Last week, Cisco reported its fiscal fourth quarter financial results. The company's fiscal fourth-quarter revenue was $13.6 billion, down 10 percent year-over-year. Cisco Chairman and CEO Chuck Robbins noted that the company's gross margin of 67.5 percent was the highest in the company's 20-year history and was boosted by the recent acquisition of network security subsidiary Splunk.
Robbins said, “We saw steady demand at the end of the fiscal year, with total product orders up 14 percent, excluding Splunk up 6 percent, indicating that the period of inventory digestion by our customers is essentially over, as we expected.” Robbins said in his report that all of Cisco's geographic segments performed strongly. He said, “Global public sector demand was particularly strong, driven by U.S. federal spending and strong Asia-Pacific markets. Enterprise demand recovered strongly, with solid performance in the Americas and EMEA, and even stronger results in Asia Pacific. We signed several deals in excess of $100 million during the quarter with global enterprises that are leveraging the breadth of our technology platform to modernize and automate network operations and deploy next-generation machine learning and artificial intelligence applications.” However, Robbins said demand from Telecom and Cable customers remains subdued, which he attributed to continued pressure across the industry.
Product demand performance
Robbins said Cisco's customers are focusing on their next highest-priority technology investments, which is bolstering demand for the company's products.Robbins said, “Excluding Splunk, orders for security products grew by double digits, and orders for collaboration products grew by double digits. Within our networking portfolio, we also saw double-digit growth in orders for data center switching products. Enterprise routing, campus switching and wireless orders were also strong, with wireless orders exceeding 1 million, up more than 20 percent year-over-year, as customers look to improve their office environments.” Robbins also said that the AI infrastructure opportunities that Cisco has worked hard to capitalize on are paying off for the company. He said, “To date, our web-scale customers have exceeded $1 billion in AI orders. Three of our four largest hyperscale customers have deployed our Ethernet AI fabric and are leveraging Cisco's proven AI infrastructure designs. We expect to add another $1 billion in AI product orders in fiscal 2025.” Cisco is also applying AI to its own services to improve productivity and customer experience. According to him, Cisco has a robust AI and automation framework that can handle at least 50 percent of service requests.
Rising order levels
Cisco CFO Scott Herren analyzed the results of the quarter and reported that total product revenues were down 15% at $9.9 billion and service revenues were up 6% at $3.8 billion.Splunk contributed about $960 million in revenues during the quarter. Revenue from networking, Cisco's largest product category, fell 28 percent year over year. Revenue from security products, including Splunk, was up 81 percent, and revenue from security products excluding Splunk was up 6 percent. herren also reported that product orders were up 14 percent year over year, and orders for products excluding Splunk were up 6 percent. He believes this indicates that the period of inventory digestion by the company's customers is now largely behind them. Based on the geographic distribution of product orders, the Americas grew 15% year-over-year, EMEA grew 12%, and APJC grew 16%. For customer markets, the public sector grew 20% year-on-year, enterprises grew 13%, and service providers and cloud grew 5%. Turning to the full fiscal year, Robbins reported that FY2024 was Cisco's second strongest year on record, with revenues of $53.8 billion (compared to $57 billion in FY2023).
Robbins said, “We had a good fourth quarter and a good fiscal year. Our order levels have improved as customers have mostly completed shipments of Cisco products. In addition, we are realigning our spending to better capitalize on future opportunities.” Despite the positive outlook, Herren reported that Cisco is planning a new round of layoffs, its second this year, that will affect about 7 percent of the company's workforce.
Cisco expects revenue to be between $13.65 billion and $13.85 billion in the first quarter of fiscal 2025, and between $55 billion and $56.2 billion for the full fiscal year.
