Cisco nasdaq Csco Stock Takes a Hit on Bleak Q3 Outlook

Cisco (NASDAQ: CSCO) Stock Takes a Hit on Bleak Q3 Outlook

Cisco Systems (NASDAQ: CSCO) stock fell after reporting lower second-quarter earnings and revenue than last year, though they beat consensus estimates despite a drop in product orders. The company’s forecast for the upcoming April-ending quarter also fell short of expectations.

Cisco Systems (CSCO) disclosed its financial results after the market closure on Wednesday. The earnings of Cisco experienced a 1% decline from the previous year, settling at an adjusted 87 cents. The revenue saw a 6% drop, amounting to $12.8 billion. According to FactSet, analysts had projected that the earnings of Cisco would be 84 cents, with a revenue of $12.71 billion.

In a subsequent cost-reduction initiative, the company intends to reduce its workforce by 5%, which equates to around 4,200 positions.

In a report, Barclays analyst Tim Long stated that Cisco had delivered a robust fiscal Q2. However, the forward guidance has been reduced for the second consecutive quarter.

He added,

“Fiscal Q2 product orders were down 12% year-over-year, above our estimate of a 17% decline and an improvement from the down 20% in the prior quarter. Service provider (telecom) and cloud orders fell 40% for the second quarter in a row as the demand market remains weak while customers digest inventory.”

Before the release of Cisco’s earnings report, Wall Street experts anticipated a downturn in the “enterprise” sector — encompassing corporate and governmental sales.

Cisco’s Fiscal 2024 Q3 Outlook

For the fiscal quarter of April 2024, Cisco projects earnings of 85 cents at the midpoint of its guidance, contrasting with analyst estimates of 92 cents.

Furthermore, Cisco anticipates sales of $12.2 billion at the midpoint of its forecast. Analysts have projected a 3.7% decline in sales to $13.09 billion.

Despite the increase in revenue from software and services at Cisco, a significant portion, more than two-thirds, still comes from computer networking equipment, primarily switches and routers. As the enterprise market has softened, the telecom clients of Cisco are also reducing their spending.

Analysts foresee potential growth in 2025 due to increased investments in artificial intelligence infrastructure by cloud-computing giants.

Cisco (NASDAQ: CSCO) Stock Performance

CSCO stock dropped 2.43% to close at $49.06 on Thursday. The traders had exchanged hands with 42,189,958 (42.18 million) shares compared to the average daily trading volume of 20.87 million.