What To Expect From Cisco’s Fiscal 2019 After A Strong End To 2018

by Trefis Team
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Cisco (NASDAQ:CSCO) announced its Q4 fiscal 2018 earnings on August 15, reporting a 6% year-over-year increase in net revenues to $12.8 billion. This was the third consecutive quarter of revenue growth for Cisco after about two years of consistent revenue declines. Revenue growth through the quarter was driven by a 10% increase in Applications revenues to $1.3 billion, which the company attributed to strength in TelePresence endpoints, UC Infrastructure and AppDynamics. Similarly, Security revenues were up 12% for the quarter to $627 million. In addition, core Infrastructure revenues were up 7% y-o-y to $7.4 billion. 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 31%, while net income was up 8% y-o-y to $3.3 billion. This was complemented by share repurchases through the year, which led non-GAAP EPS to increase 15% y-o-y to 70 cents a share.

We have created an interactive dashboard on how Cisco will perform in fiscal 2019, where we have summarized our full-year expectations for the company. You can modify any of our key forecasts and drivers to see how any changes will impact the company’s results for fiscal 2019. 

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Expectations For Fiscal 2019

Going forward, we expect the company’s Product sales to continue to show a positive trend through FY’19. Cisco’s management gave positive guidance for the fiscal first quarter, with revenues expected to be around 6% 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 30.5% range for the current quarter, with non-GAP EPS of around 71 cents a share. For the full year, we forecast both the Applications and Security segments to grow at 8-9%, driving much of the top line growth for the company. We expect the trend of low single-digit growth for the Services and Infrastructure segments to continue through FY’19.

Based on our revenue and margin forecasts, we expect Cisco’s net income and EPS for the year to be roughly flat over the comparable prior year period. Our forecasts for the year are broadly 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 year.

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