Cisco Systems’ (CSCO) fiscal Q2 results are expected to highlight the weakness in the networking market amid a depleted order backlog, BofA Securities said Monday in an earnings preview.
With backlog largely depleted, BofA said it is projecting a 9% and 7% product revenue decline in fiscal Q2 and fiscal 2024, respectively, led by Service Provider spending slowdown, Cloud Providers digesting previous purchases, and Enterprises responding to the economic cycle.
“With backlog drawdown now offering limited support post-1Q, coupled with weak underlying spending initiatives, we believe growth will go through a steep correction in FY24 and model product revenue to decline 9%, 13% and 12% YoY in the next three quarters, respectively,” BofA said.
BofA expects Cisco’s fiscal 2024 and 2025 product revenue to rebase at around $40 billion to $41 billion, compared with consensus estimates of $41 billion and $42 billion, respectively.
Cisco’s reported plan to lay off “thousands” of employees is aimed at preserving margins in fiscal 2024 in a weakening demand environment, the brokerage said.
BofA is keeping its neutral rating on the stock with a price objective of $55.