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CISCO SYSTEMS, INC. 8-K Report, Financial Results (Feb 14, 2024)

Reports
Earnings & Results·Financial Events·Exhibits & Filings
Filing Date
Filed February 14, 2024
Period End
February 14, 2024
Security
CSCO
In the record · 2016–202610-K1110-Q328-K146

CSCO filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 146 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Mar ’17Mar ’17
  2. Restructuring8-K · Aug ’20Aug ’20
  3. Leadership change8-K · Nov ’22Nov ’22
  4. Leadership change8-K · Oct ’26Oct ’26

01—Abstract

Summary

Summary of the 8-K filed February 14, 2024. Cited figures are marked; the original filing is the authoritative source.

Cisco's fiscal Q2 2024 (quarter ended January 27, 2024) showed a mixed picture: revenue of $12.8 billiona fell 6% year over year, GAAP EPS was $0.65 (down 3%), and non-GAAP EPS was $0.87 (down 1%).

Product revenue declined 9%, driven by a 12% drop in Networking, while Security (+3%), Collaboration (+3%), and Observability (+16%) grew. Management highlighted operating leverage and progress in shifting to recurring revenue: software subscription revenue rose 5%, product annualized recurring revenue (ARR) grew 9%, and total RPO reached $35.7 billionb, up 12%. Operating cash flow of $0.8 billion fell 83% from the prior year's quarter, a weak data point investors will want explained.

Cisco also announced a restructuring affecting roughly 5% of its global workforce, with pre-tax charges of about $800 millionc, mostly cash-based, weighted toward the third fiscal quarter of 2024. The company raised its quarterly dividend 3% to $0.40 per share and returned $2.8 billion to shareholders in the quarter through buybacks and dividends.

Guidance for Q3 FY2024 calls for revenue of $12.1d–$12.3 billion and non-GAAP EPS of $0.84–$0.86, while full-year FY2024 revenue is expected at $51.5–$52.5 billion with non-GAAP EPS of $3.68–$3.74. The restructuring charges will depress GAAP results in the coming quarters, so investors should focus on the non-GAAP trajectory, the pace of the recurring-revenue transition, and whether Networking stabilizes.

02—Key points

Key Highlights

  1. Revenue of $12.8 billion, down 6% year over year; product revenue down 9% and service revenue up 4%
  2. Non-GAAP EPS of $0.87 (down 1%) versus GAAP EPS of $0.65 (down 3%); non-GAAP operating margin of 33.0% and GAAP operating margin of 24.2%
  3. Networking revenue fell 12%, while Security (+3%), Collaboration (+3%), and Observability (+16%) grew
  4. Recurring revenue progress: total ARR of $24.7 billion (up 6%), product ARR up 9%, software subscription revenue up 5%, and RPO of $35.7 billion (up 12%)
  5. Restructuring plan affecting about 5% of the global workforce, with approximately $800 million in pre-tax charges, primarily cash-based, mostly in Q3 FY2024
  6. Operating cash flow fell 83% to $0.8 billion; quarterly dividend raised 3% to $0.40 per share
  7. FY2024 guidance: revenue of $51.5–$52.5 billion and non-GAAP EPS of $3.68–$3.74; GAAP EPS of $2.61–$2.73

03—Questions

Frequently Asked Questions

  1. Why did Cisco's revenue and earnings decline this quarter?

    Revenue fell 6% to $12.8 billion, driven mainly by a 12% drop in Networking, the company's largest product category. Geographically, all regions declined, with APJC down 12%, EMEA down 7%, and Americas down 4%. Non-GAAP EPS fell only 1% because of operating expense discipline and improved gross margins, which rose to 66.7% from 63.9%.

  2. What is the restructuring, and what will it cost?

    Cisco is cutting roughly 5% of its global workforce to realign the organization and fund investment in priority areas. The company estimates about $800 million in pre-tax charges, mainly severance and termination benefits. About $500 million is expected in Q3 FY2024, roughly $150 million in Q4 FY2024, and the remainder mostly through the first half of FY2025. These charges are excluded from non-GAAP results but will weigh on GAAP EPS.

  3. Is the shift to recurring revenue working?

    Cisco is making progress. Total ARR reached $24.7 billion, up 6%, and product ARR rose 9%. Software subscription revenue grew 5%, though total software revenue was flat. Remaining performance obligations rose 12% to $35.7 billion, with about 50% expected to convert to revenue over the next 12 months. Investors should watch whether subscription growth accelerates enough to offset weakness in hardware.

  4. Why did operating cash flow drop so sharply?

    Operating cash flow for the quarter was $0.8 billion, down 83% from $4.7 billion a year earlier. The filing does not give a full causal breakdown in this excerpt, but the six-month cash flow statement shows a $4.7 billion increase in cash taxes paid and related income tax payable changes, which largely explain the decline in operating cash flow.

  5. What does the outlook imply for investors?

    Q3 FY2024 guidance calls for revenue of $12.1–$12.3 billion and non-GAAP EPS of $0.84–$0.86, and full-year revenue of $51.5–$52.5 billion with non-GAAP EPS of $3.68–$3.74. The outlook implies a flat-to-down revenue trend in the near term, with margin support from cost actions. GAAP EPS will be lower than non-GAAP EPS because of restructuring and share-based compensation charges.

04—Continue

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