Cisco Systems (CSCO, Financial), a global leader in computer networking equipment, recently reported better-than-expected quarterly earnings. However, its conservative annual performance guidance resulted in a lukewarm investor response. For the first quarter of fiscal year 2025, ending October 26, Cisco's sales dropped 6% year-over-year to $13.8 billion, slightly above analyst expectations of $13.77 billion. Adjusted net income was $3.7 billion, a decrease of 19% from the previous year, while adjusted earnings per share were $0.91, surpassing the anticipated $0.87.
CEO Chuck Robbins continues to work on transitioning Cisco into a network services and software provider, a move that has successfully increased recurring revenue streams. Despite this, a significant portion of the company's revenue still comes from one-time hardware installations.
Chief Financial Officer Scott Herren noted a strong rebound in enterprise spending across all sectors and regions. Additionally, Cisco has benefited from increased orders for equipment essential for AI computing, with orders from major data center operators surpassing the $1 billion target.
However, Herren pointed out that changes within the U.S. federal government and the nature of federal budgeting have resulted in some projects not being approved. He remains confident that once a new budget is established, orders will resume quickly.
Cisco, often seen as a bellwether for corporate tech spending, has been striving to rebound from a year-long slump. Although orders are starting to grow again, investors and analysts are eager to see how swiftly this trend can continue. Herren expressed optimism about Cisco's products and market conditions, stating that the acceleration is promising.
During the period of slowed sales, Cisco implemented job cuts, announcing a reduction of roughly 7% of its workforce three months ago, incurring approximately $1 billion in associated costs.
Looking ahead, Cisco forecasts second-quarter sales between $13.75 billion and $13.95 billion, exceeding analyst projections of $13.74 billion. The company also expects full-year fiscal 2025 sales to be in the range of $55.3 billion to $56.3 billion, slightly below the analyst consensus of $55.9 billion.
Currently, Cisco's stock fell by more than 2% in after-hours trading on Wednesday.
