Cisco has reported a slowdown in its revenue, marking a 6% year-over-year decrease to $12.8 billion for fiscal Q2 2024. This decline contrasts with the previous year's performance, where Q2 FY 2023 reported a 7% revenue increase to $13.6 billion. The results also reflected in the network technology giant's earnings per share (EPS), with a GAAP EPS of $0.65, down by 3%, and a Non-GAAP EPS of $0.87, decreasing by 1% year-over-year.
Senior executives have attributed the slowdown to a combination of external market conditions and internal strategic adjustments. The technology sector has encountered headwinds, including supply chain disruptions and shifting market demands, which appear to have impacted Cisco's traditional hardware-centric business segments.
“The bottleneck that we previously saw in the supply chain has now shifted downstream to implementation by our customers and partners,” said Cisco CEO Chuck Robbins during the earnings call.
Despite the overall decline, Cisco reported areas of growth in security, collaboration, and observability products, signalling a strategic move towards high-demand sectors within the tech landscape.
The company's efforts to transition towards more software and subscription-based models are also showing promise, with a 5% increase in software subscription revenue year over year and a notable 6% growth in total annualised recurring revenue (ARR) to $24.7 billion.
“We continue to align our investments to future growth opportunities. Our innovation sits at the centre of an increasingly connected ecosystem and will play a critical role as our customers adopt AI and secure their organisations,” stated Cisco CEO in a statement.
The remaining performance obligations (RPO), which represent contracted future revenues, stood at $35.7 billion, marking a 12% increase from the previous year. This uptick indicates a strong and growing demand for the company's offerings.
“We are making good progress in our business model shift to more recurring revenue whilst remaining focused on financial discipline, operating leverage, and shareholder returns, as evidenced by our increased dividend,” said Cisco CFO Scott Herren.
For the third quarter of fiscal 2024, Cisco anticipates revenue to be between $12.1 billion and $12.3 billion, which represents a decrease from the $14.6 billion reported in the third quarter of fiscal 2023.
The company's GAAP earnings per share is expected to range from $0.51 to $0.56 for Q3 FY 2024, compared to $0.78 in Q3 FY 2023. Additionally, the forecasted Non-GAAP earnings per share is between $0.84 to $0.86, lower than the $1.00 Non-GAAP earnings per share reported in the same quarter of the previous year.
