Cisco (CSCO) Gears Up For Q1 Earnings: What's In The Cards?

Cisco Systems, Inc. (NASDAQ:CSCO) is slated to release first-quarter fiscal 2020 results on Nov 13.

For first-quarter fiscal 2020, Cisco expects revenues to grow in the range of 0-2% on a year-over-year basis. The Zacks Consensus Estimate for first-quarter revenues is pegged at $13.08 billion, almost flat when compared with the year-ago reported figure.

Non-GAAP earnings are anticipated between 80 cents and 82 cents per share. The Zacks Consensus Estimate for earnings has been steady for the past 30 days at 81 cents, indicating an improvement of 8% from the prior-year quarter.

Notably, the company surpassed the Zacks Consensus Estimate for earnings in the trailing four quarters, the average beat being 2.02%

Factors Likely to Influence Q1 Results

Cisco’s fiscal first-quarter results are likely to reflect robust adoption of its security solutions, including web security, unified threat, and network security and advanced threat offerings.

Moreover, growing clout of the company’s latest subscription-based Catalyst 9000 switching platform, Cat9K and Nexus 9K is likely to have accelerated Switching revenue growth in the fiscal first-quarter.

Further, strength in company’s Wave 2 offerings and Meraki solutions is likely to have driven growth in wireless domain.

Also, in data-center vertical, momentum in the HyperFlex data-center solution is likely to have continued in the quarter under review, in turn aiding the top-line performance.

Positive trends including, persistent customer shift from 100G to 400G architectures and growing adoption of multi-cloud platforms are likely to get reflected in the company’s fiscal first-quarter performance. Moreover, increase in enterprise spending on cybersecurity and 5G infrastructure network as 5G deployment accelerates, are likely to have favored adoption of Cisco’s offerings in the fiscal first-quarter, in turn aiding the top line.

The company is integrating AI and ML capabilities into enterprise collaboration solutions aimed at increasing productivity of users, and improve engagement. This in turn is expected to have bolstered adoption of Webex Meetings, Webex Devices and Webex Teams, among others, in the first quarter. This in turn is expected to have driven the fiscal first-quarter top line.

Nonetheless, decline in order growth on headwinds pertaining to the U.S.-China trade war and weakness in service provider and enterprise vertical is likely to have affected the fiscal first-quarter top line.

Moreover, increasing investments on product enhancements amid stiff competition from Arista (NYSE:ANET) , Juniper (NYSE:JNPR) and F5 Networks (NASDAQ:FFIV) in networking infrastructure market is likely to have limited margin expansion in the fiscal first-quarter.

Noteworthy Developments in Q1

During the fiscal first-quarter, Cisco strengthened its collaboration portfolio with latest Webex Control Hub Extended Security Pack featuring robust cybersecurity capabilities. Companies like Wacker Chemie AG and NTT Communications, are looking forward to utilize Cisco’s latest Webex Control Hub Extended Security Pack. The pack offers CASB standard anti-malware features, providing users with data security from malicious attacks.

Cisco is anticipated to boost user engagement and adoption on enhanced data security provisions by integrating its cybersecurity capabilities across Webex portfolio.

Moreover, the company concluded Voicea acquisition. Cisco plans to enrich Webex portfolio with Voicea’s AI-based voice-recognition and transcription capabilities.

Cisco also completed acquisition of CloudCherry, a Customer Experience Management (CEM) company, aimed at enhancing the company’s Contact Center Solutions business.

Zacks Rank

Currently, Cisco carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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