Cisco Webex productivity tool
Q3 revenue slump worst in 15 years / Image source: Adobe
  • Posts biggest revenue decline in 15 years
  • Covid indigestion buckling normal IT refresh cycle
  • Q3 beat of low expectations to spark share price

Looking purely at third quarter (to 27 Apr) numbers paints a bleak picture for the core IT kit that Cisco Systems (CSCO:NASDAQ) provides. Adjusted EPS (earnings per share) was down from $1.00 a year ago to $0.88 on a 13% fall in $12.7 billion revenue, the firm’s biggest annual decline in 15 years, according to CNBC.

So, as pre-market data sees the stock rallying nearly 5% when US markets reopen later today (to $51.94), it tells us a lot about how far expectations have fallen.

Wall Street Q3 estimates were pitched at $0.83 adjusted EPS on revenue of $12.48 billion and while Cisco raised full year 2024 (to end Jul) guidance – the company is now forecasting EPS of $3.69 to $3.71 on a revenue range of $53.6 billion to $53.8 billion – investors can still only hope for slightly narrower declines on 2023 figures than before.


The core trading theme for the networking company remains the continued impact of ‘customer and channel digestion’, or in other words, they bought lots of kit through and in the immediate aftermath of Covid when budgets were strong but are now managing through kit oversupply that has disrupted the normal tech refresh cycle.

The focus for Cisco is to use its vast scale to push through this period of indigestion and leverage its broad portfolio. This can be seen in flexing its software muscle in things like networks security and now, following the rough $28 billion acquisition of data cruncher Splunk, in data monitoring, or what Cisco calls ‘observability’.

In theory, this will help cap the impact of declines elsewhere. Yet the key question for the market is if we’ll see an end to this indigestion soon, and that’s depends on who you talk to.

‘It doesn’t seem like it, with macroeconomic uncertainty still a key factor behind customers choosing to sweat assets for longer’, says Megabuyte analyst Sumitha Pillay.

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Issue Date: 16 May 2024