Cisco releases Q3 earnings: What do they show about its situation?

Cisco declared an 8% decrease in revenue for its Q3 2020 to $11.98 billion, a steeper decline than the 4% slump recorded last year, which widely exceeded market expectations.

As for the company’s share price, this rose by 4% to 79 cents, which was also higher than expected, with market analysts predicting 69 cents for the quarter.

Cisco CEO Chuck Robbins stated that the current COVID-19 pandemic had an effect on financial results and business operations, “especially in our supply chain where we saw manufacturing challenges and component constraints”.

However, Robbins was keen to emphasise that the company saw solid cash flow, and said that operations remained resilient.

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Cisco’s largest segment, Infrastructure Platforms, saw a 15% slump year-on-year to $6.43 billion in revenue. This could be attributed to a slowing down in product orders, which Cisco CFO Kelly Kramer said happened in April.

The Applications segment, meanwhile, generated revenue of $1.36 billion, a 5% year-on year decrease.

Among this segment was Cisco’s web conferencing offering, Cisco Webex, which the earnings call revealed was used by over 500 million participants, generating 25 billion conference minutes in April alone.

The platform ran at a capacity of three times that of February 2020, according to Cisco’s CEO, meaning the company’s modernisation initiative, which focused on infrastructure and portfolio over the past two years.

The company would see rises in revenue elsewhere, with Services and Security seeing increases of 5% and 6% respectively.

Information Age analysis

It’s telling that Cisco managed to exceed the expectations of market analysts with its fiscal Q3 earnings. This is an achievement that was also managed by Amazon with its revenue, and Netflix with subscription numbers.

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All three of these companies offer services that have seen a rise in activity that has been attributed to the current pandemic. While Amazon has its online marketplace and Prime Video, Netflix has its on-demand media service, and Cisco is in another thriving market: video conferencing.

In March, Cisco Webex saw its amount of attendees rise to a record of 324 million in March, which eclipses Zoom‘s March figure for daily users of over 200 million, as the pandemic began to take hold of companies and force workforces to begin working from home.

While it’s not clear whether each provider’s calculation methods are similar enough for daily attendee figures to be comparable, it is likely that Webex, along with its competitors have, and will continue to thrive due to the demand of constant communication among remote workforces.

This isn’t to say that the outlook of its web conferencing platform is the be all and end all for Cisco, however. As its CEO stated during the company’s earnings call, Cisco are likely to see demand rise again in new hardware due to a surge in technical debt.

Then, there’s the issue of security, which has arguably intensified, with a recorded shift in targeting on the part of hackers to remote devices. The rise in revenue for Cisco’s security segment in its Q3 earnings shows that organisations are realising this, and are acting accordingly.

However, they won’t be able to afford to be complacent, and so success in this area, along with Webex, could be set to continue throughout this pandemic.


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Aaron Hurst

Aaron Hurst is Information Age's senior reporter, providing news and features around the hottest trends across the tech industry.

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