01—Abstract
Summary
Summary of the 10-K filed September 6, 2018. Cited figures are marked; the original filing is the authoritative source.
Cisco Systems, Inc. (CSCO) filed its 10-K for the fiscal year ended July 28, 2018, reporting a 3% increase in total revenue to $49.3 billiona, driven by growth across its Infrastructure Platforms, Applications, and Security segments.
Despite revenue growth, net income saw a significant decline of 99% primarily due to a substantial provisional tax expense of $10.4 billionb related to the Tax Cuts and Jobs Act. The company continues its strategic shift towards software and subscription-based offerings, aiming to enhance network automation, security, and intelligence. Cisco demonstrated strong cash flow from operations, returning significant capital to shareholders through share repurchases and dividends.
The company's strategic priorities include accelerating innovation with its "intent-based networking" technology, exemplified by the Catalyst 9000 series switches, increasing the value of its network through data insights and security, and transforming its business model towards recurring revenue. While the service provider market showed weakness, growth in commercial and enterprise sectors provided a counterbalance. Management highlighted investments in key growth areas like security and applications as crucial for future success, while acknowledging the competitive landscape and the ongoing transformation of the IT industry.
02—Key points
Key Highlights
- Total revenue increased by 3% to $49.3 billion in fiscal year 2018.
- Net income decreased by 99% to $110 million due to a $10.4 billion provisional tax expense related to the Tax Cuts and Jobs Act.
- Infrastructure Platforms revenue grew 2%, Applications revenue increased 10%, and Security revenue rose 9%.
- Gross margin for products decreased slightly to 60.7%, impacted by pricing and component costs, but offset by productivity gains.
- The company returned significant capital to shareholders, repurchasing $17.66 billion of stock and paying $6.0 billion in dividends.
- Cisco is transforming its business model towards software and subscription-based offerings to increase recurring revenue.
- The company continues to invest in key priority areas such as security, applications, and its intent-based networking technologies.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Cisco Systems, Inc. kept $0.00.
- Revenue$49.33B100.0%
- Cost of revenue−$18.72B38.0%
- Gross profit$30.61B62.0%
- Operating costs−$18.30B37.1%
- Operating income$12.31B25.0%
- Interest, other & tax−$12.20B24.7%
- Net income$110.0M0.2%
Where FY2018 revenue went
$49.33B- Cost of revenue: $18.72B, 38% of revenue
- Interest, other & tax: $12.20B, 25% of revenue
- Other operating costs: $11.96B, 24% of revenue
- R&D: $6.33B, 13% of revenue
- Net income: $110.0M, 0.2% of revenue
Kept 0.2% as net incomeNet income $110.0M · 0.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed September 6, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $49.33B$48.01B | +2.8% |
| Cost of Revenue | $18.72B$17.78B | +5.3% |
| Gross Profit | $30.61B$30.22B | +1.3% |
| R&D Expenses | $6.33B$6.06B | +4.5% |
| Operating Expenses | $18.30B$18.25B | +0.3% |
| Operating Income | $12.31B$11.97B | +2.8% |
| Interest Expense | $943.00M$861.00M | +9.5% |
| Net Income | $110.00M$9.61B | −98.9% |
| EPS (Basic) | $0.02$1.92 | −99.0% |
| EPS (Diluted) | $0.02$1.90 | −98.9% |
| Shares Outstanding (Basic) | 4.84B5.01B | −3.5% |
| Shares Outstanding (Diluted) | 4.88B5.05B | −3.3% |
05—Questions
Frequently Asked Questions
What was the primary driver behind Cisco's significant net income decrease in fiscal year 2018?
The primary driver for the significant decrease in net income was a provisional tax expense of $10.4 billion related to the Tax Cuts and Jobs Act, which included a U.S. transition tax on accumulated foreign earnings.
How is Cisco adapting its business model to align with industry trends?
Cisco is transforming its business model by focusing on software and subscription-based offerings to increase recurring revenue. This strategy is aimed at providing customers with more agile, secure, and automated networking solutions, as seen with its "intent-based networking" technologies.
What were the key growth areas for Cisco's product revenue in fiscal year 2018?
Cisco experienced growth across most product categories, with Applications revenue increasing by 10% and Security revenue growing by 9%. Infrastructure Platforms revenue also saw a 2% increase, despite weakness in the routing segment driven by the service provider market.
How is Cisco returning capital to its shareholders?
Cisco demonstrated a strong commitment to returning capital to shareholders by repurchasing approximately $17.66 billion of its common stock and paying out $6.0 billion in cash dividends during fiscal year 2018.
06—Continue