Summary
Cisco Systems, Inc. (CSCO) reported a significant decline in revenue for the third quarter of fiscal year 2024, with total revenue down 13% year-over-year to $12.7 billion. This decrease was primarily driven by a 19% drop in product revenue, although service revenue saw a modest 6% increase. The company attributed the product revenue decline to customers scrutinizing spend and taking longer to implement previously received product shipments. The acquisition of Splunk, completed in March 2024, contributed $413 million in revenue and was a key driver for growth in the Security (up 36%) and Observability (up 27%) product categories, partially offsetting a significant 27% decline in Networking revenue. Despite the revenue drop, Cisco demonstrated improved profitability at the gross margin level, with a 1.7 percentage point increase to 65.1%, driven by favorable product mix, productivity improvements, and the impact of Splunk. However, operating income as a percentage of revenue decreased by 9.9 percentage points to 17.2%, largely due to substantial restructuring and other charges totaling $542 million and increased amortization of purchased intangible assets. Diluted earnings per share fell significantly by 41% to $0.46. Financially, the company's cash and cash equivalents and investments decreased by $7.4 billion to $18.8 billion, primarily due to the Splunk acquisition, dividend payments, and share repurchases. Cisco maintained a strong balance sheet, with remaining authorized share repurchases of $7.2 billion, and continued to return capital to shareholders through dividends.
Financial Highlights
57 data points| Revenue | $12.70B |
| Cost of Revenue | $4.43B |
| Gross Profit | $8.27B |
| R&D Expenses | $1.95B |
| Operating Expenses | $6.08B |
| Operating Income | $2.19B |
| Interest Expense | $357.00M |
| Net Income | $1.89B |
| EPS (Basic) | $0.47 |
| EPS (Diluted) | $0.46 |
| Shares Outstanding (Basic) | 4.04B |
| Shares Outstanding (Diluted) | 4.06B |
Key Highlights
- 1Total revenue declined 13% year-over-year to $12.7 billion, impacted by customer spending scrutiny and implementation delays.
- 2Product revenue dropped 19%, largely due to a 27% decrease in Networking, though Security and Observability segments grew significantly due to the Splunk acquisition.
- 3Gross margin improved by 1.7 percentage points to 65.1%, driven by favorable product mix and productivity gains.
- 4Operating income margin contracted by 9.9 percentage points to 17.2% due to significant restructuring charges and higher amortization expenses.
- 5Diluted EPS decreased 41% to $0.46, reflecting the impact of lower revenue and higher expenses.
- 6Cash, cash equivalents, and investments decreased by $7.4 billion to $18.8 billion, mainly due to the Splunk acquisition and capital returns to shareholders.
- 7Remaining performance obligations increased 11% to $38.8 billion, indicating a strong future revenue pipeline, bolstered by the Splunk acquisition.