Cisco Systems (CSCO) Q4 2024 earnings summary

Executive summary

• Q4 revenue reached $13.6B, above guidance but down 10% year-over-year; Splunk contributed $960M and recurring revenues grew, with gross margin at a 20-year high of 67.9%.

• Product order growth was 14% year-over-year (6% excluding Splunk), with normalization of demand and inventory digestion largely completed.

• Software and recurring revenue metrics were robust, with 56% of total revenue from subscriptions and ARR at $29.6B, up 22% year-over-year.

• Splunk integration contributed to revenue and margin growth, with early synergies and cross-portfolio deals emerging.

• A restructuring plan was announced to reallocate resources toward AI, cloud, and cybersecurity, impacting 7% of the workforce and up to $1B in pre-tax charges.

Financial highlights

• Q4 total revenue: $13.6B (down 10% YoY); product revenue: $9.9B (down 15% YoY); services revenue: $3.8B (up 6%).

• Q4 non-GAAP net income: $3.5B (down 25% YoY); non-GAAP EPS: $0.87 (down 24% YoY); GAAP net income: $2.2B (down 45% YoY); GAAP EPS: $0.54 (down 44% YoY).

• FY24 revenue: $53.8B (down 6% YoY); non-GAAP EPS: $3.73 (down 4% YoY); GAAP EPS: $2.54 (down 17% YoY).

• Security revenue up 81% (6% ex-Splunk); Observability up 41% (12% ex-Splunk); Networking down 28%.

• Cash flow from operations in Q4 was $3.7B; FY24 cash flow from operations was $10.9B, down 45% YoY.

Outlook and guidance

• Q1 FY25 revenue expected: $13.65B–$13.85B; non-GAAP EPS: $0.86–$0.88; GAAP EPS: $0.35–$0.42.

• FY25 revenue guidance: $55B–$56.2B; non-GAAP EPS: $3.52–$3.58; GAAP EPS: $1.93–$2.05.

• Restructuring charges up to $1B pre-tax expected, mostly in Q1 FY25.

• Guidance assumes effective tax rates of ~17% (GAAP) and ~19% (non-GAAP).

• Demand patterns are normalizing post-inventory digestion, with expectations for continued AI infrastructure momentum and another $1B in AI product orders in FY25.