Cisco Systems Inc (CSCO, Financial) released its 8-K filing on February 14, 2024, detailing the financial performance for the second quarter of fiscal year 2024, which ended on January 27, 2024. Cisco, a global leader in networking equipment and software, cybersecurity, and collaboration products, reported a decrease in revenue and net income compared to the same quarter of the previous fiscal year. Despite the revenue dip, the company demonstrated strong operating leverage and increased its quarterly dividend, signaling confidence in its financial health and commitment to shareholder returns.
As the world's largest networking equipment provider, Cisco operates in a highly competitive and rapidly evolving industry. The company's performance is a bellwether for the hardware sector and its ability to maintain strong margins amidst challenges is crucial. Cisco's reported revenue of $12.8 billion represents a 6% decline from the previous year's $13.6 billion, reflecting a decrease in product revenue by 9%, partially offset by a 4% increase in service revenue. The decline in revenue was attributed to lower sales in the Networking segment, which decreased by 12%, while Security, Collaboration, and Observability segments saw growth.
The company's GAAP net income decreased by 5% to $2.6 billion, or $0.65 per share, from $2.8 billion, or $0.67 per share, in the prior year. Non-GAAP net income also saw a decrease of 3% to $3.5 billion, or $0.87 per share, from $3.6 billion, or $0.88 per share. Despite these declines, Cisco's gross margins improved, with GAAP total gross margin increasing to 64.2% from 62.0%, and non-GAAP total gross margin rising to 66.7% from 63.9%. This improvement in gross margin is significant as it indicates Cisco's ability to manage costs and maintain profitability in a challenging sales environment.
Operating expenses on a GAAP basis remained flat at $5.1 billion, while non-GAAP operating expenses increased slightly by 1% to $4.3 billion. The company's operating income on a GAAP basis decreased by 6% to $3.1 billion, with a GAAP operating margin of 24.2%. Non-GAAP operating income decreased by 4% to $4.2 billion, with a non-GAAP operating margin of 33.0%. Cisco's cash flow from operating activities showed a significant decrease of 83% to $0.8 billion, compared to $4.7 billion in the same quarter of the previous fiscal year.
Despite the decrease in some financial metrics, Cisco increased its quarterly dividend to $0.40 per common share, up from $0.39 in the previous quarter, demonstrating its commitment to returning value to shareholders. The company also continued its stock repurchase program, buying back approximately 25 million shares at an average price of $49.54 per share for a total of $1.3 billion.
Looking ahead, Cisco provided guidance for the third quarter of fiscal 2024, expecting revenue between $12.1 billion and $12.3 billion, with non-GAAP EPS between $0.84 and $0.86. For the full fiscal year 2024, the company anticipates revenue between $51.5 billion and $52.5 billion, with non-GAAP EPS ranging from $3.68 to $3.74.
Overall, Cisco's second-quarter results reflect the company's resilience in a challenging market. The ability to maintain strong margins and increase dividends in the face of declining revenue and net income is a testament to Cisco's operational strength and strategic focus on long-term growth opportunities.
Explore the complete 8-K earnings release (here) from Cisco Systems Inc for further details.
