Cisco Systems (NASDAQ:CSCO), Inc. CSCO is scheduled to release first-quarter fiscal 2022 results on Nov 17.
The company anticipates first-quarter fiscal 2022 revenues to improve in the range of 7.5-9.5% on a year-over-year basis. The Zacks Consensus Estimate for revenues is pegged at $12.98 billion, indicating an increase of almost 8.8% over the year-ago quarter’s reported figure.
Non-GAAP earnings are anticipated between 79 cents and 81 cents per share. The Zacks Consensus Estimate for earnings has been stable in the past seven days at 81 cents per share. The figure suggests growth of 6.6% from the prior-year quarter’s levels.
Factors Likely to Have Influenced Q1 Results
Strength in Cisco’s extensive product portfolio and customer segments as well as momentum in product order growth is expected to have positively contributed to the fiscal first-quarter top line. Accelerated digital transformation taking place globally and the need to build a safe hybrid work environment is driving demand for Cisco’s solutions.
Robust adoption of the company’s software and subscription-based offerings is likely to have acted as a tailwind.
In the last reported quarter, software revenues were up 6% to $4 billion. Software subscription revenues increased 9%, while subscriptions contributed 81% to Cisco’s software revenues in the fourth quarter of fiscal 2021.
Cisco’s revenues are likely to have benefitted from momentum in web security, identity and access, advanced threat and unified threat management security solutions, owing to higher cybersecurity spend on the back of continued remote/hybrid work set up globally.
Increasing adoption of SecureX offering (a cloud-based security platform to strengthen enterprise security infrastructure) is likely to have contributed to the to-be-reported quarter’s performance. Incremental uptake of Secure Remote Worker, which leverages Zero Trust Architecture along with a solid uptick in cloud-based solutions, including Duo and Umbrella, bodes well.
Higher bandwidth requirements by customers is expected to have driven demand for Acacia’s optical solutions. Cisco acquired Acacia Communications (NASDAQ:ACIA) in March 2021.
Strength in the company’s Catalyst 9000 and Nexus 9000 switch solutions is likely to have driven revenue growth in the company’s Infrastructure Platforms segment. Accelerated 5G deployment and higher uptake of Wi-Fi 6 products and Meraki solutions may have acted as tailwinds.
Momentum in Cisco’s video conferencing application — Webex platform — induced by coronavirus-induced remote work setup and accelerated implementation of flexible work model, is expected to have supported fiscal first-quarter performance.
However, Cisco’s Webex faces stiff competition from the likes of Microsoft’s MSFT Teams and Zoom Video ZM. For first-quarter fiscal 2022, Microsoft noted that Teams has 138 customers with more than 100,000 users of Teams and more than 3,000 clients with over 10,000 users at the end of the fiscal first quarter.
At the end of the last reported quarter, Zoom had nearly 504,900 customers (with more than 10 employees), up 36% year over year. Its trailing 12-month net dollar-expansion rate in customers with more than 10 employees was above 130%.
Weak demand for servers along with coronavirus crisis-led supply chain disruptions are likely to have acted as a headwind for Cisco in the fiscal first quarter. Due to higher supply chain costs, the company expects to report a non-GAAP gross margin in the range of 63.5-64.5% for the fiscal first quarter.
Increasing investments on portfolio expansion, product enhancements and acquisitions amid stiff competition from Arista ANET in the networking infrastructure market might have hindered margin expansion in the fiscal first quarter.
Arista’s third-quarter 2021 revenues soared 23.7% year over year to $748.7 million and came in ahead of the company’s guidance of $725-$745 million.
Major Q1 Highlights
In August 2021, Cisco rolled out Vidcast — video messaging solution — designed to overcome time zone restrictions by enabling users to share recorded videos without the need of attending a live meeting to make communication more efficient.
At its Investor Day, Cisco provided upbeat revenue projections on the back of consistent momentum in the software and subscription business. The company expects to witness a CAGR of 5-7% in revenues through fiscal 2025.
Beginning from the first quarter of fiscal 2022, the company announced that it will report product and service revenues around new categories — Secure, Agile Networks, Hybrid Work, End-to-End Security, Optimized Application Experiences, Internet for the Future, Other Products and Services.
Zacks Rank & Price Movement
At present, Cisco carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.
In the past year, shares of Cisco have returned 33.6% compared with the industry’s growth of 32.6%.
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