thereby hurting top-line growth.
Cisco now expects both service providers, including telecommunication and cable service providers, to start reinvesting in fiscal 2025 instead of the previous expectation of the second half of fiscal 2024. Moreover, it has witnessed sluggish demand in certain countries of the APJC and Europe. Both these factors are expected to hurt top-line growth in the near term.
The Zacks Consensus Estimate for fiscal third-quarter Networking revenues is currently pegged at $6.57 billion, suggesting a 13% year-over-year decline.
Cisco’s prospects are further challenged in the AI-driven networking space due to stiffening competition aggravated by Hewlett Packard’s (HPE - Free Report) deal to acquire Juniper for roughly $14 billion.
Hewlett Packard’s multi-billion-dollar investment plan across expanding networking capabilities is noteworthy. It has linked AI, Industrial Internet of Things, and distributed computing with its fast-growing networking business arm, Aruba Networks.
Although the increase in AI-related workload presents a strong long-term opportunity for Cisco, HPE’s expanding footprint, thanks to the Juniper acquisition, is noteworthy for investors.
These negative factors keep us on the sidelines. However, we acknowledge that Cisco’s long-term growth trajectory benefits from an expanding partner base that now includes NVIDIA (NVDA - Free Report) , a strong security portfolio and acquisitions, including Splunk and Isovalent.
Security portfolio expansion with solutions like XDR, Secure Access and Multicloud Defense suites are winning customers. Innovative product pipeline is a key catalyst for this segment.
In fact, Cisco is expected to witness growth in the Security business thanks to its portfolio strength in the fiscal third quarter. The Zacks Consensus Estimate for Security revenues is currently pegged at $1.03 billion, indicating 7.8% year-over-year growth.
Cisco’s partnership with NVIDIA is expected to boost its footprint in the AI space. The partnership combines Cisco’s expertise in Ethernet networking with NVIDIA’s GPU technology. It aims to provide enterprises with easily deployable and manageable solutions for the evolving AI landscape.
Although these positive factors present a solid investment opportunity, we believe investors should refrain from making any bets on Cisco in the current environment. Instead, a wait-and-see approach is advisable.
What Our Model Says
Per the Zacks model, 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. But that’s not the case here.
Cisco has an Earnings ESP of -3.28% and currently carries a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
A Stock to Consider
Here is a company you may want to consider, as our model shows that it has the right combination of elements to post an earnings beat in its upcoming release:
Snowflake (SNOW - Free Report) has an Earnings ESP of +6.25% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Snowflake is scheduled to release first-quarter fiscal 2025 results on May 22. SNOW’s shares have declined 21% in the year-to-date period.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.