The News: Cisco reported fourth quarter (Q4) results and fiscal year (FY) results for the period ended July 29, 2023. The company posted Q4 revenue of $15.2 billion, net income on a generally accepted accounting principles (GAAP) basis of $4.0 billion or $0.97 per share, and non-GAAP net income of $4.7 billion or $1.14 per share. Cisco reported FY 2023 revenue of $57.0 billion, an increase of 11% year over year (YoY). Read the earnings press release on the Cisco website.
Cisco Q4 and FY 2023: AI, Security, and Cloud Fuel Milestone Results
Analyst Take: Cisco delivered record performance in both its full year and Q4 FY results. Chair and CEO Chuck Robbins emphasized that Cisco is experiencing solid customer demand, gaining market share, and producing innovation across key areas such as AI, security, and cloud. As such, Cisco is well-positioned to win more business opportunities as reflected in its FY 2024 guidance of $57.0 billion to $58.2 billion.
Specifically, total revenue was up 16% at $15.2 billion, with product revenue up 20% and service revenue up 4%. Revenue by geographic region included: Americas up 21%, EMEA up 10%, and APJC up 7%. Product revenue performance was led by growth in Secure, Agile Networks up 33%, Optimized Application Experiences up 15%, and Internet for the Future up 3%. Collaboration was down 12%. End-to-end Security was flat.
Cisco’s earnings per share (EPS) of $1.14 beat expectations of $1.06, registering 43% YoY growth. From our view, by delivering beats on earnings and revenue, Cisco is fortifying its business model transformation to fulfill the sturdy customer demand that the company sees, especially throughout the AI, cloud, and security domains.
Here are additional key Cisco Q4 and FY 2023 figures by the numbers:
- Gross Margin: On a GAAP basis, total gross margin, product gross margin, and service gross margin were 64.1%, 63.6%, and 65.7%, respectively, as compared with 61.3%, 59.1%, and 67.5%, respectively, in Q4 fiscal 2022.
- Operating Income: GAAP operating income was $4.3 billion, up 24%, with GAAP operating margin of 28.0%. Non-GAAP operating income was $5.4 billion, up 27%, with non-GAAP operating margin at 35.4%.
- Net Income and EPS: For FY 2023, on a GAAP basis, net income was $12.6 billion, an increase of 7%, and EPS was $3.07, an increase of 9%. On a non-GAAP basis, net income was $16.0 billion, an increase of 13% compared to fiscal 2022, and EPS was $3.89, an increase of 16%.
Balance Sheet and Other Financial Highlights
- Cash and Cash Equivalents and Investments: $26.1 billion at the end of Q4 fiscal 2023, compared with $23.3 billion at the end of Q3 fiscal 2023, and compared with $19.3 billion at the end of fiscal 2022.
- Remaining Performance Obligations (RPOs): $34.9 billion, up 11% in total, with 51% of this amount to be recognized as revenue over the next 12 months. Product RPOs were up 12% and service RPOs were up 9%.
Delving Deeper Into Cisco’s Q4 and FY 2023 Earnings
We anticipate that Cisco has the ecosystem-wide influence and portfolio resources to accelerate enterprise adoption of cloud security and AI solutions with greater confidence. Cisco can provide valuable support not only in improving overall cloud-related security, but also in providing insight and assistance in areas such as upholding emerging AI rules and regulations including protecting intellectual property (IP) across generative AI environments as well as best practices for using AI ethically.
Cisco deftly used its annual Cisco Live 2023 event to announce its AI-driven Security Cloud solution, aimed primarily at empowering security teams to meet the expanding challenges of an increasingly intricate threat landscape by streamlining operations and boosting efficiency. Cisco’s multi-year investments in AI and machine learning (ML) played an integral role in the launch of Cisco Secure Access, Cisco’s new security service edge (SSE) solution.
In our assessment, Cisco is directly addressing the topmost security concerns of enterprise IT decision-makers by designing Cisco Secure Access to provide more swift detection and response, single cloud-managed console, and common access experience capabilities. For instance, Cisco collaborated with Apple to incorporate Zero Trust Access (ZTA) powered by Cisco Secure Access into a native experience on iOS and macOS, making secure access to applications universal, while making it easier for IT to implement as well as more secure for all users.
Plus, Cisco raised its end-to-end Network Assurance as well as Data Center and Provider Connectivity portfolio capabilities with the Accedian and SamKnows acquisitions, in our estimation. Now Cisco, through its ThousandEyes platform and comprehensive visibility portfolio assets, can enhance digital experiences across the global digital ecosystem by minimizing the network disruptions that can undermine business outcomes, diminish productivity, and damage brand reputation.
Notably, in Q4 fiscal 2023, Cisco closed the following acquisitions: Lightspin Technologies, a privately-held cloud security software firm; Smartlook, a privately-held firm that provides a digital experience and product analytics solution that monitors user engagement on websites and mobile applications in real time; and Armorblix, a privately-held firm focused on the use of large language models (LLMs) and natural language understanding (NLU) in cybersecurity.
Cisco Q4 and FY 2023: Key Takeaways
Overall, we find that Cisco is the trusted partner that enterprises can rely on to advance their AI-powered security cloud journey. Cisco Secure Access in combination with new security offerings such as Cisco Firewall 4200 Series, Cisco Multicloud Defense, and Panoptica, fulfill the topmost security priorities of enterprises, assuring that security and IT teams can streamline their overall AI-imbued security implementations by delivering swifter detection and response, single cloud-managed console, and common access experience capabilities.
By delivering double-digit growth in revenue and EPS and producing robust operating leverage in Q4 fiscal 2023, we believe that Cisco is executing its business model transformation and taking a sound strategic approach in its measured fiscal 2024 guidance, especially as macro considerations such as inflationary concerns, geopolitical uncertainties, as well as the transformative impact that AI poses for the tech sector and the overall economy.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discussed Cisco earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other insights from The Futurum Group:
Cisco Live 2023: Cisco Launches AI-Powered Security Cloud to Empower Enterprise Security Teams
Cisco Live 2023: Cisco and AT&T Join Forces to Elevate Mobile Experience for Hybrid Workforces
Author Information
Ron is an experienced, customer-focused research expert and analyst, with over 20 years of experience in the digital and IT transformation markets, working with businesses to drive consistent revenue and sales growth.
He is a recognized authority at tracking the evolution of and identifying the key disruptive trends within the service enablement ecosystem, including a wide range of topics across software and services, infrastructure, 5G communications, Internet of Things (IoT), Artificial Intelligence (AI), analytics, security, cloud computing, revenue management, and regulatory issues.
Prior to his work with The Futurum Group, Ron worked with GlobalData Technology creating syndicated and custom research across a wide variety of technical fields. His work with Current Analysis focused on the broadband and service provider infrastructure markets.
Ron holds a Master of Arts in Public Policy from University of Nevada — Las Vegas and a Bachelor of Arts in political science/government from William and Mary.
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
