Key Takeaways From Cisco’s Earnings And What To Expect Going Forward

by Trefis Team
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Cisco (NASDAQ:CSCO) announced its Q3 fiscal 2018 earnings on May 16, reporting a 4% year-over-year increase in net revenues to $12.5 billion. This was the second consecutive quarter of revenue growth for Cisco after about two years of consistent revenue declines. Revenue growth through the quarter was driven by a 19% increase in Applications revenues to $1.3 billion, which the company attributed to strength in TelePresence endpoints, UC Infrastructure and AppDynamics segments. Similarly, security revenues were up 11% for the quarter to $583 million. On the other hand, core infrastructure revenues were up only 2% y-o-y to $7.2 billion. While switching and data center product revenues were up, routing revenues continued to decline. Cisco’s service revenues rose 3%, driven by consistent demand for advanced services and software support. In terms of margins, Cisco’s non-GAAP operating margin was roughly flat over the comparable prior year period at 32%, while net income was up 6% y-o-y to $3.2 billion

Going forward, we expect the aforementioned trends to continue through the end of the current fiscal year. Cisco’s management gave a positive guidance for the fiscal fourth quarter, with revenues expected to be around 5% higher on a year-over-year basis. On the other hand, the company’s non-GAAP operating profit margin is expected to be around the 30% range for the quarter with a non-GAP EPS of around 70 cents a share. Taking the company guidance and market trends into account, we have created an interactive analysis where we have summarized our FY’18 expectations for Cisco. Our forecasts for the year are broadly in line with the consensus estimates. If you disagree with our estimates, you can change expected segment revenue and margin figures for Cisco to gauge how it will impact expected EPS for the year.

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