Cisco's Earnings Won't Be Pretty

Cisco's Earnings Won't Be Pretty

Networking hardware giant Cisco Systems (NASDAQ: CSCO) expects sales to decline during the fourth quarter, results for which will be released on Wednesday after the market closes. The company's guidance calls for a 4% to 6% year-over-year revenue decline, driven by weak product orders from some large customers and emerging markets, uncertainty delaying orders from the U.S. federal government, and a continuing headwind from shifting its business toward subscriptions.

While the first two issues are likely temporary, the shift to subscription software and services will have longer-lasting effects. Cisco announced during its financial analyst conference in June that it now expects to produce revenue growth of just 1% to 3% annually over the next three to five years, down from a previous outlook of 3% to 6% annual growth. The software business is expected to grow by 12% to 15% annually, but Cisco's focus on subscription software will push revenue into the future, hurting near-term results.

Image source: Cisco Systems.https://americas.thecisconetwork.com/themes/new/img/header/cisco_homepage_icon_logo.png

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Source: Fool.com