Cisco Set to Report Q1 Earnings: Buy, Sell or Hold CSCO Stock?

Cisco Systems CSCO is set to release its first-quarter fiscal 2025 results on Nov. 13.The company anticipates first-quarter fiscal 2025 revenues between $13.65 billion and $13.85 billion. Non-GAAP earnings are expected between 86 and 88 cents per share. The Zacks Consensus Estimate for revenues is pegged at $13.76 billion, indicating a decline of 6.17% from the year-ago quarter’s reported figure. The consensus mark for earnings has been steady at 87 cents per share in the past 30 days, suggesting a year-over-year decline of 21.62%. CSCO’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 4.93%. Cisco Systems, Inc. Price and EPS Surprise Cisco Systems, Inc. price-eps-surprise | Cisco Systems, Inc. Quote Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Let’s see how things are shaping up prior to this announcement.Key Factors to Note for CSCO’s Q1 EarningsCisco has been suffering from sluggish networking sales, primarily due to lackluster demand from telecommunication and cable services providers, as well as stiff competition. Excess inventory with customers has dragged down growth in the recent past.In the fourth quarter of fiscal 2024, Cisco reported revenues of $13.64 billion, which declined 10.3% year over year, primarily due to a 15.4% decline in product revenues, which accounted for 72.3% of total revenues. The Zacks Consensus Estimate for fiscal first-quarter Networking revenues is currently pegged at $6.909 billion, indicating 21.7% year over year.The consensus mark for Collaboration revenues is pegged at $1.065 billion, indicating a 4.7% decline on a year-over-year basis.However, Cisco is benefiting from strong security growth, driven by robust demand for solutions like XDR, Secure Access and Multicloud Defense suites. The Zacks Consensus Estimate for fiscal first-quarter Security revenues is currently pegged at $1.816 billion.CSCO Shares Underperform Sector, Beat IndustryCisco shares have increased 14.9% year to date (YTD), underperforming the Zacks Computer & Technology sector’s appreciation of 30.4% but outperforming the Zacks Computer Networking industry’s return of 14.2%.Year-to-Date Performance Chart Image Source: Zacks Investment Research However, Cisco stock is not so cheap, as the Value Score of C suggests a stretched valuation at this moment.In terms of the forward 12-month Price/Sales ratio, CSCO is trading at 4.12, higher than the industry’s 3.58.Price/Sales Ratio (F12M) Image Source: Zacks Investment Research Cisco’s Prospects Ride on an Innovative PortfolioThe increase in AI-related workload presents a strong growth opportunity for Cisco, thanks to an innovative portfolio. The total growth opportunity is expected to be $950 billion, with current markets expected to witness a CAGR of 6% and expansion markets likely to see a CAGR of 16% between 2025 and 2027.Cisco’s aggressive investments in AI, cloud, and cyber security are noteworthy. It currently has more than $1 billion in AI orders from hyperscalers, with more than $1 billion in orders in the pipeline for fiscal 2025.The Security segment is particularly noteworthy, with solutions like XDR, Secure Access and Multicloud Defense suites that are winning customers. Current markets are expected to witness a CAGR of 8%, and expansion markets are likely to see a CAGR of 14% between 2025 and 2027. The Splunk acquisition is expected to further boost CSCO’s prospects in the domain, with addressable markets worth $118 billion.In the infrastructure domain, Cisco’s addressable market is expected to be $221 billion. CSCO has been benefiting from the growing use of AI and cloud, with the ongoing digital transformation happening at enterprises. Recovery in Networking demand bodes well for Cisco's long term prospects. Its switching, routing, security, and observability are enabling customers to automate network operations with cutting-edge innovations like AI-powered robotics and unmatched supply-chain visibility. Investment in AI operations and autonomous networks by service providers is helping customers monetize B2B offerings.Strong Partner Base Drives CSCO’s ProspectsCisco’s rich partner base, which includes the likes of Meta Platforms META, Microsoft, NVIDIA NVDA, Lenovo, and AT&T T, deserves attention.The Cisco-NVIDIA partnership has introduced the Cisco Nexus HyperFabric AI cluster solution, a new end-to-end infrastructure designed to scale generative AI workloads efficiently. Cisco is collaborating with AT&T to introduce a seamless digital buying experience for businesses, offering 5G Fixed Wireless Access through the Meraki MG52 and MG52E gateways.Cisco’s Silicon One continues to gain momentum. Meta Platforms is planning to deploy the Cisco 8501, which combines the power of the Cisco Silicon One G200 and a Cisco-designed and validated hardware system.It is launching two new solutions based on Cisco Silicon One G200 — the Cisco 8122-64EH/EHF and the Cisco Nexus 9364E-SG2 — which support AI and machine learning buildouts across enterprise datacenters and hyperscalers.ConclusionCisco’s near-term results are expected to suffer from sluggishness in the networking business. However, an expanding portfolio, a growing footprint in the cybersecurity domain and a strong partner base are key catalysts that can help CSCO shares rebound in fiscal 2025.Cisco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Free Report: 5 Clean Energy Stocks with Massive UpsideEnergy is the backbone of our economy. 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