Cisco Systems (CSCO) is the best Dow Jones stock Thursday after the networking equipment specialist beat top- and bottom-line expectations for its fiscal fourth quarter and announced a 7% reduction to its global workforce.
In the three months ended July 27, Cisco said its revenue decreased 10.3% year-over-year to $13.6 billion, pressured by a 28% drop in networking revenue to $6.8 billion. Its earnings per share (EPS) fell by 23.7% to 87 cents.
"We delivered a strong close to fiscal 2024," said Cisco CEO Chuck Robbins in a statement. "In our fourth quarter, we saw steady customer demand with order growth across the business as customers rely on Cisco to connect and protect all aspects of their organizations in the era of artificial intelligence (AI)."
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Despite the decline in both the top and bottom lines, Cisco's results topped analysts' expectations. Wall Street was anticipating revenue of $13.5 billion and earnings of 85 cents per share, according to CNBC.
In a separate filing, Cisco announced a restructuring plan that will "allow it to invest in key growth opportunities and drive more efficiencies in its business." As part of its restructuring efforts, the company will be eliminating approximately 7% of its global workforce. This marks its second round of layoffs this year, with the Cisco Systems cutting 5% of its labor force back in February.
Cisco also provided an outlook for the first quarter and new fiscal year. For the first quarter, CSCO anticipates revenue in the range of $13.65 billion to $13.85 billion and earnings per share to arrive between 86 cents to 88 cents. For all of fiscal 2025, the company is guiding for revenue of $55 billion to $56.2 billion and EPS in the range of $3.52 to $3.58.
Cisco's outlook satisfies what analysts are anticipating. According to Yahoo Finance, Wall Street is forecasting revenue of $13.65 billion and earnings of 85 cents per share for the first quarter. For the full year, expectations are for revenue of $55.6 billion and earnings of $3.56 per share.
Is Cisco stock a buy, sell or hold?
Cisco Systems has struggled on the price charts this year, down 13% on a total return basis (price change plus dividends) vs the S&P 500's 23% gain.
Still, Wall Street leans bullish on the blue chip stock. According to S&P Global Market Intelligence, the average analyst target price for CSCO stock is $53.71, representing implied upside of about 10% to current levels. Meanwhile, the consensus recommendation is Buy, though with low conviction.
Financial services firm Oppenheimer is one of the more bullish outfits on CSCO stock with an Outperform rating (equivalent to a Buy) and a $58 price target.
"Cisco remains the dominant networking vendor, with strong underlying fundamentals," says Oppenheimer analyst Ittai Kidron. "We see Cisco as well positioned for the next-generation virtualized data center given its history of strong execution and M&A, product breadth, geographic diversity, and scale advantages."
The analyst adds that he's upbeat on the opportunities available in software-as-a-service (Saas) and Cisco's cloud segment, which includes security and collaboration. These initiatives, Kidron adds, will likely drive more recurring revenue.
The analyst also points to stock buybacks, which are likely to support the share price. In fiscal 2024, Cisco repurchased $5.8 billion of its own stock.
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