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01/10 00:30
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call indicates strong financial performance with significant AI infrastructure orders and partnerships, optimistic growth in security products, and a robust shareholder return plan. Despite some growth deceleration due to year-over-year comparisons, the company remains confident in its future prospects, especially with AI and networking. The Q&A section revealed no major concerns, with management addressing questions transparently and emphasizing growth opportunities. The positive guidance, shareholder returns, and lack of negative surprises suggest a positive stock price movement.
Revenue Total revenue was $14.7 billion, up 8% year-over-year. The increase was driven by strong order growth and margins.
Non-GAAP Net Income Non-GAAP net income was $4 billion, up 12% year-over-year. This reflects good operating leverage with EPS growth outpacing revenue growth.
Non-GAAP Earnings Per Share (EPS) Non-GAAP EPS was $0.99, up 14% year-over-year, demonstrating good operating leverage.
Total Product Revenue Total product revenue was $10.9 billion, up 10% year-over-year. Growth was led by double-digit growth in Internet infrastructure and enterprise routing, partially offset by a decline in servers.
Services Revenue Services revenue was $3.8 billion, flat year-over-year.
Networking Revenue Networking revenue was up 12% year-over-year, driven by double-digit growth in Internet infrastructure and enterprise routing, as well as solid growth in switching.
Security Revenue Security revenue was up 9% year-over-year, primarily driven by growth in offerings from Splunk and SASE.
Collaboration Revenue Collaboration revenue was up 2% year-over-year, driven by solid growth in devices.
Observability Revenue Observability revenue was up 4% year-over-year, led by strong growth in Splunk and ThousandEyes.
Total Recurring Revenue (RPO) Total RPO was $43.5 billion, up 6% year-over-year. Product RPO grew 8%, and total short-term RPO was $21.7 billion, up 4%.
Annualized Recurring Revenue (ARR) Total ARR ended the quarter at $31.1 billion, an increase of 5% year-over-year. Product ARR grew 8%.
Total Subscription Revenue Total subscription revenue increased 3% year-over-year to $7.9 billion, representing 54% of Cisco's total revenue.
Total Software Revenue Total software revenue was up 5% year-over-year at $5.6 billion, with software subscription revenue also up 5%.
Operating Cash Flow Operating cash flow was $4.2 billion, up 14% year-over-year, primarily driven by revenue and earnings growth.
Capital Returned to Shareholders $2.9 billion was returned to shareholders during the quarter, including $1.6 billion in cash dividends and $1.3 billion in share repurchases.
Full Fiscal Year Revenue Revenue for the full fiscal year was $56.7 billion, up 5% year-over-year.
Full Fiscal Year Non-GAAP Gross Margin Non-GAAP gross margin for the full fiscal year was 68.7%, up 120 basis points year-over-year.
Full Fiscal Year Non-GAAP Net Income Non-GAAP net income for the full fiscal year was $15.2 billion, flat year-over-year.
Full Fiscal Year Non-GAAP EPS Non-GAAP EPS for the full fiscal year was $3.81, up 2% year-over-year.
Full Fiscal Year Operating Cash Flow Operating cash flow for the full fiscal year was $14.2 billion, up 30% year-over-year, positively impacted by the absence of large tax payments from the prior year.
Full Fiscal Year Capital Returned to Shareholders $12.4 billion was returned to shareholders during the fiscal year, including $6.4 billion in cash dividends and $6 billion in share repurchases.
AI-ready networking systems: Refreshed product portfolio with Silicon One, AI-native security solutions, and software operating systems to support AI era.
Cisco Cat9k smart switches: New family of smart switches powered by Silicon One, offering enhanced performance, quantum secure networking, and AI-driven operations.
AgenticOps and AI Canvas: Introduced revolutionary generative user interface for real-time collaboration and simplified IT operations.
AI infrastructure orders: Record orders exceeding $800 million in Q4, totaling over $2 billion for FY '25, driven by webscale customers.
Neocloud and sovereign AI opportunities: Strategic partnerships in the Middle East progressing, with sovereign AI opportunities expected to build momentum in FY '26.
