Cisco (NASDAQ: CSCO) stock got a nice bump last week, with a single-day surge following its quarterly results (the company’s fiscal fourth). It shot up almost 9% in a single day’s trading.
But it left me with more of a queasy feeling.
I think that’s because the results were only really good because the bar was so unfathomably low.
That is, revenue fell 10% for the quarter and 6% for the year. And GAAP EPS fell 44% for the quarter and 17% for the year.
And that’s cause for celebration in the world of Cisco?
How the mighty have fallen.
When I was growing up in the ’90s, this was the stock to own. Then the dot-com bubble burst and it tumbled 85% from about $80 to $12, and for the past 20 years it’s been hoeing its way back.
So what’s got everyone abuzz of late?
Well, it’s laying off 7% of its workforce in its second round of job cuts this year. For a company with roughly 80,000 employees, that’s about 5,600 people they’re letting go. And that’s after they dumped about 4,000 jobs in February. Join Wealth Daily today for FREE. We’ll keep you on top of all the hottest investment ideas before they hit Wall Street. Become a member today, and get our latest free report: “How to Make Your Fortune in Stocks”The Best Free Investment You’ll Ever Make
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Pop the Champagne!
What else is Cisco up to?
Well, like every single tech company you’ve ever heard of, it’s pivoting to AI.
The company is pouring $1 billion in tech startups like Cohere, Mistral, and Scale to develop AI products — which is also about how much it’s going to pay in severance and parachutes for everyone it’s throwing off the plane.
Money well spent.
Chasing IBM, Microsoft, and all the other AI giants with a skeleton crew of demoralized employees is going to go great.
On top of that, Cisco also closed its acquisition of Splunk — a cybersecurity company with an AI spin — in March. It paid $28 billion for it.
Indeed, Cisco seems determined to buy its way into the AI craze and it’s betting its workers’ livelihoods on the endeavor.
But the kabuki show isn’t complete without a partnership with Nvidia. Tying yourself to that powerhouse shows you’re serious.
So Cisco is checking that box with an AI infrastructure/ethernet product called HyperFabric — as opposed to HyperShield, which is the AI cybersecurity program it’s built through Splunk.
All of this is meant to distract from the fact that Cisco is carrying a $30 billion debt burden as it tries to resuscitate itself. Even if it succeeds, the returns won’t be realized in some time.
Cisco itself is projecting GAAP EPS of $0.35–$0.42 in for its FY25 first quarter and non-GAAP EPS of $0.86–$0.88. Again, that’s after posting GAAP EPS of $0.54 and non-GAAP EPS of $0.87 in the fiscal fourth.
At best, it’s treading water.
I’d sooner bet on a company like C3.ai (NYSE: AI), which is ahead of the curve.
C3 makes software that can analyze and model missile trajectories to improve America’s defenses. It also improves aircraft fleet readiness by analyzing flight data, maintenance logs, and user manuals to predict what subsystems on a fighter jet need to be replaced and when.
That’s a verified niche that’s backed by a massive surge in defense spending — one that’s carried defense spending to almost $900 billion in the United States and $2 trillion worldwide.
I’ve also got another AI defense company in my Secret Stock Files portfolio that synthesizes satellite, GPS, and other forms of data to target missile and rocket strikes in real time.
It’s being used by both the Israeli and Ukrainian militaries to aid in their respective wars and gaining a lot of attention as a result.
You can find out more about that here.
Fight on, Jason Simpkins Simpkins is the founder and editor of Secret Stock Files, an investment service that focuses on companies with assets — tangible resources and products that can hold and appreciate in value. He covers mining companies, energy companies, defense contractors, dividend payers, commodities, staples, legacies and more… In 2023 he joined The Wealth Advisory team as a defense market analyst where he reviews and recommends new military and government opportunities that come across his radar, especially those that spin-off healthy, growing income streams. For more on Jason, check out his editor’s page. Be sure to visit our Angel Investment Research channel on YouTube and tune into Jason’s podcasts. Want to hear more from Jason? Sign up to receive emails directly from him ranging from market commentaries to opportunities that he has his eye on. 
