This Forgotten Tech Giant Just Soared After A Massive Boost in AI Revenue... (Best Day Since 2020)

Goodmorning and Happy Saturday everyone!

I genuinely hope all the hangovers are starting to ease this morning, but hey, when the market has catapulted like it has this past week, while adding a nice $4 trillion in market value (nearly erasing the global fallout during the beginning of the month), the extra partying is definitely understandable for investors all around.

(Source: StockTwits) 

Live look at me telling my grandkids how I survived the stock market crash of August 5th, 2024:

(Source: Imgflip) 

However, while the market closed Friday with yet another massive green day as the Dow inched +1.3% on the day, while the S&P 500 and Nasdaq followed with an impressive +1.6% and +2.3% closing, it was Cisco that stole the spotlight towards the end of the week.

(Source: Barrons) 

Ironically, even though this sleeping tech giant is savagely laying off an additional 7% of its workforce, the company's recent earnings had analysts falling head over heels with their spreadsheets in hand. In short, Cisco didn’t just beat expectations; they waltzed right past them as EPS nailed estimates with a +2.49% beat -  cruising past the predicted $0.85. And revenue? An eye raising $13.64 billion against the forecasted $13.54 billion. Which again, is not shabby for this “forgotten” giant.

(Source: TipRanks) 

With that said though, even with adding an impressive earnings to Cisco’s “Win” column, the company's year-over-year stats was about as charming as Trump’s orange glow. For instance, Revenue dipped by -10.27%, net income plummeted -45.38%, and the net profit margin took a nosedive of -39.01%. Oooof.

Yet, analysts are still swooning like they’ve spotted their office crush at a “Swiftie” concert due to the fact that Cisco’s bold $38 billion bet on Splunk is actually starting to pay off. 

(Source: Market Watch) 

You see, back in March, Cisco made headlines with its audacious purchase of Splunk. At the time, people were scratching their heads, wondering if this was a brilliant move or a midlife crisis. But surprise, surprise—turns out, it’s the former. Splunk has added a spicy 700 basis points to Cisco’s top line, driving double-digit increases in product orders and subscriptions.

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Meaning this gamble on AI-driven data management is paying dividends, literally and figuratively. Software subscriptions, for example, which now make up 51% of Cisco’s annual revenue, saw a 21% uptick in recurring revenue. 

This resulted in analysts singing a far different tune this time around as Wall Street has recently upgraded price targets on the stock averaging around $62.13— for a potential 25.62% upside. In fact, what’s even more interesting, is that leading the charge on these Cisco upgrades is none other than Sam Poser (not to be confused with my poser of a brother-in-law) at Williams Trading, throwing a major bullish $93 target into the ring. For those not into quick math, that’s an 88.39% upside peeps. 

(Source: The Street) 

On the other hand, while the trailing 12 month results look less than appealing to most, Cisco’s technicals are showing the strongest signs as all 17 technical indicators we have at Stocks.News are screaming “Strong Buy” - with all 15 moving averages sitting in the “Strong Buy” section as well. 

So given all of this, what does this mean for Cisco and its investors going forward? Well, looking ahead, Cisco guidance is definitely showing promise. Of course, while Cisco is still wrestling with some legacy business weaknesses, the AI-driven segments are making up for it as the company expects a return to top-line growth in FQ2 2025.

(Source: Investopedia) 

Keep in mind though, this earnings report combined with proof of a gamble gone great, comes at a pivotal moment with plans to cut 7% of Cisco's workforce. However, apparently Wall Street dgaf, about layoffs, considering the stock is up 8.42% over the last five trading days. (Marking their best day since November 2020, when the market was literally printing money hand over fist).

(Source: CNBC)

So clearly, in the end, Cisco is definitely making its comeback as a strong competitor within Big tech. So, for those who don’t know the drill yet, keep a close eye on this “sleeping giant” going forward. 

Because while Costco is busy pissing off it’s customers by c*ck blocking their family moochers, Cisco is busy sprinkling some of dat AI magic into its comeback special. (It’s about dang time…)

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Stocks.News does not hold any positions in companies mentioned in the article.