- Revenue (Q4): $13.6 billion, above the high end of guidance range.
- Revenue (Fiscal Year 2024): $53.8 billion.
- Gross Margin (Q4): 67.9%, up 200 basis points year over year.
- Gross Margin (Fiscal Year 2024): 67.5%, highest in 20 years.
- Non-GAAP Net Income (Q4): $3.5 billion.
- Non-GAAP Earnings Per Share (Q4): $0.87, above the high end of guidance range.
- Non-GAAP Earnings Per Share (Fiscal Year 2024): $3.73.
- Operating Cash Flow (Q4): $3.7 billion.
- Operating Cash Flow (Fiscal Year 2024): $10.9 billion.
- Product Revenue (Q4): $9.9 billion, down 15% year over year.
- Services Revenue (Q4): $3.8 billion, up 6% year over year.
- Annualized Recurring Revenue (ARR): $29.6 billion, up 22% year over year.
- Subscription Revenue (Q4): $7.7 billion, 56% of total revenue.
- Shareholder Returns (Q4): $3.6 billion through share repurchases and cash dividends.
- Shareholder Returns (Fiscal Year 2024): $12.1 billion, 119% of free cash flow.
- Product Orders (Q4): Up 14% year over year.
- Security Revenue (Q4): Up 81%, including Splunk; up 6% excluding Splunk.
- Observability Revenue (Q4): Up 41%, excluding Splunk up 12%.
- Networking Revenue (Q4): Down 28% year over year.
- Guidance (Q1 Fiscal Year 2025): Revenue expected to be $13.65 billion to $13.85 billion; Non-GAAP EPS $0.86 to $0.88.
- Guidance (Fiscal Year 2025): Revenue expected to be $55 billion to $56.2 billion; Non-GAAP EPS $3.52 to $3.58.
Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cisco Systems Inc (CSCO, Financial) reported $13.6 billion in revenue for Q4, exceeding the high end of their guidance range.
- Annualized recurring revenue, remaining performance obligations, and subscription revenue all showed solid growth.
- The company returned $3.6 billion to shareholders in Q4 through share repurchases and cash dividends.
- Cisco Systems Inc (CSCO) saw double-digit product order growth across all geographies and strong performance in public sector demand.
- The integration of Splunk has begun to realize early synergies, enhancing Cisco's capabilities in security and observability solutions.
Negative Points
- Total product revenue was down 15% year-over-year, reflecting the final quarter of customer inventory issues.
- Networking revenue, Cisco's largest product category, was down 28% compared to Q4 2023.
- The restructuring plan will impact approximately 7% of Cisco's global workforce, with estimated pretax charges of up to $1 billion.
- Service provider and cloud customer demand remained muted overall, despite some strength in EMEA.
- The interest impact from financing the Splunk acquisition negatively affected non-GAAP earnings per share for the quarter.
Q & A Highlights
Q: What are you seeing in terms of customer prioritization, especially balancing AI investments?
A: We observed balanced demand across geographies and technology portfolios. Customers are upgrading their infrastructure in preparation for AI, reallocating some AI budget to modernize their infrastructure. This trend is evident in large platform sales, such as a logistics company leveraging AI-powered robotics and supply chain visibility. (Charles H. Robbins, Chairman & CEO)
Q: Can you explain the rationale behind the 7% restructuring despite strong performance?
A: The restructuring is not driven by cost savings but by reallocating resources to high-growth areas like AI, cloud, and cybersecurity. This ensures we can pivot more resources into these critical areas. (Charles H. Robbins, Chairman & CEO; Richard Scott Herren, Executive VP & CFO)
Q: How is the integration of Splunk progressing, and what impact is it having?
A: Splunk is performing in line with expectations, with double-digit ARR growth. We are seeing early synergies and cross-sell deals between Cisco and Splunk sales forces. The integration is expected to drive significant revenue growth over time. (Charles H. Robbins, Chairman & CEO; Richard Scott Herren, Executive VP & CFO)
Q: What is driving the integration of networking, security, and collaboration teams?
A: The integration aims to enhance cross-portfolio innovation and execution, particularly as AI and security become more intertwined with networking. This move positions us to deliver more integrated solutions to our customers. (Charles H. Robbins, Chairman & CEO)
Q: Can you elaborate on the $1 billion AI orders and their composition?
A: The $1 billion AI orders are primarily from web-scale customers and include a mix of Ethernet, optics, and silicon solutions. We are seeing strong demand from hyperscalers, and enterprise AI pipeline is also building. (Charles H. Robbins, Chairman & CEO)
Q: How should we think about the fiscal 2025 revenue guidance, considering the backlog normalization?
A: The fiscal 2025 guidance reflects a tough compare due to significant backlog shipments in fiscal 2024. Excluding this, the core business growth aligns with our long-term growth rate. (Richard Scott Herren, Executive VP & CFO)
Q: What are the expected cost savings from the restructuring program?
A: The restructuring is more about reallocating resources rather than cost savings. We are finding efficiencies to pivot resources into high-growth areas like AI, cloud, and cybersecurity. (Richard Scott Herren, Executive VP & CFO)
Q: How is the platform approach resonating with different customer segments?
A: The platform approach is resonating well with large enterprise and public sector customers, particularly in areas like cloud edge security and data center integration. We are seeing strong demand for integrated solutions across our portfolio. (Charles H. Robbins, Chairman & CEO)
Q: What is the impact of the AI-driven infrastructure upgrades on your product portfolio?
A: Customers are upgrading their infrastructure to prepare for AI applications, leading to increased demand for data center switching, wireless, and core network infrastructure. This trend is broad-based across various industries. (Charles H. Robbins, Chairman & CEO)
Q: How are you addressing the sales efforts and compensation structures with the ongoing restructuring?
A: We are implementing cross-sell incentives for the Cisco and Splunk sales forces, focusing on simplicity, increasing frontline quota-carrying reps, and investing in enterprise capacity. The goal is to drive more platform sales and core networking focus. (Charles H. Robbins, Chairman & CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
