Photo Credit: Bob Schoenherr

Cisco Systems, Inc. (CSCO) Information Technology – Communications Equipment| Reports February 10, After Market Closes

Networking giant, Cisco, is scheduled to report its fiscal second quarter earnings after the market closes on February 10. Cisco is the largest of several tech companies reporting this week that have benefited from the trend toward big data and cloud computing. These areas have grown the fastest for Cisco while its core business continues to struggle. Despite coming off two consecutive quarters of positive earnings surprises, expectations are low going into this earnings call. The Estimize consensus is calling for EPS of $0.55 and revenue $11.861 billion, approximately $100 million higher than Wall Street’s top-line estimate. Compared to FQ2 2015, this represents a projected YoY increase in EPS of 7% with revenue remaining flat. Like countless other technology companies, macroeconomic volatility has been blamed for the company’s relatively stagnant growth. 

Over the last few quarters, a weakened macroeconomic environment has been a challenge for Cisco and the entire industry. Weakness in emerging markets along with a strong U.S. dollar have been dragging down Cisco’s international performance. The company relies heavily on demand from China and other developing countries where economic weakness persists. Furthermore, margins on the company’s legacy business are facing pressure from increased competition. To offset slumping sectors, the company has pushed its high growth services, namely data centers and security. Cisco has made a slew of acquisitions to bolster both areas and has emerged as a leading server and security solutions vendor in the world. That said, shares of the company have responded adversely, falling 20% in the past 3 months and reaching a 52-week low. If Cisco reports poor guidance this Wednesday, it may be enough to continue the freefall in enterprise technology.