Cisco Provides Disappointing Q2 Revenue Guidance; Shares Drop After-Hours

Cisco Systems (CSCO) has provided disappointing revenue guidance for the second quarter of Fiscal Year 2022, as the company’s first-quarter revenues missed consensus estimates.

Don't Miss Our Christmas Offers:

Discover the latest stocks recommended by top Wall Street analysts, all in one place with Analyst Top Stocks
Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter

Following the news, shares of the manufacturer of networking hardware, software, telecommunications equipment, and other high-technology services and products plunged 6.1% in Wednesday’s extended trading session.

Results in Detail

Cisco reported adjusted first-quarter earnings of $0.82 per share, up 8% year-over-year and in line with the consensus estimate.

Revenues of $12.9 billion stood below analysts’ expectations of $13.03 billion but were up 8% year-over-year on the back of strong performance across the business.

Segment-wise, while product revenue was up 11% year-over-year to $9.5 billion, service revenue grew 1% to $3.4 billion.

Adjusted gross margin was 64.5% during the quarter, down 130 basis points year-over-year. (See Cisco stock charts on TipRanks)

In the first quarter of Fiscal Year 2022, Cisco returned $1.8 billion to stockholders through share buybacks and dividends. The company repurchased 5 million shares of common stock at an average price of $56.49 per share for a total value of $256 million.

CEO Comments

The CEO of Cisco, Chuck Robbins, said, “In Q1, we had robust growth and continued strong demand despite the very dynamic supply environment. Cisco’s technology sits at the heart of the accelerated digital transformation happening today. Our breakthrough innovation, strong demand, and the success of our business transformation position us well for another year of growth in fiscal 2022.”

Guidance

For the second quarter of Fiscal Year 2022, revenue is expected to reflect 4.5% to 6.5% year-over-year growth, lower than the Street’s estimate of around 7% growth. Adjusted EPS is anticipated in the range of $0.80 to $0.82 against analysts’ expectations of $0.82 per share.

For Fiscal Year 2022, revenue is likely to reflect 5% to 7% year-over-year growth. Adjusted EPS is anticipated between $3.38 and $3.45, as compared to the consensus estimate of $3.42 per share.

Wall Street’s Take

The rest of the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 12 Buys versus 10 Holds. The average Cisco price target of $63.42 implies 11.73% upside potential to current levels. Shares have increased 37.4% over the past year.

Smart Score

According to TipRanks’ Smart Score system, Cisco gets a 7 out of 10, which indicates that the stock is likely to perform in line with market averages. (See Top Smart Score Stocks on TipRanks)