What To Expect From Cisco’s Q4 Earnings As Product Sales Bounce Back

by Trefis Team
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Cisco (NASDAQ:CSCO) is scheduled to report its Q4 fiscal 2018 earnings on August 15. In the last couple of years, the company has reported a slowdown in revenue growth, driven primarily by low core product sales. This trend reversed in the two most recent quarters, however, with product sales picking up. Two prominent areas of revenue growth in recent quarters were the Applications and Security segments. As a result of double digit growth in revenues from these segments, Cisco’s management gave positive guidance for the fiscal fourth quarter, with revenues expected to be around 5% higher on a year-over-year basis to around $12.7 billion. On the other hand, the company’s non-GAAP operating profit margin is expected to continue to be lower than FY’17 levels at around 30%. We have summarized our expectations on an interactive earnings preview dashboard for Cisco. Our forecasts for the quarter are about in line with 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 quarter.

What We Will Be Watching

For the June quarter, we forecast Cisco’s core Infrastructure Platforms revenues to be around 3% higher on a y-o-y basis to $7.2 billion. The company reported 2% revenue growth in this segment in the most recent quarter, which is a strong positive for the company given that these revenues witnessed low single digit declines through FY’17. Similarly, we forecast Services revenues to also increase by over 3% to $3.2 billion for the June quarter. In addition to core products and services, we expect much of the revenue growth to come from the Applications and Security segments. We forecast both segments’ revenues to increase in the low teens to $1.5 billion and $820 million, respectively. On the other hand, Cisco’s operating profit margin is likely to remain lower than previous year levels. Cisco’s guided operating margin (non-GAAP) range lies from 29.5% to 30.5%, which at the midpoint is over 150 basis points lower on a y-o-y basis. Resulting net income and EPS are expected to be around 10% higher on a y-o-y basis to $3.4 billion and 69 cents a share, respectively.

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