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Will Security & Applications Aid Cisco's (CSCO) Q2 Earnings?

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Cisco Systems, Inc. CSCO is set to report second-quarter fiscal 2020 results on Feb 12.

The company’s results are likely to reflect robust adoption of its security solutions amid weakness in service provider domain.

Click here to know how Cisco’s overall second-quarter performance is expected to be.

Strength in Security Solutions: A Key Catalyst

Strong demand witnessed by web security, unified threat, network security and advanced threat solutions in the fiscal first quarter is likely to have continued in second-quarter 2020, primarily driven by growing security headwinds faced by enterprises globally.

The company’s expanded family of cloud security solutions that helps in securing identity, endpoints and the network is expected to have expanded customer base in the fiscal second quarter.

The Zacks Consensus Estimate for Security is pegged at $733 million, indicating an improvement of 11.4% from the figure reported in the year-ago quarter.

Cisco Systems, Inc. Revenue (Quarterly)


Cisco Systems, Inc. Revenue (Quarterly)

Cisco Systems, Inc. revenue-quarterly | Cisco Systems, Inc. Quote

Robust Webex Portfolio Deserves a Special Mention

The Applications segment’s fiscal second-quarter top line is expected to have benefited from high demand for enterprise collaboration offerings including Webex Meetings, Webex Devices and Webex Teams, among others.

Cisco is integrating AI and ML capabilities into enterprise collaboration solutions aimed at increasing productivity of users, and improving engagement. In fact, with Voicea acquisition, the company is well poised to enhance Webex portfolio with AI-based voice-recognition and transcription capabilities.

These initiatives are expected to have bolstered adoption of Webex services in the to-be-reported quarter amid stiff competitive in the enterprise communication market from Microsoft’s MSFT Teams and Slack (WORK - Free Report) .

The Zacks Consensus Estimate for Applications revenues is pegged at $1.42 billion, suggesting a decline of 2.9% from the year-ago reported figure.

Other Factors to Consider

Growing clout of the company’s Meraki solutions, campus switches including Cat9K and Nexus 9K, and HyperFlex data-center offering, are likely to have benefited Infrastructure Platforms segment’s performance.

The Zacks Consensus Estimate for Infrastructure Platforms revenues is pegged at $6.62 billion, suggesting a decline of 7.1% from the year-ago reported figure.

Markedly, during the quarter under review, the company announced plans to acquire Exablaze to enhance Nexus switching portfolio with advanced FPGA capabilities.

Moreover, in a bid to strengthen its network hardware business, the company rolled out Cisco Silicon One Q100 networking chip in the quarter under review. The new Silicon One Q100 networking processor functions as both switch and routing chip. It is enabled to transfer data at a faster rate and can be programmed as required.

Notably, Cisco’s new Silicon One Q100 has been already gaining traction among prominent companies with significant data center operations including Microsoft, and Facebook. This is likely to have positively impacted the fiscal second-quarter performance. Management is anticipated to divulge more details on the latest product’s business prospects in the upcoming earnings conference.

Nevertheless, increasing investments on product enhancements and acquisitions, amid stiff competition from Arista ANET and Juniper in networking infrastructure market is likely to have limited margin expansion in the fiscal second quarter.

Zacks Rank

Cisco currently has a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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