Cisco Systems Inc. (CSCO)_ FQ4'22 Wrap_ Strong order momentum and improving supply; Better FY'23 guidance(1)

Key Data __________________________________ GS Forecast ________________________________ GS Factor Profile ____________________________ Source: Company data, Goldman Sachs Research estimates. See disclosures for details.   Revenue($mn)Old51,175.552,718.354,803.0-- EBITDA($mn)18,297.818,213.419,256.519,988.3 EBIT($mn)17,346.817,787.218,951.119,752.2  EPS($)Old3.353.543.80-- P/E(X)15.913.212.211.4 Dividendyield(%)2.83.33.43.5 Netdebt/EBITDA(X)(0.5)(0.6)(0.6)(0.7)  EPS($)0.830.830.860.89CSCOrelativetoAmericasCoverageCSCOrelativetoAmericasHardwareandCommunicationsTechnologyGrowth FinancialReturnsMultipleIntegrated Percentile20th40th60th80th100th Cisco reported better than expected FQ4 revenues as supply availability improved through the quarter. More importantly, Product orders declined by only -6% Y/Y compared to our expectation for a -10% or worse Y/Y decline. The represented normal Q/Q seasonality of >15% order growth vs. our expectation for below normal seasonality given the volatile macro climate. Cisco went on to guide FY’23 revenue growth of +4% to +6% Y/Y which is ahead of consensus’ +3% expectation. Management noted that they see healthy end demand but commented that they expect backlog and RPO to remain elevated through FY’23 given ongoing supply challenges. FY23 EPS guidance was just in line with consensus as ongoing costs associated with supply issues offset the better expected revenue growth. This margin pressure is not unique to Cisco as we note other networking companies such as Juniper have also highlighted supply linked margin headwinds. We see this as a surprisingly strong quarter for Cisco against a tough macro and operating backdrop though we believe risks to fundamentals persist given the weak macro backdrop. Order momentum much better than expected. Cisco’s nproduct orders grew in-line with typical seasonality of >15% Q/Q in FQ4 leading to a Y/Y decline of only -6%. This is better than our expectation of greater than a -10% Y/Y decline and below normal seasonality. Management noted that demand remained healthy through the quarter. In terms of customer segments, Cisco noted that they saw Q/Q growth in double digitEnterprise, Commercial and Public Sector product orders. Management called out that their Webscale business is now approaching ~$3bn in annual scale with orders growing at ~50% over the past 4 quarters. FY’23 revenue guidance better; supply shortages to limit n CSCO12mPrieTarget:$50.00Prie:$46.66Upside:7.2%Cisco Systems Inc. (CSCO) FQ4’22 Wrap: Strong order momentum and improving supply; Better FY’23 guidance17 August 2022 | 9:44PM PDT Goldman Sachs does and seeks to do business with c