Cisco Systems, Inc. (#Cisco) ), the world’s largest internet hardware and software company, has seen its revenues rising from increasing service users and recurring sales. The Q1 2022 earnings report (quarter ending October 2021) is expected to be available on Wednesday November 17 after the market closes.
Quarter 4 2021 (quarter ending July 2021), the company reported revenue of $13.1 billion, an increase of 8% compared to the prior-year quarter. It also reported a return per share of $0.84, an increase of 5% compared to the prior year quarter. It has annual revenue of $49.8 billion, with an annual order growth rate of 31% the highest in a decade across all markets and regions. This includes an increase in software delivery and subscription revenue, which increased 6% in the fourth quarter to $4 billion year-on-year to $15 billion, or a 15% year-over-year increase.
Chuck Robbins, President and CEO of Cisco said, “We continue to see great momentum in our business as customers are looking to modernize their organizations for agility and resiliency.” Therefore, the previous quarter’s growth trend is expected to continue in the upcoming quarterly report. This is because companies and organizations still need to adapt to the current Covid-19 pandemic situation with improved security and mobility solutions to support working from home. This will benefit its products such as SecureX, a cloud-based security platform, Webex, a video conferencing platform, as well as the acquisition of Acacia Communications, which earlier this year, helped Cisco meet the demand for higher bandwidth communications.
However, the demand for server products is declining, and higher costs from supply chain disruptions that occurred during the quarter, could hurt the company’s earnings report for the quarter. Zacks forecast Q1 2022 sales of $12.98 billion, down from $13.1 billion the previous quarter (but up 8.79% compared to the same quarter last year). While the return per share is expected to be $0.81, down from $0.84 the previous quarter. The company’s earnings report, however, has exceeded Zacks’ forecasts for every quarter since 2018.
From a technical point of view, Cisco’s share price is undergoing correction. After moving to a new year’s high in the $60.00 zone on strong Q4 earnings reports, a lower-than-expected earnings report could push the company’s share price into the quarter’s lows again at $53.00. However, if earnings are better than expected, the company’s share price may rise to test the previous high of $60.00 again, and this could lead to a major correction in this zone.
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Chayut Vachirathanakit
Market Analyst – HF Educational Office – Thailand
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