Home Networking service Cisco (CSCO) Q2 Revenue: What to Expect

Cisco (CSCO) Q2 Revenue: What to Expect


VSIsco (CSCO) stock is down 13% so far this year, including an 11% decline in the last thirty days, lagging the S&P 500 index in both periods. And extending that six-month horizon, stocks lost almost 2% of their value, while the S&P 500 index rose 1.5%.

Given the company’s strong 2.6% dividend yield, Cisco now presents excellent value and strong defensive qualities heading into the reopening of the economy. The networking giant reports its second-quarter fiscal 2022 results after the closing bell on Wednesday. Investors want to know what it will take to keep Cisco stock moving higher. The company continues to steer its business model more towards software and applications, especially services that generate high recurring revenue.

Cisco management has invested in ways to increase its recurring revenue from subscription-based software and services as it moves away from its core business of selling network switches and routers. By 2025, the company said it expects subscription revenue to make up 50% of total revenue, which would represent a six percentage point increase (from 44%) over the past year. fiscal year 2021. Additionally, the company remains in a strong position to benefit from the increased demand for digital networks for educational and business needs.

Investors anticipate increased demand not only for infrastructure and networking services, but also for cloud computing and telecommunications network services, which have become key drivers of Cisco’s growth over the past year. past year. But for any of those catalysts to count, the market will want Cisco to show on Wednesday that it can quickly pivot to new growth businesses and execute in a way that offsets declining revenue in legacy segments.

In the three months ending in January, Wall Street expects Cisco to earn 81 cents a share on revenue of $12.65 billion. That compares to the year-ago quarter when earnings were 79 cents per share on revenue of $11.96 billion. For the full year, ending in June, earnings are expected to rise 6.2% year-over-year to $3.42 per share, while annual revenue of $52.7 billion would increase around 5.8% year-on-year.

Moreover, as evidenced by recent acquisitions, Cisco continues to shift its business model more toward software and applications, especially services that generate high recurring revenue. The speed of Cisco’s software transformation is key to Cisco’s success as it continues to realize revenue declines in its legacy hardware segments, particularly the routing and switching business which is cyclical in nature. As Cisco moves away from its core business, the pace of transition hasn’t been as fast as some investors would like.

It is probably for this reason that Cisco is now would have interested in entering into a deal with data analytics software specialist Splunk (SPLK). Splunk takeover bid could be worth more than $20 billion, says The Wall Street Journal. The Splunk takeover would be Cisco’s biggest takeover ever, surpassing its 2005 deal for Scientific Atlanta that was worth $7 billion. Until new deals are announced, Cisco will have to rely on organic growth that has been less than stellar.

In the first quarter, consolidated revenue rose 8.1% to $12.9 billion, but missed estimates by $90 million. Although Q1 EPS of 82 cents beat 2 cents, adjusted gross margin fell to 64.5% from 65.8% due to higher costs. Just like the product gross margin and the service gross margin. On Wednesday, the market will want to see if Cisco can improve on those metrics before taking a long look at the stock.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.