Cisco (CSCO) is always a tricky play around its earnings report.
The company isn’t a fast grower, and what the Street focuses on tends to shift from quarter to quarter. Sometimes it’s profit margins, sometimes it’s product orders, sometimes it’s the outlook.
Going through the latest, I don’t hate the quarter and outlook. Gross margins were up across the board, and the AI narrative and numbers were solid as well. There was some weakness in the security business, as expected, but the demand drivers out there suggest new full-year guidance could be conservative.
“We think investors should look past Public Sector weakness, which likely hurt Security growth, given the opportunity around Hyperscaler/Enterprise AI, Neoclouds, and Sovereign could quickly offset the weakness. We continue to like Cisco for these drivers of growth, and when paired with a mix shift toward software/subscription over time, healthy free cash flow growth, and shareholder returns, we believe a premium to historical valuations is warranted,” KeyBanc analyst Brandon Nispel said.
I am live on Opening Bid today around 9:40 a.m. ET with Cisco’s new CFO Mark Patterson. So we’ll get to pull apart the numbers and guidance further!