Cisco Systems is scheduled to release its next earnings report on Thursday after closing bell, and analysts are expecting revenue of $12.54 billion and earnings of 56 cents per share. Cisco management guided for sales of between $12.49 billion and $12.74 billion for the first fiscal quarter of 2016.

Cisco Systems, Inc. Earnings Preview: Headwinds Already Apparent
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Cisco’s headwinds remain the same

Analyst Simon Leopold and team at Raymond James don’t expect any surprises in Cisco Systems’ earnings report. They note that management has already highlighted a number of headwinds like weakness in emerging markets, currency headwinds, and soft spending by service providers. They add that these same headwinds are affecting all vendors in the networking space but that they believe expectations for Cisco already have factored them in.

Some potential differences that could have impacted Cisco’s first quarter include Enterprise trends, which have been mixed. They believe federal seasonality and improvements in Europe might have offset the potential softening in the Enterprise market. Some investors have been concerned about softening in capital expenditures by web scale operators, but the Raymond James team says that at this point, it’s unclear how much of this softening is related to equipment and how much is “lumpiness.”

While Cisco has very limited exposure to China at less than 3% of its revenue coming from there, they also believe contagion from China might be a problem. They say countries that depend on trade with China may not spend as much with Cisco. In general, they like Cisco as a long term bet and have maintained their Outperform rating and $33 per share price target on the company going into Thursday’s earnings report.

Cisco’s multiple won’t expand: Nomura

Nomura analysts Jeffrey Kvaal and James Chen also have a $33 per share price target on Cisco Systems, but they have a Neutral rating on the stock. They don’t expect this week’s report to drive an expansion in the company’s multiple, although they think consensus estimates for earnings might increase after the report, especially if end markets remain steady and management’s guidance is “sufficiently conservative.”

They see steady markets as being “easily achievable” and say that Cisco’s guide is toward the low end of the historical sequential pattern and consensus revenue for the second fiscal quarter’s earnings remain flat.

Cisco’s main performance drivers

The Nomura team thinks the main drivers of Cisco’s Enterprise sales are the revamped security portfolio, and they said their checks suggest that growth in this area has slowed the company’s share losses a lot if not halted them completely. They also believe the company benefited from spending on E-RATE Wi-Fi during the quarter.

Their checks of carriers suggest that Cisco’s new core routers are selling pretty well, so they expect the strength in this area to offset weakness in its “aging” edge routing products. They do expect the company to launch a new edge router soon, however, and possible another product by the end of the year. They warned investors though that Cisco’s new products often take nine to 19 months to ramp.

Shares of Cisco Systems slumped today, falling by as much as 0.5% to $28.04 per share during regular trading hours.