Cisco has made a forecast of growth for 2025
Cisco (CSCO) shares rallied slightly after the company forecast an increase in the percentage of the more profitable segment in the overall business and gave a revenue growth forecast for 2025. However, Cisco noted problems that have persisted for quite some time.
On Wednesday, Cisco (CSCO), the largest networking equipment manufacturer for data centers and enterprise customers, released important forward-looking statements for investors (Wednesday).
Cisco shares, up 41.8% in the past 12 months and 28.6% YTD, are up 1.1% postmarket on Wednesday.
Today, stock market analysts and investors applaud the company’s transition to a subscription model for cloud-based software such as WebEx collaboration and cybersecurity services.
Cisco said Wednesday it aims to increase its software subscription revenue share from the 44% recorded in FY2021. Up to 50% by FY2025 year. A more significant percentage of this segment in the entire business should generate more consistent revenue growth for Cisco, better scalability, and higher margins.
Cisco continued its restructuring efforts last quarter with the acquisition of startups Kenna Security (a cybersecurity company) and Socio Labs (an online event platform).
At the same time, as the share of hardware sales in the Cisco business remains high, the company is highly dependent on supply and volatile demand.
In an interview with Reuters, Cisco CFO Scott Herren said that a global shortage of semiconductors and electronics components “has driven prices up and that price increases will be with us for quite some time.” “We are a customer of Taiwan Semiconductor Manufacturing, and they have increased the price range from 8% to 20% across the board.”
Higher prices from vendors can lead to lower profit margins from Cisco hardware devices. The Market Reporter wrote about this issue in its quarterly report “Cisco Shares Fall Despite Good Quarter – Supply Chain Problem.”
Cisco Predictions
Cisco’s current quarterly (FY2022 Q1, ending October 31, 2021) is mainly above average analyst forecasts, but CFO Scott Herren said gross margin is likely to decline due to additional costs related to supply constraints …
Cisco’s year-on-year earnings forecast is $ 3.38 – $ 3.45 per share versus analysts’ $ 3.41 forecast, and revenue growth in the 5% – 7% range versus 4% or $ 51.91 billion from analysts.
The company also gave a forecast of revenues for 2025 FY. Year at about $ 62.9 billion, with an annual growth rate of 5% to 7%, the same rate Cisco expects for profit growth, targeting an average of $ 4.07 per share in 2025.
