01—Abstract
Summary
Summary of the 10-Q filed November 21, 2023. Cited figures are marked; the original filing is the authoritative source.
Cisco Systems, Inc. reported strong financial results for the first quarter of fiscal year 2024, demonstrating robust revenue growth and improved profitability.
Total revenue increased by 8%a year-over-year, driven primarily by a 9% rise in product revenue, while service revenue saw a 4% increase. This growth was underpinned by significant improvements in product gross margin, which rose by 5.3 percentage points due to productivity gains, favorable pricing, and product mix. The company also highlighted a healthy increase in diluted earnings per share, up 37% year-over-year, reflecting both improved profitability and a reduced share count.
Despite the positive top-line and bottom-line performance, Cisco noted a decline in product demand in the current quarter. Management attributes this primarily to customers needing more time to implement product shipments from prior quarters, particularly among larger enterprise, service provider, and cloud customers. While macroeconomic challenges persist, the company is focused on strategic investments, innovation, and managing its business model transition toward software and subscriptions, aiming for long-term profitable growth.
02—Key points
Key Highlights
- Total revenue increased by 8% to $14.7 billion compared to the prior year's first quarter.
- Product revenue grew by 9% to $11.1 billion, while service revenue increased by 4% to $3.5 billion.
- Product gross margin improved significantly, up 5.3 percentage points to 64.5%, driven by productivity, pricing, and product mix.
- Operating income increased by 21% to $4.3 billion, with operating income as a percentage of revenue rising to 29.2% from 26.0%.
- Diluted earnings per share (EPS) surged by 37% to $0.89, benefiting from increased net income and a lower diluted share count.
- The company announced its intent to acquire Splunk for approximately $28 billion in cash, a significant strategic move into cybersecurity and observability.
- Free cash flow remained strong at $2.2 billion for the quarter, underscoring Cisco's robust cash generation capabilities.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Cisco Systems, Inc. kept $0.25.
- Revenue$14.67B100.0%
- Cost of revenue−$5.11B34.8%
- Gross profit$9.56B65.2%
- Operating costs−$5.28B36.0%
- Operating income$4.28B29.2%
- Interest, other & tax−$638.0M4.3%
- Net income$3.64B24.8%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed November 21, 2023Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $14.67B$13.63B | +7.6% |
| Cost of Revenue | $5.11B$5.29B | −3.3% |
| Gross Profit | $9.56B$8.35B | +14.5% |
| R&D Expenses | $1.91B$1.78B | +7.4% |
| Operating Expenses | $5.28B$4.81B | +9.9% |
| Operating Income | $4.28B$3.54B | +20.8% |
| Interest Expense | $111.00M$100.00M | +11.0% |
| Net Income | $3.64B$2.67B | +36.3% |
| EPS (Basic) | $0.90$0.65 | +38.5% |
| EPS (Diluted) | $0.89$0.65 | +36.9% |
| Shares Outstanding (Basic) | 4.06B4.11B | −1.2% |
| Shares Outstanding (Diluted) | 4.09B4.12B | −0.7% |
05—Questions
Frequently Asked Questions
What was Cisco's revenue performance in Q1 FY2024?
Cisco reported total revenue of $14.7 billion, an 8% increase compared to $13.6 billion in the first quarter of fiscal year 2023. Product revenue grew by 9% to $11.1 billion, and service revenue increased by 4% to $3.5 billion.
How did Cisco's profitability change?
Profitability improved significantly. Gross margin increased by 4.0 percentage points to 65.2%, with product gross margin alone rising 5.3 percentage points to 64.5%. Operating income grew 21% to $4.3 billion, and diluted earnings per share (EPS) increased by 37% to $0.89.
What is the outlook regarding product demand?
While overall revenue grew, Cisco noted a decline in product demand in the current quarter. Management attributes this to customers needing more time to implement elevated levels of product shipments from prior quarters, particularly affecting larger enterprise, service provider, and cloud customers.
What are the key strategic initiatives or events highlighted in the report?
Cisco announced its intent to acquire Splunk for approximately $28 billion in cash, a major step to enhance its cybersecurity and observability offerings. The company also continues to focus on its business model transition towards software and subscriptions, and on driving innovation across its portfolio.
06—Continue