Note: Cisco’s FY 2024 concluded on July 27, 2024
Cisco Systems Inc (NASDAQ: CSCO), a firm specializing in networking equipment, security, collaboration, and cloud management services, is set to disclose its fiscal third-quarter earnings on Wednesday, May 14, 2025, with analysts forecasting earnings of 92 cents per share on $14.06 billion in revenue. This would signify a 5% year-over-year rise in adjusted earnings and an 11% increase in sales compared to the previous year’s figures of 88 cents per share and $12.7 billion in revenue. Historically, CSCO stock has exhibited a tendency to outperform post-earnings announcements, rising 60% of the time with a median one-day increase of 4.2% and a maximum observed growth of 7%.
Cisco is particularly responsive to global economic changes due to its expansive institutional customer base. Although tariffs affecting Canada, China, and Mexico might strain profitability, management has taken measures to minimize their effects. In spite of these uncertainties, Cisco maintains its market leadership and is well-equipped to capitalize on the growth of the Internet of Things (IoT). The firm has $238 billion in current market capitalization. Revenue for the past twelve months was $54 billion, and it achieved operational profitability with $12 billion in operating profits and $9.2 billion in net income.
For traders focused on events, historical trends may provide an advantage, whether by pre-positioning before earnings or responding to movements following the announcement. That being said, if you are looking for upside with less volatility than from individual stocks, the Trefis High Quality portfolio offers an alternative, having outperformed the S&P 500 and produced returns surpassing 91% since its inception. See earnings reaction history of all stocks.
Cisco’s Historical Odds Of Positive Post-Earnings Return
Here are some insights on one-day (1D) post-earnings returns:
- There are 20 earnings data points logged over the past five years, with 12 positive and 8 negative one-day (1D) returns recorded. Overall, positive 1D returns occurred approximately 60% of the time.
- However, this percentage drops to 58% if we consider data from the last 3 years instead of 5.
- The median of the 12 positive returns is 4.2%, while the median of the 8 negative returns is -4.1%
Additional statistics for observed 5-Day (5D) and 21-Day (21D) returns following earnings are summarized along with the figures in the table below.
Correlation Between 1D, 5D, and 21D Historical Returns
A relatively less risky approach (although not effective if the correlation is low) is to comprehend the correlation between short-term and medium-term returns post earnings, identify a pair with the highest correlation, and implement the suitable trade. For instance, if 1D and 5D exhibit the strongest correlation, a trader can take a “long” position for the following 5 days if the 1D post-earnings return is positive. Below is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D indicates the relationship between 1D post-earnings returns and subsequent 5D returns.
Is There Any Correlation With Peer Earnings?
Occasionally, the performance of peers can impact the stock reaction following earnings. Indeed, the pricing-in may commence prior to the earnings disclosure. Below is some historical data on the past post-earnings performance of Cisco Systems stock compared to the performance of peers that released earnings just before Cisco Systems. For accurate comparison, peer stock returns also represent post-earnings one-day (1D) returns.
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