What can past surprises tell us about CSCO's earnings?

Cisco Systems (CSCO) has a history of delivering mixed results, with some surprises that can inform our expectations for future earnings reports.

1. Consistency in Beat or Miss Expectations: Cisco has a pattern of slightly beating or meeting expectations on the earnings front, as evidenced by the latest report period where it estimated an EPS of $0.75 and revenue of $13.87 billion for Q3 2025. This consistency suggests a stable underlying performance.

2. Splunk Acquisition Impact: The acquisition of Splunk in March 2024 has been a significant event, contributing to revenues but also being dilutive to earnings. The impact of this acquisition is expected to influence future earnings, potentially boosting revenues but also affecting margins and EPS.
3. Market Conditions and Competitor Pressure: Cisco has faced challenges from lackluster demand from telecom and cable services providers, as well as intense competition. These factors have impacted its networking sales but show signs of recovery with revenues from networking products exceeding expectations in the latest reported quarter.
4. Growth Focus Areas: Cisco's focus on AI inference, enterprise clouds, and AI network connectivity indicates a strategic shift that could lead to future growth opportunities. These areas may contribute to improved earnings over time if successful.
5. Analyst Expectations and Ratings: Analysts have shown a mixed outlook with a consensus rating of "Moderate Buy" and a price target of $66.53. This suggests that while there is potential for growth, there are also concerns about short-term performance and market conditions.

In conclusion, Cisco Systems has shown a track record of delivering modest earnings beats, with the Splunk acquisition presenting both opportunities and challenges. The company's strategic focus on growth areas like AI and enterprise clouds could influence future earnings positively. However, the impact of market conditions and competitive pressures should not be underestimated. Investors should monitor Cisco's ability to navigate these factors and capitalize on its growth initiatives to assess the company's future earnings potential.