Cisco Systems is gearing up to report its fourth-quarter earnings for 2024, with a focus on key highlights and insights into the company’s performance. The upcoming earnings call is expected to cover a range of topics, including artificial intelligence (AI), cloud demand, updates on Splunk integration, and the latest developments in the security portfolio.
### AI Opportunities and Insights
One of the key areas of interest for analysts and investors during Cisco’s earnings call will be the company’s AI opportunities. As demand for AI technologies continues to grow across industries, Cisco is likely to provide insights into how it is leveraging AI within its various business segments. In particular, analysts may be interested in understanding when this demand for AI could translate into meaningful revenue for Cisco.
In a recent report from Morgan Stanley, Cisco was identified as one of the top five vendors expected to receive incremental share of generative AI spending in 2024. While the company’s net score of 1 percent was smaller compared to top recipients like Microsoft and Amazon, it highlights Cisco’s position in the AI market. Additionally, Cisco ranked fifth in a survey on incremental share of GenAI spending over the next three years, indicating the company’s potential for growth in the AI space.
In a strategic move to capitalize on the growing AI market, Cisco announced a joint product with Nvidia in June – the Cisco Nexus HyperFabric AI clusters for data centers. This partnership aims to enhance data center capabilities and drive innovation in AI technologies. However, analysts will be looking for further details on Cisco’s overall AI strategy and its plans to expand its footprint in the AI market.
### Cloud Growth and Impact
Another significant aspect likely to be discussed during Cisco’s earnings call is the impact of cloud adoption on the company’s business. With the rise of AI technologies driving interest in cloud solutions, analysts may seek insights into how Cisco is navigating the evolving cloud landscape and capitalizing on this trend.
According to Morgan Stanley’s July report, Cisco is not among the most popular vendors for managing hybrid cloud environments, logging only 2 percent in a quarterly survey. Despite this, Cisco’s position in the cloud market remains a topic of interest, especially as cloud adoption continues to reshape the IT landscape.
In a bid to strengthen its cloud offerings, Cisco introduced new capabilities across the Cisco Security Cloud in June, including the Cisco Firewall 1200 Series. These updates reflect Cisco’s commitment to enhancing its cloud security solutions and catering to the evolving needs of customers in an increasingly cloud-centric environment.
Looking ahead, a report from Bank of America projected strong growth in GenAI data center switching over the next several years, with a compound annual growth rate (CAGR) of 73.3 percent from 2023 to 2027. This growth trajectory presents opportunities for Cisco, along with other key players like Arista Networks and HPE-Juniper, to capitalize on the demand for cloud-centric networking solutions.
### Splunk Updates and Integration
As Cisco continues to expand its security portfolio, analysts will be eager to hear updates on the integration of Splunk and the latest developments in the security business. Following Cisco’s acquisition of Splunk in March, the company has been focused on enhancing its security offerings and leveraging Splunk’s capabilities to bolster its portfolio.
In August, Splunk kicked off a private preview for its AI Assistant Security, with early feedback expected to shed light on the effectiveness of the GenAI tool. This initiative underscores Cisco’s commitment to driving innovation in security solutions and harnessing AI technologies to enhance threat detection and security operations.
A note from KeyBanc highlighted CrowdStrike’s addition of security information and event management (SIEM) capabilities, positioning the vendor as a more competitive player in the SIEM market. This move could create opportunities for vendors like Splunk/Cisco and Palo Alto Networks to differentiate themselves in the evolving security landscape.
In June, Cisco and Splunk unveiled a Unified Observability Experience that combines products from both vendors, emphasizing the importance of collaboration and integration in delivering comprehensive security solutions. These strategic partnerships and joint initiatives are expected to play a key role in driving growth and innovation within the security segment.
### Networking, Communications, and Inventory
In addition to AI, cloud, and security updates, Cisco’s earnings call is likely to touch upon networking, communications, and inventory trends. A report from Morgan Stanley referenced a survey highlighting Cisco’s potential for a strong second half of the calendar year, driven by factors such as inventory digestion and elongated sales cycles.
The survey results indicated a slight acceleration in Communications budget growth expectations for 2024, signaling positive trends in networking upgrades and replacement cycles. This underscores the importance of capacity-led networking investments and the impact of asset sweat on Cisco’s business outlook.
Notably, Cisco was identified as the top performing Networking vendor in a survey of value-added resellers, maintaining its position for at least the past five quarters. While the company’s share of responses has experienced a slight decline, Cisco’s performance in the networking segment remains robust, outpacing competitors like HPE.
Looking ahead, analysts will be keen to gain insights into Cisco’s inventory management strategies and how the company plans to navigate potential headwinds related to inventory digestion. Despite the challenges posed by excess inventory, Cisco’s ability to adapt to market dynamics and drive networking upgrades is expected to drive growth in the coming quarters.
### Conclusion
As Cisco prepares to unveil its Q4 2024 earnings, investors, analysts, and industry observers are eagerly anticipating key insights into the company’s performance across AI, cloud, Splunk integration, security, networking, and inventory management. With a focus on innovation, collaboration, and strategic partnerships, Cisco is poised to navigate the evolving technology landscape and capitalize on emerging opportunities in the market. The upcoming earnings call is expected to provide valuable insights into Cisco’s growth trajectory, market positioning, and strategic initiatives as the company continues to drive innovation and deliver value to its stakeholders.
