Cisco reported first quarter results for the period ended October 28, 2023. Cisco reported first quarter revenue of $14.7 billion, net income on a generally accepted accounting principles (GAAP) basis of $3.6 billion or $0.89 per share, and non-GAAP net income of $4.5 billion or $1.11 per share.
“We had a solid start to fiscal 2024 with the strongest Q1 results in our history on both revenue and profitability,” said Chuck Robbins, chair and CEO of Cisco. “We are confident in the foundational strength of our business and future growth opportunities fueled by AI, Security, Cloud, and Observability.”
“In Q1, we delivered revenue and EPS at the high end or above our guidance range, generating strong operating leverage,” said Scott Herren, CFO of Cisco. “We also saw double-digit year-over-year growth in software revenue, product ARR and total RPO. After customers implement large amounts of recently shipped product, we expect to see product order growth rates accelerate in the second half of the year. We are committed to delivering operating leverage and increasing capital returns to our shareholders.”
| GAAP Results | ||||||
| Q1 FY 2024 | Q1 FY 2023 | Vs. Q1 FY 2023 | ||||
| Revenue | $ 14.7 billion | $ 13.6 billion | 8 % | |||
| Net Income | $ 3.6 billion | $ 2.7 billion | 36 % | |||
| Diluted Earnings per Share (EPS) | $ 0.89 | $ 0.65 | 37 % | |||
| Non-GAAP Results | ||||||
| Q1 FY 2024 | Q1 FY 2023 | Vs. Q1 FY 2023 | ||||
| Net Income | $ 4.5 billion | $ 3.5 billion | 28 % | |||
| EPS | $ 1.11 | $ 0.86 | 29 % | |||
Reconciliations between net income, EPS, and other measures on a GAAP and non-GAAP basis are provided in the tables located in the section entitled “Reconciliations of GAAP to non-GAAP Measures.”
Cisco Declares Quarterly Dividend
Cisco has declared a quarterly dividend of $0.39 per common share to be paid on January 24, 2024, to all stockholders of record as of the close of business on January 4, 2024. Future dividends will be subject to Board approval.
Financial Summary
All comparative percentages are on a year-over-year basis unless otherwise noted.
Q1 FY 2024 Highlights
Revenue — Total revenue was $14.7 billion, up 8%, with product revenue up 9% and service revenue up 4%. Revenue by geographic segment was: Americas up 14%, EMEA flat, and APJC was down 3%. Product revenue performance reflected growth in Networking up 10%, Security up 4%, Observability up 21% and Collaboration up 3%.
Gross Margin — On a GAAP basis, total gross margin, product gross margin, and service gross margin were 65.2%, 64.5%, and 67.3%, respectively, as compared with 61.2%, 59.2%, and 67.3%, respectively, in the first quarter of fiscal 2023.
On a non-GAAP basis, total gross margin, product gross margin, and service gross margin were 67.1%, 66.5%, and 69.0%, respectively, as compared with 63.0%, 61.0%, and 68.8%, respectively, in the first quarter of fiscal 2023.
Total gross margins by geographic segment were: 66.2% for the Americas, 69.5% for EMEA and 67.0% for APJC.
Operating Expenses — On a GAAP basis, operating expenses were $5.3 billion, up 10%, and were 36.0% of revenue. Non-GAAP operating expenses were $4.5 billion, up 5%, and were 30.5% of revenue.
Operating Income — GAAP operating income was $4.3 billion, up 21%, with GAAP operating margin of 29.2%. Non-GAAP operating income was $5.4 billion, up 24%, with non-GAAP operating margin at 36.6%.
Provision for Income Taxes — The GAAP tax provision rate was 18.1%. The non-GAAP tax provision rate was 19.0%.
Net Income and EPS — On a GAAP basis, net income was $3.6 billion, an increase of 36%, and EPS was $0.89, an increase of 37%. On a non-GAAP basis, net income was $4.5 billion, an increase of 28%, and EPS was $1.11, an increase of 29%.
Cash Flow from Operating Activities — $2.4 billion for the first quarter of fiscal 2024, a decrease of 40% compared with $4.0 billion for the first quarter of fiscal 2023, primarily due to the timing of tax payments.
Balance Sheet and Other Financial Highlights
Cash and Cash Equivalents and Investments — $23.5 billion at the end of the first quarter of fiscal 2024, compared with $26.1 billion at the end of fiscal 2023.
Remaining Performance Obligations (RPO) — $34.8 billion, up 12% in total, with 51% of this amount to be recognized as revenue over the next 12 months. Product RPO were up 14% and service RPO were up 11%.
Deferred Revenue — $25.7 billion, up 11% in total, with deferred product revenue up 12%. Deferred service revenue was up 11%.
Capital Allocation — In the first quarter of fiscal 2024, we returned $2.8 billion to stockholders through share buybacks and dividends. We declared and paid a cash dividend of $0.39 per common share, or $1.6 billion, and repurchased approximately 23 million shares of common stock under our stock repurchase program at an average price of $54.53 per share for an aggregate purchase price of $1.3 billion. The remaining authorized amount for stock repurchases under the program is $9.7 billion with no termination date.
Acquisitions
In the first quarter of fiscal 2024, our closed acquisitions include:
- Accedian, a privately held network performance monitoring company
- Working Group Two, a privately held company that developed a cloud native mobile services platform
- Oort, Inc., a privately held company focused on identity threat detection and response technology
- SamKnows, a privately held broadband network monitoring company
- Code BGP, Inc., a privately held border gateway protocol monitoring company
Cisco’s Intent to Acquire Splunk
On September 21, 2023, we announced our intent to acquire Splunk Inc., a public cybersecurity and observability company. The acquisition is expected to close by the end of the third quarter of calendar year 2024, subject to regulatory approval and other customary closing conditions including approval by Splunk shareholders.