The News: Cisco reported fourth quarter (Q4) results for the period ended July 27, 2024. The company reported Q4 revenue of $13.6 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.2 billion or $0.54 per share, and non-GAAP net income of $3.5 billion or $0.87 per share. FY 2024 results included revenue of $53.8 billion, a decrease of 6% year over year. Read the earnings press release on the Cisco website.
Cisco Q4 & FY 2024: Focus on AI, Security, and Cloud
Analyst Take: Cisco reported $13.6 billion in Q4 revenue, down 10% year-over-year (YoY), net income on a generally accepted accounting principles (GAAP) basis of $1.9 billion or $0.46 per share, and non-GAAP net income of $3.6 billion or $0.88 per share. Chuck Robbins, chair and CEO of Cisco, emphasized that the company’s Q4 aligned with steady customer demand alongside order growth across the business indicating that customers are using Cisco solutions to connect and protect all aspects of their organization in the AI era.
Cisco also showed positive outcomes in key areas such as strong product order growth and margins during Q4 FY 2024:
- Product order growth of 14% YoY; up 6% excluding Splunk
- Revenue of $13.6 billion in Q4 FY 2024, above the high end of Cisco’s guidance range, although down 10%, with product revenue down 15% and services revenue up 6%. Splunk contributed approximately $960 million of total revenue for Q4 fiscal 2024
- Strong margins with Q4 FY 2024 GAAP gross margin of 64.4% and non-GAAP gross margin of 67.9% and FY 2024 GAAP gross margin of 64.7% and non-GAAP gross margin of 67.5%, the highest in 20 years
Key Cisco FY 2024 Figures by the Numbers:
- Revenue: $53.8 billion, decrease by 6% year over year
- Earnings per share: GAAP: $2.54; Non-GAAP: $3.73. GAAP EPS decreased 17% year over year; non-GAAP EPS decreased 4% year over year
- Solid growth in software and recurring metrics in FY 2024, enhanced by Splunk comprising total subscription revenue of $27.4 billion (including Splunk), representing 51% of total revenue
- Total annualized recurring revenue (ARR) at $29.6 billion, including $4.3 billion from Splunk, up 22% YoY as well as total software revenue at $18.4 billion, up 9% YoY, with software subscription revenue of $16.4 billion, up 15% YoY, making up 89% of total software revenue
- FY 2024 GAAP gross margin of 64.7% and non-GAAP gross margin of 67.5%, the highest in 20 years
FY 2024 Balance Sheet and Other Financial Highlights:
- Cash and Cash Equivalents and Investments: $17.9 billion at the end of Q4 fiscal 2024, compared with $18.8 billion at the end of fiscal 2024
- Remaining Performance Obligations (RPO): $41.0 billion, up 18% in total, with 51% of this amount to be recognized as revenue over the next 12 months. Product RPO was up 27% and service RPO was up 10%
Diving Deeper into Cisco’s Q4 2024 & FY 2024 Earnings
We find that Cisco is showing strength down the line with beats across the networking, security, and collaboration product categories as well as services, while also factoring in YoY declines in many areas as shown in the below breakdown. This outcome is all anticipated based upon the extended digestion period linked with AI infrastructure builds, with the ending of the slow AI infrastructure digestion period in sight. Cisco’s robust FY 2025 GAAP and non-GAAP gross margins, the highest in the last two decades, merit a shout out as this outcome directly powered Cisco’s better than expected results.
Also on the plus side, Cisco delivered a beat-beat with adjusted EPS: $0.87 (beating estimate of $0.85) and revenue: $13.640B (beating estimate of $13.537B). Specific Q4 fiscal 2024 product revenue performance reflected growth in Security up 81% and Observability up 41%, Networking was down 28% while Collaboration was flat. Security and Observability, excluding Splunk, grew 6% and 12%.
Cisco AI, Cybersecurity, and Cloud Portfolio Initiatives Gain Momentum
Cisco is combining its security, collaboration, and networking segments into a new unit headed by Jeetu Patel, previously executive VP and GM of Security and Collaboration, with current networks leader Jonathan Davidson assuming a new role advising the CEO office. The consolidation is accompanied by Cisco’s organization-wide restructuring that includes a 7% reduction in the overall workforce.
A major focus of Cisco Live 2024 revolved around the importance of connecting and protecting everything within the digital ecosystem. Cisco’s approach focuses on providing comprehensive insights across various domains, including multicloud, on-premises, edge, and remote locations. This comprehensive approach is exemplified in the company’s Hyperfabric initiative, which emphasizes the importance of AI security.
Cisco’s Hyperfabric initiative is an important contribution toward improving the ability to see and manage operations within an open ecosystem. Cisco intends to use AI in collaboration with key partners such as VAST Data and NVIDIA to unlock the potential and valuable insights of data. The collaboration aims to expedite enterprises’ AI projects, enabling them to effectively manage the increasing need for data processing and analysis while maintaining strong security protocols.
One of the key announcements at Cisco Live 2024 was the unveiling of Digital Experience Assurance, powered by ThousandEyes. This platform incorporates AI capabilities to provide visibility throughout the entire digital journey of users. Cisco seeks to simplify the intricacies of the global area network to assist businesses in increasing their operational speed without being concerned about downtime.
