Cisco Reports 6% Revenue Decline, Net Income Down 25% in Q1 Fiscal 2025

Cisco Systems, Inc. reported a decline in financial performance for the first quarter of fiscal 2025, ending October 26, 2024. Total revenue reached $13,841 million, a decrease of 6% from $14,668 million in the same period of the previous year. Product revenue fell by 9% to $10,114 million, while services revenue increased by 6% to $3,727 million. The decline in product revenue was primarily attributed to a significant drop in networking sales, which decreased by 23% year-over-year, alongside a 3% decline in collaboration revenue. In contrast, security product revenue surged by 100%, driven by strong demand for Threat Intelligence and SASE offerings.

Net income for the quarter was $2,711 million, down 25% from $3,638 million in the prior year, resulting in a diluted earnings per share of $0.68, a decrease of 24%. Operating income also saw a substantial decline of 45%, falling to $2,358 million from $4,276 million, largely due to increased operating expenses, which rose by 15% to $5,833 million, influenced by restructuring charges and higher amortization costs related to recent acquisitions, including Splunk.

Cisco announced a restructuring plan affecting approximately 7% of its global workforce, with estimated pre-tax charges of up to $1 billion. In the first quarter, the company incurred $665 million in restructuring charges, primarily cash-based, which contributed to the increase in operating expenses.

On the balance sheet, cash and cash equivalents increased to $9,065 million from $7,508 million at the end of the previous quarter. However, accounts receivable decreased significantly by 33% to $4,457 million, reflecting the timing and amount of billings. Total current assets decreased slightly to $35,752 million, while total liabilities fell to $78,056 million from $78,956 million.

The company’s strategic focus on subscription-based revenue continued to show promise, with total subscription revenue increasing by 21%, primarily driven by Splunk. However, overall revenue excluding Splunk decreased by 14%, indicating challenges in the broader market.

Cisco's effective tax rate for the quarter was a benefit of 19.6%, down from a tax provision of 18.1% in the previous year, influenced by a $720 million tax benefit from a U.S. Tax Court opinion. The company remains committed to its stock repurchase program, with approximately $3.2 billion authorized for future buybacks.