Cisco Systems, the largest maker of computer networking equipment, experienced a rebound in late trading as the company showcased progress in artificial intelligence (AI) and security technology, alleviating concerns about a sales slowdown. The company reported its fiscal fourth-quarter results, which highlighted a spike in demand caused by the end of pandemic-related supply shortages. While growth is decelerating from last year’s surge, Chief Executive Officer Chuck Robbins is optimistic about the future, where revenue will be more consistent due to subscription-based services and Cisco’s focus on AI-focused data centers.
According to Cisco, it has already generated $500 million in orders for AI products, which it offers to large cloud-computing service providers known as hyperscalers. Robbins emphasized the company’s commitment to helping its customers navigate the transition to AI in a trusted and responsible manner. This positive outlook drove Cisco’s stock up by more than 2% in extended trading.
Cisco’s gross margin has been a standout performance, and it is expected to be around 65% to 66% this quarter on an adjusted basis. Sales for the period ending in October are projected to reach approximately $14.6 billion, aligning with analysts’ estimates. Excluding certain items, the company anticipates a profit of approximately $1.03 per share, exceeding the average estimate of 99 cents.
Looking ahead, Cisco forecasts sales of $57 billion to $58.2 billion in fiscal year 2024. This falls slightly short of the $58.3 billion estimated by analysts in a Bloomberg survey. Although the projected growth pales in comparison to the 11% leap in the just-ended fiscal year, the company is confident that it can leverage its supply of hardware and associated software to meet pent-up demand.
Cisco’s CEO, Robbins, has been focused on transforming the company into a provider of networking services and software. Cisco is gradually building up its recurring revenue as evidence of the successful transition. However, the company still heavily relies on selling expensive pieces of network equipment with proprietary software, making it challenging to avoid the fluctuations in demand from corporate customers. As a result, experts anticipate a slowdown in sales growth from 11% last year to just 2% this year.
Artificial intelligence was a significant topic of discussion during Cisco’s conference call, mirroring the trend among tech companies. Cloud service providers are racing to enhance their computing power to accommodate demanding services like OpenAI’s ChatGPT and Google Bard. Robbins believes that Cisco will play a role in this lucrative market, though he refrained from providing a specific forecast on its size.
Robbins expressed confidence in Cisco’s ability to prevail in the AI space, emphasizing the company’s laser focus on leading and winning in the market. The successful progress in AI and security technology has reinvigorated investors’ faith in Cisco Systems, solidifying its position as a key player in the evolving tech landscape. With a commitment to supporting customers in their AI journey, Cisco is poised to capitalize on the growing demand for advanced networking solutions.