Cisco also unveiled its new Workflow solutions with the aim of streamlining the setup process for new services. These workflows are specifically designed to minimize the time needed for deploying new services, offering comprehensive visibility throughout the global area network. This program aims to tackle the increasing complexity of security by recognizing that AI is transforming the field, where security is now predominantly a data-related challenge.
From our perspective, the Security Cloud by Cisco has significantly improved, now reinforced with the agile capabilities of Splunk. This improvement combines telemetry, design language, and policy objects, together with network and infrastructure integration. The outcome is an environment that follows a zero-trust approach with zero friction by employing Cisco Secure Access and ThousandEyes to provide robust security measures.
Cisco Augments Cloud Security and Observability with OutShift and Splunk Enhancements
From our view, the Outshift group updates to Panoptica demonstrates major improvements to its cloud security platform. These updates are geared toward fulfilling the growing enterprise demand for an all-encompassing security solution. Panoptica offers a suite of advanced features that include application monitoring, real-time threat prevention, risk prioritization, and GenAI for cloud-native application security.
These capabilities can provide organizations with valuable insights to enhance their security position, especially as cybersecurity threats become increasingly sophisticated. After the launch of Smart CDR, GenAI Dynamic Remediation, and Security Graph Query, Panoptica has expanded its range of offerings to include more far-ranging CI/CD and code security, cloud infrastructure entitlement management (CIEM) for managing cloud identity risks, and data security posture management (DSPM) for classifying sensitive data.
We see that Cisco and Splunk are progressing in developing a Unified Observability Experience, which combines their respective observability solutions. This integration can enable comprehensive monitoring of the entire technology stack and delivers real-time analysis plus understanding of almost any environment. The duo is meeting the growing demand for organizations to swiftly identify, analyze, and address issues, assisting both traditional and modern application architectures.
The incorporation of Splunk Log Observer Connect for Cisco AppDynamics aims to improve the accuracy and efficiency of troubleshooting. Additionally, Cisco AppDynamics may now be hosted on Microsoft Azure, allowing for the use of multi-cloud strategies. In addition, the introduction of an AI Assistant for AppDynamics and the integration of advanced AI capabilities into Splunk IT Service Intelligence (ITSI) can provide customers with guidance and insights into the health of their IT systems.
Observability Integration Progress: Cisco AppDynamics Updates
We find that the introduction of Cisco’s AppDynamics Flex licensing model provides another option for developers and their approach to observability solutions. This licensing strategy allows organizations to switch between self-hosted and SaaS products, in line with their changing needs and objectives for digital transformation. Developers may have increased flexibility and agility to adjust their observability architecture to meet evolving workload requirements and compliance constraints.
Moving forward, we may anticipate a greater focus on hybrid observability strategies, wherein organizations use a blend of self-hosted and cloud-based solutions to enhance security, performance, and compliance. Future innovation and customer flexibility depend on vendors who are proactive in identifying and responding to market changes, as Cisco has demonstrated with AppDynamics Flex. Developers and IT teams may enjoy advantages in terms of increased options and flexibility when choosing observability solutions that match their specific needs.
Cisco and Lenovo Set Out to Ease the Path to AI Innovation
With the new AI-focused partnership, Lenovo and Cisco are committed to delivering fully integrated infrastructure and networking solutions, including cloud networking, designed to accelerate digital transformation for businesses of all sizes. This collaboration involves designing, engineering, and delivering solutions that enhance GenAI capabilities and digital workplace productivity by leveraging the combined strengths of Lenovo’s edge-to-cloud portfolio and Cisco’s advanced networking capabilities. The goal is to create solutions that connect, protect, and analyze data seamlessly, thereby propelling AI-powered innovation.
Cisco’s Nexus networking ecosystem will be integrated into Lenovo’s infrastructure solutions, with the goal of delivering competitively advantageous network performance, security, and scalability. This integration promises customers accelerated time-to-innovation, operational excellence, and advanced automation analytics practices. Furthermore, offering a streamlined management system can empower customers to configure, operate, and analyze network operations across their entire ecosystem from one interface. This simplification ensures vendor consistency and reliability, allowing enterprises to purchase fully engineered solutions from a single technology provider.
Cisco FY 2025 Guidance
Cisco FY 2025 guidance included revenue of $55.0 billion to $56.2 billion and earnings per share on a GAAP basis of $1.93 to $2.05 and on a non-GAAP basis of $3.52 to $3.58. From our view, the guidance indicates that Cisco expects to attain a return to a growth trajectory in 2025. Cisco’s portfolio development emphasis on AI, security, and cloud aligns with the market-wide spending priorities of organizations including a rebound across the enterprise networking and campus segments. Progress in the integration of Splunk shows that Cisco will have a strengthened security, networking, and observability proposition that can positively contribute to growth expectations.
Cisco Q4 FY 2024 & FY 2024: Key Takeaways
Overall, we find that Cisco’s portfolio consolidations focused on bolstering its AI, security, and cloud capabilities pave the way for Cisco to better capitalize on the AI megatrend and the prioritization on organization-wide security implementations including full integration of hybrid and mutlicloud defense. The portfolio realignment and organizational restructuring underpin Cisco’s return to growth path in 2025 across the burgeoning AI era.
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 Q3 2024: Networking, Security, Observability, and Data Wax
Lenovo and Cisco: Let’s Ease the Path to AI Innovation
Analyst Coverage of Cisco Live 2024 Highlighting Innovations and Announcements
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.
