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01/10 00:30
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Cisco's earnings call highlights strong financial performance with revenue and product growth, especially in AI and security. The robust shareholder return plan with significant dividends and repurchases is a positive indicator. Although there are competitive pressures and tariff impacts, management's strategies to mitigate these and optimistic guidance for AI and cloud growth suggest a positive outlook. The Q&A session did not reveal significant negative concerns, and the overall sentiment remains favorable, justifying a positive stock price prediction.
Total Revenue $14,100,000,000, up 11% year over year.
Non GAAP Net Income $3,800,000,000, year over year change not specified.
Non GAAP Earnings Per Share $0.96, year over year change not specified.
Total Product Revenue $10,400,000,000, up 15% year over year.
Services Revenue $3,800,000,000, up 3% year over year.
Networking Revenue Up 8%, driven by double digit growth in switching and enterprise routing, partially offset by a decline in servers.
Security Revenue Up 54%, primarily driven by growth in offerings from Splunk and SASE.
Collaboration Revenue Up 4%, driven by growth in devices, WebEx Suite, and CPaaS offerings.
Observability Revenue Up 24%.
Total Annualized Recurring Revenue (ARR) $30,600,000,000, an increase of 5%.
Product ARR Growth 8%.
Total Subscription Revenue $7,900,000,000, up 15%, representing 56% of total revenue.
Total Software Revenue $5,600,000,000, up 25%.
Software Subscription Revenue Up 26%.
Total Remaining Performance Obligations (RPO) $41,700,000,000, up 7%.
Product RPO Up 10%.
Total Short Term RPO $21,100,000,000, up 5%.
Product Orders Up 20% year over year; excluding Splunk, up 9%.
Americas Product Orders Up 27%.
EMEA Product Orders Up 4%.
APJC Product Orders Up 21%.
Service Provider and Cloud Orders Up 32%.
Enterprise Orders Up 22%.
Public Sector Orders Up 8%.
Non GAAP Gross Margin 68.6%, up 30 basis points year over year.
Non GAAP Product Gross Margin 67.6%, up 70 basis points, driven by productivity improvements and Splunk.
Non GAAP Services Gross Margin 71.3%, down 30 basis points.
Non GAAP Operating Margin 34.5%, above the high end of guidance.
Operating Cash Flow $4,100,000,000, up 2%.
Capital Returned to Shareholders $3,100,000,000, comprised of $1,600,000,000 in dividends and $1,500,000,000 in share repurchases.
Total Cash, Cash Equivalents, and Investments $15,600,000,000.
AI Infrastructure Orders: Received AI infrastructure orders from web scale customers exceeding $600 million in Q3, surpassing the $1 billion target for fiscal year 2025 a quarter early.
WiFi 7 Portfolio: Achieved triple-digit sequential growth in orders for the WiFi 7 portfolio in Q3.
Industrial IoT Portfolio: Year-to-date orders for the Industrial Internet of Things portfolio grew 35% year over year.
Cisco Secure AI Factory: Announced the Cisco Secure AI factory with NVIDIA to embed security end-to-end for AI workloads.
Public Sector Orders: Public sector orders grew 8% year over year, with U.S. Federal orders growing in double digits.
Saudi Arabia Partnership: Announced a multi-phased investment program in Saudi Arabia, becoming a strategic technology partner for a new AI company.
AI Infrastructure Partnership: Joined the AI infrastructure partnership with major firms to invest in scalable infrastructure for AI workloads.
Capital Returns: Returned $3.1 billion to shareholders through share repurchases and dividends in Q3.
Recurring Revenue Growth: Generated solid growth in annualized recurring revenue, remaining performance obligations, and subscription revenue.
Operational Efficiency: Total product orders grew 20% year over year, indicating strong operational execution.
Leadership Changes: Scott Herron will retire at the end of fiscal year 2025; Mark Patterson will become the new CFO.
AI Strategy: Cisco's AI strategy focuses on three pillars: AI training infrastructure, AI inference for enterprise clouds, and AI network connectivity.
Tariffs: Cisco's guidance assumes current tariffs and exemptions remain in place through the quarter, including a 30% tariff on China, 25% on Mexico and Canada for non-USMCA eligible products, and a base rate of 10% for other countries, reverting to country-specific tariffs after July 9.
Supply Chain Challenges: Cisco's supply chain team is focused on mitigating the impact of tariffs through flexibility and agility built into operations, leveraging the size and scale of their supply chain.
Customer Behavior: Despite tariff uncertainties, Cisco has not observed significant changes in customer purchasing behavior, with customers remaining committed to technology transitions, particularly in AI.
Public Sector Risks: There are ongoing stresses in the civilian public sector due to job concerns, although the intelligence and Department of Defense segments are performing well.
Economic Factors: The uncertain macro environment continues to pose risks, but Cisco's strong performance indicates resilience against these economic challenges.
AI Infrastructure Orders: AI orders are nonlinear and dependent on execution; if Cisco can increase capacity, they expect continued growth in this area.
Competitive Pressures: Cisco faces competition in the AI infrastructure space, particularly from other technology providers, which necessitates strong execution to maintain market position.
AI Infrastructure Orders: Received AI infrastructure orders from web scale customers exceeding $600 million in Q3, surpassing the original fiscal year 2025 target of $1 billion a quarter early.
Saudi Arabia Investment Program: Announced a multi-phased investment program in Saudi Arabia, partnering with a new AI company, Humane, to contribute to their AI infrastructure build-outs.
Partnership with NVIDIA: Expanded collaboration with NVIDIA to create a unified architecture for AI deployments, integrating Cisco Silicon One with NVIDIA technology.
Security Innovations: Introduced several innovations in security, including Cisco XDR and partnerships with ServiceNow to enhance security operations.
Organizational Changes: Announced leadership changes, including Mark Patterson as new CFO and Jeetu Patel as President and Chief Product Officer.
Q4 Revenue Guidance: Expect revenue in the range of $14.5 billion to $14.7 billion.
Fiscal Year 2025 Revenue Guidance: Expect revenue in the range of $56.5 billion to $56.7 billion.
Q4 Non-GAAP EPS Guidance: Expected to range from $0.96 to $0.98.
Fiscal Year 2025 Non-GAAP EPS Guidance: Expected to range from $3.77 to $3.79.
Q4 Gross Margin Guidance: Anticipate non-GAAP gross margin to be in the range of 67.5% to 68.5%.
Q4 Operating Margin Guidance: Expected to be in the range of 33.5% to 34.5%.
Quarterly Cash Dividend: $1,600,000,000 returned to shareholders as dividends in Q3.
Share Repurchases: $1,500,000,000 spent on share repurchases in Q3.
Total Capital Returned: $3,100,000,000 returned to shareholders in Q3, totaling $9,600,000,000 year to date.
Remaining Share Repurchase Program: $15,400,000,000 remaining under the share repurchase program.
Cisco's earnings call highlights strong AI-related growth, strategic partnerships, and product innovation. Despite a decline in operating cash flow, the company is investing in AI infrastructure and returning significant capital to shareholders. The Q&A section reveals confidence in AI orders, multiyear product cycles, and a shift to cloud services. Although there are challenges, such as increased DRAM pricing and a one-time revenue timing issue, the overall sentiment is positive due to optimistic guidance, strategic partnerships, and a strong AI demand outlook.
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