To The Moon

$Cisco(CSCO)$ will be reporting their fiscal second-quarter 2025 earnings on 12 Feb after the market close. CSCO is one of the more tech names to watch for earnings as their product and services are complementing what A.I. infrastructure building need.

Analysts expect CSCO to report earnings of 91 cents per share (+4.6% YoY) on revenue of $13.9 billion (+8.6% YoY).

With the CAPEX spending not reducing despite worry of slower economic, CSCO is expected to have a slight top-line beat as networking results have largely been better than expected on improving CAPEX spending environment.

On top of that, the data center demand which have been driven by the A.I. deployment demand has also increased as customers are modernizing their infrastructure to allow more capacity requirements, and also with multi-cloud environments getting into a norm for these customers, CSCO product and services demand would be seen to increase.

Cisco Systems (CSCO) Last Positive Earnings Call Give A 6.21% Change Since

Since CSCO last earnings call on 13 Nov 2024, which has a positive sentiment, we have seen the share price gaining a positive 6.21% since, the earnings call presented a strong start to the fiscal year with solid revenue and earnings, significant growth in product orders, and successful integration of Splunk. However, there were challenges, such as a decline in networking revenue and delays in U.S. federal spending impacting security growth.

Cisco Systems (CSCO) Optimistic Guidance

During Cisco's Q1 2025 earnings call, the company provided optimistic guidance for the upcoming quarters, leveraging a strong start to the fiscal year with $13.8 billion in revenue, outperforming the high end of their guidance range. Cisco reported a significant 20% year-over-year growth in product orders, with organic growth at 9%, and achieved a remarkable non-GAAP EPS of $0.91, supported by a non-GAAP gross margin of 69.3%, the highest in over two decades.

Their annualized recurring revenue reached $29.9 billion, marking a 22% increase, with subscription revenue now comprising 57% of total revenue. For Q2 2025, Cisco anticipates revenue between $13.75 billion to $13.95 billion and a non-GAAP EPS range of $0.89 to $0.91.

The full fiscal year 2025 outlook projects revenue between $55.3 billion to $56.3 billion, with a non-GAAP EPS ranging from $3.60 to $3.66, assuming a 19% effective tax rate. Cisco is optimistic about exceeding $1 billion in AI orders this fiscal year from web-scale customers, driven by the combined strength of their networking and security portfolios, enhanced by the recent integration of Splunk.

With the hyperscalers and enterprise CAPEX spending set to increase on A.I., I would think that CSCO AI orders for the fiscal year would be able to exceed $1 billion, and with the enhancement of Splunk integrated into the CSCO ecosystem, this would make CSCO more appealing to these customers.

Expect Significant Growth In Cisco Systems (CSCO) Product Orders Due To A.I.

In fiscal Q1 2025, Cisco had strong revenue and earnings performance, where Cisco delivered $13.8 billion in revenue for Q1 FY25, at the high end of guidance. Non-GAAP EPS of $0.91 also exceeded expectations.

The strong performance is due to the significant growth in product orders which grew 20% year-over-year in Q1, with 9% organic growth, surpassing previous growth of 14% in the prior quarter.

I would think this could increased further with a stronger organic growth and also we will be seeing strong growth from Enterprise and Service Provider

Enterprise and Service Provider Order Growth To Increase

Enterprise product orders increased by 33% and service provider and cloud orders grew by 28%, including triple-digit growth in web scale.

But we might see a decline in networking revenue because in Q1 2025, networking revenue was down 23% year-over-year, largely due to elevated shipments in the prior year. This might still cause some impact in Q2 2025.

One area that need to take note is the U.S. Federal spending delays, where public sector orders were up only 2%, affected by delays in U.S. federal spending due to continuing resolutions and fiscal responsibility act discussions. I hope to see an improvement with the new Trump administration.

Security and Observability Segments

Security orders more than doubled, driven by Splunk, and observability orders were up by high single digits, with significant contributions from ThousandEyes and Splunk Observability. Integration of Splunk has progressed well, with several joint products launched and a significant number of Cisco partners trained on Splunk solutions.

Excluding Splunk, security product orders grew only 2%, with U.S. Federal delays impacting results.

Cisco Systems (CSCO) Price Target

Based on 16 Wall Street analysts offering 12 month price targets for Cisco Systems in the last 3 months. The average price target is $63.67 with a high forecast of $73.00 and a low forecast of $53.00. The average price target represents a 1.99% change from the last price of $62.43.

With the demand for a multi-scale networking solutions, Cisco would be in a good position to be the providers so I am expecting Cisco to be trading near the $65 at least.

Technical Analysis - Exponential Moving Average (EMA)

If we look at how CSCO have been trading on the technicals, the level at 12-EMA ($61) is important, because if CSCO were to fall below this level then we might see a downtrend.

On the other hand, the bulls is trying to create a daily uptrend expansions but does not seem to succeed as CSCO looks like trading sideway, so the earnings and guidance outlook is important to make either a surge after the earnings call, or a surprise EPS could help CSCO to make a nice uptrend.

I would be looking to add some shares once CSCO correct to around $62 to $62.80.

Summary

I would think CSCO is in a good position to benefit from the demand from A.I. revolution as there have been demand for more data center, and data center networking solutions would be something that CSCO is strong in. I look forward to see a strong growth in revenue from CSCO.

Appreciate if you could share your thoughts in the comment section whether you think CSCO would provide an earnings surprise with better sales order growth .

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.