Cisco Systems (NASDAQ:CSCO) has disclosed its fiscal Q4 2023 results, revealing non-GAAP earnings of $1.14 per share, which surpassed the Zacks Consensus Estimate by 7.55%. The company’s net income surged by 37.3% in comparison to the previous year.

The Q4 revenues displayed a year-over-year increase of 16%, reaching $15.2 billion, outperforming the consensus forecast by 1.04%. Notably, product revenues, accounting for 76.6% of the total, experienced a significant rise of 20.3%, totaling $11.09 billion.

Within the company’s business segments, Secure, Agile Networks revenues surged by 33% year over year, reaching $8.125 billion, surpassing the consensus projection by 5.85%. Meanwhile, End-to-End Security revenues amounted to $987 million, falling short of the Zacks Consensus Estimate by 3.04%.

Although Internet for the Future revenues grew by 3% to $1.298 billion, this figure fell below the consensus prediction by 9.29%. Optimized Application Experiences revenues demonstrated a 15% increase, reaching $214 million, surpassing the consensus mark by 2.43%.

However, Collaboration revenues experienced a 12% decline on a year-over-year basis, amounting to $1.023 billion. Revenues generated from Other Products saw a significant drop of 33%, totaling $2 million.

Service revenues, constituting 23.4% of total revenues, witnessed a slight increase of 4.1% year over year, reaching $3.55 billion.

Q4 Earnings Performace

In terms of regional performance, Cisco’s revenues from the Americas surged by 12% compared to the previous year, totaling $9.075 billion and outpacing the consensus expectation by 4.34%. Revenues from the EMEA region exhibited a 10% increase year over year, amounting to $3.93 billion, though it fell short of the consensus projection by 2.9%. Similarly, APJC revenues grew by 7% year over year, reaching $2.203 billion, but missed the consensus mark by 2.59%.

Annualized recurring revenues (ARR) reached $24.3 billion, reflecting a 5% year-over-year growth. Product ARR experienced a more substantial increase of 10%.

Cisco’s non-GAAP gross margin expanded by 270 basis points (bps) from the same quarter of the previous year, reaching 65.9%. On a non-GAAP basis, the product gross margin showed an even greater expansion of 420 bps, reaching 65.5%. Conversely, the service gross margin contracted by 150 bps, settling at 67.5%.

Non-GAAP operating expenses amounted to $4.65 billion, indicating a 14.7% increase compared to the previous year. As a percentage of revenues, operating expenses decreased by 40 bps, reaching 30.6%.

The non-GAAP operating margin expanded by 300 bps year over year, reaching 35.4%.

Financial Position and Cash Flow

As of July 29, 2023, Cisco reported cash and cash equivalents, along with investments, totaling $26.15 billion, a rise from $23.29 billion as of April 29, 2023.

The total debt remained unchanged sequentially, standing at $8.39 billion as of July 29, 2023.

Operating activities generated a cash flow of $6 billion, surpassing the $5.2 billion reported in the previous quarter.

The remaining performance obligations (RPO) by the end of the fiscal Q4 amounted to $34.9 billion, indicating an 11% increase, with 51% of this value expected to be recognized as revenues over the next 12 months. Product RPO increased by 12%, while service RPO increased by 9%.

Future Outlook

Cisco has provided guidance for the first quarter of fiscal 2024, estimating revenues between $14.5 billion and $14.7 billion. This projection aligns closely with the Zacks Consensus Estimate of $14.53 billion.

The anticipated non-GAAP gross margin for the quarter is expected to fall between 64.5% and 65.5%.

The non-GAAP operating margin is predicted to range from 34% to 35% for the quarter.

Projected non-GAAP earnings per share are expected to be between $1.02 and $1.04. The Zacks Consensus Estimate for earnings currently stands at 99 cents per share, falling below the provided range.

For fiscal year 2024, revenues are anticipated to range between $57 billion and $58.2 billion. Likewise, non-GAAP earnings are projected to fall within the range of $4.01 to $4.08 per share.

The consensus forecast for fiscal 2024 earnings and revenues is $4.04 per share and $58.28 billion, respectively.

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