Key Metrics
- Revenue: $13.6 billion (down 10% yoy)
- Product Revenue: $9.9 billion (down 15% yoy)
- Service Revenue: $3.8 billion (up 6% yoy)
- Networking Revenue: Down 28% yoy
- Security Revenue: Up 81% yoy (including Splunk); Excluding Splunk, up 6%
- Collaboration Revenue: Flat
- Observability Revenue: Up 41% yoy (including Splunk); Excluding Splunk, up 12%
- Non-GAAP Gross Margin: 67.9% (up 200 bps yoy)
- Product Gross Margin: 67.0% (up 150 bps yoy)
- Service Gross Margin: 70.3% (up 280 bps yoy)
- Non-GAAP Operating Margin: 32.5% (exact yoy % not provided)
- Ending Deferred Revenue: $28.5 billion (up 11% yoy)
- Remaining Performance Obligations (RPO): $41.0 billion (up 18% yoy)
- Cash from Operations: $3.7 billion
- Repurchases: $2.0 billion in share repurchases during Q4; Total value returned to shareholders in Q4 was $3.6 billion (including dividends).
Forward guidance
- Fiscal Q1 Revenue Guidance: Expected in the range of $13.65 billion to $13.85 billion.
- Fiscal Q1 Non-GAAP Gross Margin: Anticipated to be in the range of 67% to 68%.
- Fiscal Q1 Non-GAAP Operating Margin: Expected in the range of 32% to 33%.
- Fiscal Q1 Non-GAAP EPS Guidance: Expected to range from $0.86 to $0.88.
- Fiscal Q1 Non-GAAP Effective Tax Rate: Assumed to be approximately 19%.
- Fiscal Year 2025 Revenue Guidance: Expected in the range of $55 billion to $56.2 billion.
- Fiscal Year 2025 Non-GAAP EPS Guidance: Expected to range from $3.52 to $3.58.
Key takeaways
- Positives:
- Chuck Robbins noted, "We saw steady demand as we closed the year with total product order growth of 14%," indicating a strong recovery from previous inventory digestion issues.
- The integration of Splunk is yielding early synergies, with Robbins stating, "We believe we have an unmatched capability to unlock the full power of the network with market-leading security and observability solutions."
- Cisco's gross margin reached 67.5%, the highest in 20 years, reflecting operational efficiency and strong product mix, as highlighted by Scott Herren.
- The company is pivoting resources towards AI, cloud, and cybersecurity, with Robbins emphasizing, "We are shifting hundreds of millions of dollars into AI, into AI networking for cloud, into AI infrastructure."
- Public sector demand surged by 20%, driven by federal spending, showcasing resilience in government contracts.
- Negatives:
- Despite strong overall performance, networking revenue declined by 28% year-over-year, indicating challenges in that segment, as noted by Herren.
- The restructuring plan affecting 7% of the workforce raises concerns about potential operational disruptions, with Herren clarifying, "It's not about cost saving... it's much more about finding efficiencies."
- The competitive landscape remains tough, with Herren acknowledging, "Price was somewhat of a headwind to product revenue in the quarter," suggesting ongoing pricing pressures.
- The guidance for fiscal 2025 reflects a tough comparison against a strong prior year, with Robbins stating, "We still have a tough compare in Q1," due to significant backlog clearance in the previous year.
Peer Summary
- Networking Demand: Arista Networks emphasized that "networks are emerging at the epicenter of mission-critical transactions," indicating a strong demand for networking solutions, particularly in AI applications, contrasting with Cisco's 28% decline in networking revenue.
- AI and Cloud Growth: Hewlett Packard Enterprise reported a "notable acceleration of AI systems revenue conversion," with a 39% increase, highlighting a sector-wide shift towards AI that may impact Cisco's competitive positioning.
- Market Recovery Sentiment: Extreme Networks noted they are in the "early stages of a broad networking market recovery," suggesting potential sector growth that could challenge Cisco's current revenue trends.
- Supply Chain Challenges: Ciena Corp highlighted ongoing supply chain issues, stating "lead times for advanced semiconductors remain extended," which could affect Cisco's operational efficiency if similar challenges persist.
- International Spending Caution: Ciena also mentioned "cautious spending persists" among international service providers, reflecting macroeconomic concerns that could impact Cisco's global revenue streams.
