Cisco Systems' shares went up by about 4% before the market opened on Thursday. This rise happened because the company gave a positive forecast for its fourth-quarter earnings. Cisco is seeing more stable demand for its products and is benefiting from buying the cybersecurity company Splunk for $28 billion.
Cisco had been facing slow demand as customers were using up extra inventory they bought during the pandemic and dealing with supply-chain problems. However, analysts from Morgan Stanley saw the recent order numbers as a good sign after some tough quarters.
For the fourth quarter, Cisco expects revenue between $13.4 billion and $13.6 billion, a bit higher than what analysts predicted. CEO Charles Robbins said most of the inventory should be installed by the end of July. In the third quarter, product orders stayed the same, not counting the impact of buying Splunk, compared to a 12% drop in the previous quarter.
If the premarket gains hold, Cisco's market value could increase by almost $8 billion. The company is expected to benefit from big investments by tech giants like Microsoft and Meta Platforms in data centers to support AI tools like ChatGPT.
Cisco reported that three of the top four cloud-computing companies are using its ethernet products and aims to reach $1 billion in AI product orders by 2025. The company also raised its 2024 revenue forecast to between $53.6 billion and $53.8 billion.
The acquisition of Splunk, completed in March, boosted revenue in Cisco's security segment by 36% in the third quarter. Overall, Cisco's gross margin for the third quarter was 65.1%, up from 63.4% a year ago. The company expects the Splunk acquisition to continue improving its gross margins in the future.
Key Points
Positive Earnings Forecast and Revenue Growth:Â Cisco's shares rose 4% due to a positive fourth-quarter earnings forecast, predicting revenue between $13.4 billion and $13.6 billion.
Impact of Splunk Acquisition:Â The $28 billion acquisition of Splunk boosted Cisco's security segment revenue by 36% in the third quarter, improving the company's overall financial performance.
FAQs
Q1. Why did Cisco's shares go up?
Cisco's shares increased by about 4% because the company gave a positive forecast for its fourth-quarter earnings and is seeing more stable demand for its products.
Q2. Is Cisco a Good Stock to Buy in 2024?
Cisco could be a good stock to buy in 2024 for a few reasons. The company has given a positive earnings forecast and expects revenue to grow. Its recent acquisition of Splunk has boosted its security segment, and Cisco is benefiting from investments in AI and data centers by big tech companies.
However, it's important to remember that all investments come with risks. While Cisco has shown promising signs, stock prices can be unpredictable.
Play at your own risk and consider consulting a financial advisor before making any investment decisions.
Q3. Who is the Largest Shareholder of Cisco?
The largest shareholder of Cisco is usually a large institutional investor like Vanguard Group or BlackRock. These firms manage mutual funds and exchange-traded funds (ETFs) that include Cisco in their portfolios. Because they manage so many funds, they often end up being the biggest shareholders in many large companies, including Cisco.
For the most current information, it's a good idea to check the latest shareholder reports or financial news, as these holdings can change over time.
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