Cisco profits fall by 21 percent in FQ1 2020 due to economic headwinds

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On Wednesday, Cisco posted its sales for the fiscal first quarter of 2020. Though the firm has retained its position as one of the world’s largest network technology companies, its quarterly profits are down 21 percent year-on-year. Moreover, the corporation offered a disappointing forecast for the upcoming period as a result of continued global economic uncertainty.

Fiscal First Quarter Results

In FQ1 2020, Cisco generated $13.09 billion in revenue. According to market research firm Refinitv, Wall Street predicted that the corporation would gross $13.16 billion. The company brought in $2.93 billion, or $.16 per share, in income last quarter. During the same frame last year, the firm earned $3.55 billion or $.72 per share.

Notably, Cisco made $7.54 billion in hardware sales in the period ending October 26. As such, the company’s data center and router sales fell by one percent and missed analyst estimates of $7.16 billion.

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In slightly better news, Cisco’s software segments both saw meaningful gains. The firm’s applications unit brought in revenues of $1.5 billion, an increase of six percent year-on-year. Also, its cybersecurity division generated $815 million in revenue, an increase of 22 percent from 2018.

Recently, Cisco has made increasing its networking security capacity a priority. In July, the firm announced plans to buy security services firm Signal Sciences for an undisclosed sum. Last year the corporation spent $2.35 billion to acquire another firm called Duo Security.

Fiscal Second Quarter Forecast

Despite experiencing gains in its software segment, Cisco offered an uninspiring forecast for the fiscal second quarter. The firm projects that its revenue will fall by between three and five percent year-on-year, which would be approximately $11.9 billion. Previously, market analysts estimated that the organization’s networking technology business would take in $12.8 billion during the period.

Cisco also offered income guidance of $.75 to $.77 per share next quarter. Wall Street optimistically forecasts that the firm will post profits of $.79 per share in the same frame. After making its earnings projections, the corporation’s stock price fell by four percent.

Cisco CEO Chuck Robbins attributed the firm’s grim outlook to continuing macroeconomic headwinds in an analyst call.

The executive noted that his company’s more prominent clients are holding off on purchasing new gear until current worldwide upheaval calms down. “Just go around the world, and you see what’s happening in Hong Kong, you look at China, what’s happening in D.C., you’ve got Brexit, uncertainty in Latin America,” said Robbins.

Bloomberg notes that the company will likely experience an increase in long-term revenue thanks to the deployment of fifth-generation cellular technology. Indeed, data centers will need new hardware as 5G networks go online across the world in 2020.