Cisco has announced its strongest first quarter results in the company's history for the fiscal year 2024. The networking giant recorded a significant increase in revenue and profitability, with a reported revenue of $14.7 billion. This figure represents an 8% growth compared to the previous year.
In the first quarter, Cisco's GAAP net income climbed to $3.6 billion, showing a 36% increase from the prior year. Similarly, the non-GAAP net income also saw a substantial rise, reaching $4.5 billion, which is a 28% increase year over year. The earnings per share (EPS) followed this upward trend. The GAAP EPS rose by 37% to $0.89, while the non-GAAP EPS increased by 29% to $1.11.
“We had a solid start to fiscal 2024 with the strongest Q1 results in our history on both revenue and profitability,” said Cisco CEO Chuck Robbins. “We are confident in the foundational strength of our business and future growth opportunities fueled by AI, Security, Cloud, and Observability.”
Cisco's revenue growth was largely driven by a 13% year-over-year increase in total software revenue and a similar rise in software subscription revenue. The company also reported a growth in its annualised recurring revenue (ARR), which stood at $24.5 billion, marking a 5% increase from the previous year. Furthermore, Cisco's remaining performance obligations (RPO) were up 12% year over year, reaching $34.8 billion.
Geographically, Cisco saw varied performance across different regions. The Americas segment reported a 14% increase in revenue, while the revenue in the EMEA region remained flat. The APJC segment, however, experienced a 3% decline in revenue.
Looking ahead, Cisco provided guidance for the second quarter of fiscal 2024, projecting revenue to be between $12.6 billion and $12.8 billion. The non-GAAP earnings per share are estimated to be between $0.82 and $0.84. For the full fiscal year 2024, the company expects revenue to range from $53.8 billion to $55.0 billion, with non-GAAP EPS projected between $3.87 and $3.93.
Cisco's shares experienced a significant downturn, dropping as much as 13% in after-hours trading on Wednesday. This decline came in response to the company's less-than-optimistic forecast for both the current quarter and the entirety of the fiscal year.
The company attributes the slowdown in new product orders during the quarter to customers focusing on the installation and implementation of products delivered over the previous three quarters.
Cisco CEO Chuck Robbins, in a call with analysts, emphasised this point, noting that the ‘sales teams and customers have consistently identified this as a primary issue'. Robbins also mentioned that sales cycles are currently longer than usual, with an estimated backlog of one to two quarters worth of shipped products yet to be implemented.
In addition to its financial performance, Cisco announced the completion of several acquisitions, including network performance monitoring company Accedian and cloud-native mobile services platform developer Working Group Two.
The company also announced its intention to acquire cybersecurity and observability firm Splunk with the transaction expected to close by the end of the third quarter of calendar year 2024.
Cisco Q1 FY 2024 Financial Performance Overview
- Total Revenue: Cisco achieved $14.7 billion in revenue, marking an 8% increase year over year.
- Net Income: GAAP net income stood at $3.6 billion (up 36% year over year), and non-GAAP net income was $4.5 billion (up 28% year over year).
- Earnings Per Share: GAAP EPS was $0.89 (a 37% increase), and non-GAAP EPS reached $1.11 (a 29% increase).
- Software Revenue: Experienced a 13% year-over-year increase.
- Annualized Recurring Revenue (ARR): Reached $24.5 billion, a 5% increase year over year.
- Remaining Performance Obligations (RPO): Amounted to $34.8 billion, up 12% year over year.
Cisco Q1 FY 2024 Geographic Performance
- Americas: Reported a 14% increase in revenue.
- EMEA: Revenue remained flat.
- APJC: Experienced a slight decline of 3%.
Cisco Q1 FY 2024 Product Portfolio Growth
Strong revenue growth across Cisco's product portfolio, particularly in areas like Generative AI, Cloud, Security, and Full Stack Observability.
Cisco Q1 FY 2024 Dividend Declaration
Cisco declared a quarterly dividend of $0.39 per common share, payable on January 24, 2024.
Cisco Q2 FY 2024 Outlook
- Q2 FY 2024 Guidance: Revenue expected between $12.6 billion and $12.8 billion, with non-GAAP EPS projected between $0.82 and $0.84.
- FY 2024 Guidance: Revenue forecasted between $53.8 billion and $55.0 billion, and non-GAAP EPS expected to be in the range of $3.87 to $3.93.
Cisco closed acquisitions of several companies, including Accedian, Working Group Two, Oort, Inc., SamKnows, and Code BGP, Inc., and announced its intent to acquire Splunk Inc.
Cisco Business Model Transformation
Cisco's transformation is evident in its increased focus on software and subscription-based offerings, contributing significantly to the company's revenue and profitability.
Cisco's Challenges and Strategies
Cisco faces challenges such as a slowdown in new product orders and a decrease in cash flow from operating activities. However, the company remains optimistic about accelerating product order growth rates in the second half of the year and is committed to delivering operating leverage and increasing capital returns to shareholders.