Cisco Systems, Inc. (CSCO) 2024 Q4 Earnings Call Summary
August 14, 2024 
Cisco Systems, Inc. (CSCO)
| Market Cap | 0.21T |
|---|---|
| Beta | |
| P/E | 39.75452774136047 |
| EPS | 12.247158441111395 |
| Dividend | 0 |
| Dividend Yield | 0.00% |
Optimistic Highlights
Strong Fiscal Year Close: Cisco ended fiscal year 2024 with $13.6 billion in Q4 revenue and $53.8 billion annually, exceeding guidance with significant growth in recurring and subscription revenue.
Gross Margin Peak: Achieved a 20-year high gross margin of 67.5%, attributed to excellent margins and the integration of Splunk.
Product Order Growth: Reported a total product order growth of 14%, indicating a recovery from inventory digestion issues.
Investments in Innovation: Highlighted investments in Hypershield and hyperfabric for AI, and the successful integration of Splunk, enhancing security and observability solutions.
Restructuring for Efficiency: Announced a restructuring plan to invest in growth areas like AI, cloud, and cybersecurity, aiming for efficiency and stronger execution.
Pessimistic Highlights
Revenue Decline: Total revenue for Q4 was down 10% year-over-year, primarily due to comparing against a strong Q4 in fiscal 2023.
Product Revenue Drop: Total product revenue decreased by 15%, with networking down 28% compared to the previous year.
Splunk's Growth: While Splunk's integration is on track, its growth was implied to be around 5% in the quarter, which might be seen as subdued.
Company Outlook
Fiscal Q1 and Full-Year 2025 Guidance: For Q1, revenue is expected between $13.65 billion to $13.85 billion, with full-year revenue projected in the range of $55 billion to $56.2 billion. This guidance reflects a return to normal customer demand patterns and the full integration of Splunk.
Focus on AI and Cybersecurity: Cisco plans to continue its investment in AI, cloud, and cybersecurity, expecting these areas to drive future growth and profitability.
Q & A Highlights
Q: What are you seeing in terms of budget prioritization from customers, especially around AI initiatives? (Meta Marshall, Morgan Stanley)
A: Customers are upgrading their infrastructure in preparation for AI, with some reallocating AI budgets towards modernizing their infrastructure. Demand was balanced across the portfolio, with significant growth in security and collaboration. (Chuck Robbins)
Q: Is the full restructuring embedded in the fiscal '25 guidance? (Meta Marshall, Morgan Stanley)
A: Yes, the restructuring is included in the guidance. It's more about reallocating resources to key growth areas rather than cost savings. (Scott Herren)
Q: How are you thinking about changes to the sales efforts or compensation structures with the ongoing restructuring? (Jim Fish, Piper Sandler)
A: The focus is on simplicity, more frontline quota-carrying reps, investing in enterprise capacity, and doubling down on core networking and infrastructure. Cross-sell incentives for Splunk are being put in place. (Chuck Robbins)