Cisco Systems (CSCO) reported fiscal third-quarter earnings and revenue that fell from a year earlier but topped consensus estimates as product orders improved from a year earlier. The company offered an early peek into fiscal 2025 revenue and profit guidance for Cisco stock.

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The computer networking giant reported financial results after the market close on Wednesday. Pro forma results included recently acquired Splunk for the first time. The deal closed March 18. Splunk added $413 million in fiscal Q3 revenue.

CSCO Stock: Q3 Earnings Top Views

“Revenue, gross margin and EPS in Q3 were at the high end or above our guidance range, both including and excluding Splunk, resulting in continued operating leverage,” Chief Financial Officer Scott Herren said in the earnings release. “Customers are consuming the equipment shipped over the last few quarters in line with our expectations and we are seeing stabilization of demand as a result.”

Cisco earnings fell 12% from a year earlier to 88 cents on an adjusted basis. Revenue fell 13% to $12.7 billion. Analysts estimated that Cisco would earn 83 cents on revenue of $12.53 billion, according to FactSet.

Fiscal Q3 product orders rose 4% versus a 12% decline in the previous quarter.

On the stock market today, Cisco stock initially rose on the earnings release, then pulled back. CSCO stock was down 2.2% to 48.57 in midday  trading.

CSCO Stock: Fiscal 2025 Revenue Outlook

For the July quarter of fiscal 2024, Cisco forecasts earnings of 85 cents at the midpoint of guidance vs. analysts consensus estimate of 86 cents. Cisco said it expects sales of $13.5 billion at the midpoint of its outlook. Analysts predicted that sales will fall 13% to $13.25 billion.

For Splunk, management forecast July revenue in a range of $950 million to $1 billion, below estimates of  $1.065 billion in sales.

Meanwhile, for fiscal 2025, “management set early expectations for revenue growth in the low to mid single digits, while indicating that non-GAAP operating income margin for the full year should be around the same 32% level it guided to for the fourth quarter,” said William Blair analyst Sebastien Naji in a report.

At Bank of America, analyst Tal Liani said: “Management implicitly expects Cisco’s core revenue excluding Splunk to recover to 5% growth next year.” Liani expects a boost in fiscal 2025 from Cisco’s security business.

Investor Day June 4

At UBS, analyst David Vogt lowered his fiscal 2025 profit outlook based on management commentary.

“From an EPS perspective, our fiscal 2025 estimate declines 6.5% to $3.50 from $3.74 as Cisco integrates Splunk and invests in operating expenses to drive its go-to-market engine. In addition, as we expected, the financing cost related to Splunk is also a headwind.”

Cisco hosts an investor day on June 4. It will likely discuss long-range financial goals at the event.

While Cisco has increased revenue from software and services, it still garners over two-thirds of revenue from computer networking gear, mainly switches and routers. While the enterprise market has weakened, Cisco’s telecom customers also are also spending less.

Cisco Stock: Splunk Deal

Heading into the Cisco earnings report, the company owned a weak Relative Strength Rating of 24 out of a best-possible 99, according to IBD Stock Checkup.

CSCO stock had retreated 2% in 2024, prior to the fiscal Q3 earnings report.

Meanwhile, Cisco acquired software maker Splunk for $28 billion in cash. With roots in data analytics software, Splunk has expanded into cybersecurity.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.

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