Cisco Q1 Earnings on deck: All eyes on security segment amid declining networking sales

Digital communication technology company, Cisco (NASDAQ:CSCO) is expected to announce its first quarter earnings results on Wednesday, November 13th, after the bell. Investors are skeptical as the company continues to suffer from declining networking sales due to weak demand from cable service providers, and growing competition. Excess inventory has also impacted the company’s growth in recent quarters.

Wall Street analysts expect the company to report a 21.6% decline in EPS to $0.87, at a revenue of $13.77B, 6% lower than last year. Analysts expect Cisco’s (CSCO) results to be impacted by sluggishness in the networking sector, however see long-term potential with the company’s investments in cloud, cybersecurity, and AI.

Cisco (CSCO) was upgraded to Overweight from Neutral by J.P. Morgan on Monday due in part to a recovery cycle in enterprise networking. The investment bank also bumped up the price target on the stock to $66 from $55, an increase of 20%.

J.P. Morgan analysts, led by Samik Chatterjee, said in an investor note that the “wild card” to watch for in the upcoming earnings report will be the Security segment. “Given Cisco’s recent re-focus on Security and subsequent investments, Security as a percentage of total revenue has expanded from less than 10% of total product revenue to being on track to account for almost 20% or greater,” Chatterjee noted.

In the last three months, analysts have revised their estimates quite a few times, with EPS estimates seeing 14 upward revisions, and 4 downward, while revenue estimates saw 11 upward revisions, and 5 downward.

Seeking Alpha analyst Brian Gilmartin pointed out that the fiscal Q1 ’25 is the last tough “compare” Cisco has against last year’s “inventory overhang”, and the forward estimates are looking for better growth from the networking giant.

Cisco (CSCO) reported a 10% decline in revenue last quarter with an EPS of $0.87. The company said it expects revenue of $13.65B to $13.85B in the first quarter, and expects Non-GAAP earnings per share in the range of $0.86 to $0.88.

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