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CISCO SYSTEMS, INC. 8-K Report, Financial Results (Nov 13, 2024)

Reports
Earnings & Results·Exhibits & Filings
Filing Date
Filed November 13, 2024
Period End
November 13, 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 November 13, 2024. Cited figures are marked; the original filing is the authoritative source.

Cisco reported fiscal first quarter 2025 results (quarter ended October 26, 2024) with revenue of $13.8 billiona, down 6% year over year, and GAAP net income of $2.7 billion, or $0.68 per diluted share, down 24%.

Non-GAAP EPS was $0.91b, down 18%. Results were at the high end of or above guidance on revenue, gross margin, and EPS. Growth was concentrated in Security (up 100%, though much of that reflects the Splunk acquisition; excluding Splunk, Security grew 2%) and Observability (up 36%, or 1% excluding Splunk).

Networking, the largest product line, fell 23%c, and total revenue excluding Splunk declined 14%. Product orders rose 20% year over year, or 9% excluding Splunk, which management characterized as broad-based acceleration in demand as customers invest in AI-related infrastructure. Profitability was mixed.

GAAP results were boosted by a $720 milliond tax benefit from a U.S. Tax Court decision on deemed foreign dividends, which produced a GAAP tax benefit rate of 19.6%. Non-GAAP operating margin was 34.1%, down 1.4 points, and non-GAAP gross margin was 69.3%, up from 67.1%. GAAP operating expenses rose 28% to $6.8 billion, driven by restructuring charges of $665 million and higher acquisition-related costs.

Operating cash flow grew 54% to $3.7 billion. Remaining performance obligations reached $40.0 billion, up 15%, and deferred revenue was $27.5 billion, up 7%. Cisco returned $3.6 billion to shareholders through a $0.40 quarterly dividend and $2.0 billion of buybacks at an average price of $49.56.

For the second quarter of fiscal 2025, Cisco guided revenue to $13.75 billion to $13.95 billion and non-GAAP EPS to $0.89 to $0.91. For full-year fiscal 2025, it guided revenue to $55.3 billion to $56.3 billion and non-GAAP EPS to $3.60 to $3.66, with GAAP EPS of $2.26 to $2.38. Investors will likely focus on whether the order acceleration converts into sustained revenue growth, since Networking remains under pressure and the Splunk integration and restructuring costs weigh on reported profitability.

02—Key points

Key Highlights

  1. Revenue of $13.8 billion, down 6% year over year (down 14% excluding Splunk), at the high end of guidance
  2. Product orders up 20% year over year (up 9% excluding Splunk), signaling broad-based demand recovery
  3. GAAP EPS of $0.68 (down 24%) and non-GAAP EPS of $0.91 (down 18%), both above guidance; GAAP results include a $720 million tax benefit from a U.S. Tax Court ruling
  4. Non-GAAP gross margin expanded to 69.3% from 67.1%, while non-GAAP operating margin fell to 34.1%
  5. Remaining performance obligations of $40.0 billion, up 15%, with 51% expected to be recognized within 12 months
  6. Operating cash flow of $3.7 billion, up 54%; $3.6 billion returned to shareholders through dividends and buybacks
  7. FY2025 guidance of $55.3B-$56.3B revenue and $3.60-$3.66 non-GAAP EPS, with Q2 revenue guided to $13.75B-$13.95B

03—Questions

Frequently Asked Questions

  1. How did Cisco perform relative to its own guidance in the first quarter?

    Revenue reached the high end of the guidance range, and GAAP gross margin of 65.9%, non-GAAP gross margin of 69.3%, GAAP EPS of $0.68, and non-GAAP EPS of $0.91 were all at or above the guidance ranges, per management.

  2. Why did GAAP EPS decline less sharply than it otherwise might have, and what is the impact of the tax benefit?

    GAAP results include a $720 million tax benefit from a U.S. Tax Court decision on deemed foreign dividends under the Tax Cuts and Jobs Act. This lifted GAAP net income and produced a negative GAAP tax provision rate of 19.6%. Excluding this one-time item, GAAP results would have been weaker, and the benefit is excluded from non-GAAP measures as a significant tax matter.

  3. Is Cisco's growth driven by the Splunk acquisition?

    Partly. Total revenue fell 6%, but excluding Splunk it declined 14%. Security grew 100% and Observability 36% reported, but excluding Splunk those segments grew only 2% and 1%, respectively. Networking, the largest segment, declined 23%.

  4. What does the order growth and backlog mean for future revenue?

    Product orders rose 20% year over year, and product RPO grew 24% to $19.9 billion, which suggests improving demand. Total RPO of $40.0 billion is up 15%, with about 51% expected to convert to revenue within 12 months. Investors should watch whether this order strength translates into revenue growth in coming quarters, given the continued year-over-year revenue decline.

  5. What are the key drivers of the guidance outlook and the restructuring charges?

    Full-year fiscal 2025 guidance calls for revenue of $55.3B-$56.3B and non-GAAP EPS of $3.60-$3.66. GAAP restructuring and other charges reached $665 million in the quarter, up from $123 million a year earlier, and are expected to continue to weigh on GAAP EPS, which is guided to $2.26-$2.38 for the year.

04—Continue

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