Earnings for Cisco in Q4 Fall Short of Expectations, Revenues Steady Year-Over-Year

Cisco Systems NASDAQ:CSCO

Cisco Systems (NASDAQ:CSCO) reported non-GAAP earnings of 83 cents per share for the fourth quarter of the fiscal year 2022. This was 27.38% less than the Zacks Consensus Estimate. Compared to last year, profits fell by 1.2%.

Sales were $13.10 billion, which is basically the same as the previous year. The revenue number is 2.75% more than expected.

Quarterly Breakdown

North and South America saw a 3% decline in revenue to $7.47 billion from the previous year. Its earnings in Europe, the Middle East, and Africa (EMEA) region were $3.58 billion, up 8% from last year. Total income for the APJC dropped by 2% annually, reaching $2.06 billion.

The $3.41 billion earned from services (a 26.1% share of total income) remained unchanged from the prior year.

“ARR” totaled $22.9 billion, up 8% year-on-year.

At $9.69 billion, product sales (which account for 73.6% of overall sales) are down 0.3% from a year ago.

Revenue Distribution by Product

The $6.09 billion in revenue generated by “Secure, Agile Networks” (which accounted for 62.9% of total Product revenues) was down 1% from the previous year.

Revenues from Collaboration (12%of Product revenues) grew by 2% annually to $1.16 billion.

The 10.2% of Product sales from End-to-End Security increased by 20% to $984 million.

Sales from the Internet of the Future segment (13% of Product sales) fell 10% to $1.26 billion.

Optimized Application Experiences saw an increase in sales of 8%, reaching $185 million (1.9% of Product revenues).

Other Product sales fell 22% to $3 million in revenue.

Operating Highlights

Cisco Systems (NASDAQ:CSCO) recorded gross margin adjusted for non-GAAP methods fell to 62.9% from 63.1% in the prior-year period.

Product gross margin fell 370 basis points to 61.3% when reported non-GAAP. The 61.3% gross margin in the service industry has not changed.

In 2018, operational costs were $4.59 billion, an increase of 8.9% from 2017. Operating costs as a proportion of sales rose by 290 basis points, to 35%.

The operating margin outside of GAAP increased by 20 basis points compared to the previous year, reaching 32.4%.

Cisco’s Cash Flow Statement and Balance Sheet

Cisco Systems (NASDAQ:CSCO) cash and cash equivalents and investments amounted to $19.3 billion as of July 30, 2022, down from $20.1 billion as of April 30, 2022.

As of July 30, 2022, total debt (short-term and long-term) was $9.52 billion, up from $9.42 billion as of April 30.

Like the previous quarter, operating cash flow amounted to $3.7 billion.

Cisco Systems (NASDAQ:CSCO) gave $2.4 billion to shareholders through buybacks and a quarterly dividend of 38 cents per share.

At the end of the fiscal fourth quarter, remaining performance obligations (“RPO”) totalled $31.5 billion, up 2%, with 54% of this amount recognized as revenues during the next 12 months. Service RPO decreased by 1%, while product RPO increased by 6%.

Guidance

Cisco Systems (NASDAQ:CSCO) revenues are projected to increase by 2% and 4% in the first quarter of fiscal 2023.

We expect a non-GAAP gross margin for the quarter between 63% and 64%.

We expect a non-GAAP operating margin of 31.5–32.5% for the quarter. Earnings per share, excluding items not considered in determining GAAP financial health, range from 82 cents to 84 cents.

Revenues are anticipated to increase by 4-6% annually in fiscal 2023. Non-GAAP EPS is expected to range from $3.49 to $3.56.

Featured Image:  Megapixl @Wolterk

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