Public sector demand: Sequential growth in public sector demand despite a 6% year-over-year decline in Q4.
Revenue and profitability: Q4 revenue of $14.7 billion, up 8% year-over-year, with non-GAAP gross margin at 68.4% and operating margin at 34.3%.
Capital returns: Returned $2.9 billion to shareholders in Q4 and $12.4 billion in FY '25 through dividends and share repurchases.
AI and automation in operations: Over 2/3 of support cases touched by AI and automation, leading to productivity gains.
AI-focused innovation: Positioned as a core system provider for AI training and inference clusters, leveraging partnerships with NVIDIA and others.
Security integration: Fusing security into networking products to address AI-driven operational needs.
Global supply chain agility: Leveraging supply chain flexibility to mitigate tariff impacts and support global operations.
Public Sector Orders: Public sector orders were down 6% year-over-year in Q4, which could indicate challenges in maintaining demand in this segment compared to the strong performance in FY '24.
Tariffs and Trade Policies: The company is operating under complex tariff environments, including tariffs from China, Mexico, and Canada, which could impact costs and profitability.
Supply Chain Challenges: While Cisco has built flexibility into its supply chain, the ongoing complexity and potential disruptions in global supply chains remain a risk.
Economic Environment: The company acknowledges operating in a complex economic environment, which could pose challenges to demand and financial performance.
AI Infrastructure Demand: While AI infrastructure orders are strong, the company faces the challenge of meeting unprecedented levels of network traffic and security requirements as AI adoption grows.
Competitive Pressures: The need to innovate rapidly in AI and networking to stay ahead of competitors presents ongoing strategic execution risks.
Geopolitical Risks: The company’s reliance on international markets and partnerships, such as those in the Middle East, exposes it to geopolitical uncertainties.
Revenue Guidance for Q1 FY 2026: Expected revenue to be in the range of $14.65 billion to $14.85 billion.
Revenue Guidance for FY 2026: Expected revenue to be in the range of $59 billion to $60 billion.
Non-GAAP Gross Margin Guidance for Q1 FY 2026: Expected to be in the range of 67.5% to 68.5%.
Non-GAAP Operating Margin Guidance for Q1 FY 2026: Expected to be in the range of 33% to 34%.
Non-GAAP Earnings Per Share Guidance for Q1 FY 2026: Expected to range from $0.97 to $0.99.
Non-GAAP Earnings Per Share Guidance for FY 2026: Expected to range from $4 to $4.06.
AI Infrastructure Orders: AI infrastructure orders from webscale customers exceeded $800 million in Q4 FY 2025, with a total of over $2 billion for FY 2025. Demand for AI technologies from Neocloud providers and sovereign customers is expected to increase in FY 2026.
AI Training Infrastructure: Cisco expects demand for AI training infrastructure, including Cisco 8K, Silicon One, optics, and optical systems, to grow in FY 2026.
AI Inference and Enterprise Clouds: Cisco anticipates growth in AI inference and enterprise cloud deployments, supported by its partnership with NVIDIA and innovations in hardware and software.
AI Network Connectivity: Cisco foresees increased demand for AI network connectivity as network traffic grows due to AI agents and applications.
Security Solutions: Cisco expects continued growth in security solutions, including Secure Access, XDR, Hypershield, and AI Defense, with a focus on integrating security into networking products.
Strategic Partnerships in the Middle East: Cisco's partnerships with HUMAIN, G42, and Stargate UAE are expected to drive sovereign AI opportunities in the second half of FY 2026.
Product Innovation: Cisco plans to continue innovating with AI-driven products, including smart switches, routers, and industrial IoT devices, to support AI-ready infrastructure.
Capital Returned in Q4: $2.9 billion returned to shareholders through share repurchases and dividends.
Total Return in Fiscal Year 2025: $12.4 billion returned to shareholders, representing 94% of free cash flow.
Dividend Increase: Dividend increased for the 14th consecutive year in FY '25.
Share Repurchases in Q4: $1.3 billion worth of shares repurchased.
Remaining Share Repurchase Program: $14.2 billion 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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