The stock price once experienced a sharp drop of 16%! Cisco (CSCO.US) Q1 revenue and EPS both exceeded expectations, but the performance guidance is disappointing.

On Thursday morning, Beijing time, Cisco, the world's largest computer networking equipment manufacturer, announced its financial results for the first quarter of the fiscal year 2024, ending on October 28. The data shows that the company's Q1 revenue was $14.7 billion, an 8% year-on-year growth, exceeding market expectations of $14.6 billion; net profit was $3.6 billion, a 36% year-on-year growth; adjusted earnings per share were $1.11, a 29% year-on-year growth, exceeding market expectations of $1.03. In terms of business division, the first-quarter product revenue was $11.139 billion, a 9% year-on-year growth, of which the networking business grew by 10%, the security business grew by 4%, the observability business grew by 21%, and the collaboration business grew by 3%; the service revenue was $3.529 billion, a 4% year-on-year growth. Cisco also released disappointing performance guidance, intensifying concerns about the company's control of technology spending. Cisco expects revenue to be $12.6 billion to $12.8 billion for the second quarter of the fiscal year 2024, ending in January, with earnings per share excluding certain items of $0.82 to $0.84. In comparison, the market expects Q2 revenue to be $14.2 billion and earnings per share to be $0.99. The company also expects adjusted gross margin to be 65% to 66%, in line with market expectations. Cisco also lowered its 2024 fiscal year revenue guidance to $53.8 billion to $55 billion, previously predicting as high as $58 billion. Analysts' previous average expectation was around $58 billion. Cisco's report shows that the slowdown in network hardware orders is affecting growth. Cisco CEO Chuck Robbins is trying to reduce the company's reliance on one-time equipment sales by delving into software and security, among other services. However, this shift is not enough to alleviate the impact of declining enterprise spending budgets on Cisco. The company expects the weak environment for orders to continue, estimating that "one to two quarters of orders with shipments are still pending customer execution." Nevertheless, the company still expresses hope for a sales rebound in the second half of the fiscal year. "After customers have extensively used recently shipped products, we anticipate an acceleration in the growth rate of product orders in the second half," CFO Scott Herren said in a statement. In September of this year, Cisco announced a $28 billion acquisition of data processing software manufacturer Splunk Inc., in an attempt to further diversify its business. This transaction will allow Cisco to offer more services to enterprise customers, including services that monitor network health and network security risks. The company expects to complete this transaction by the end of the third quarter of 2024. In previous quarterly performances, Cisco received a boost from AI spending. The company stated that it was winning orders from large companies that are building infrastructure to handle more AI computing. At that time, the company said it had already received $500 million worth of orders in this field. After the financial report was released, as of the time of writing, Cisco's stock price fell 10.79% after-hours, to $47.53, previously dropping by 16%.