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    CSCO
    Earnings call· Jul 2025(Q4 FY25)

    CISCO SYSTEMS, INC. CSCO

    Aug 13, 2025 Source

    Executive summary

    Cisco Q4 FY25 — Record AI Infrastructure Orders and Strong Profitability

    Cisco closed FY25 with strong Q4 results, driven by record AI infrastructure orders and robust product order growth across geographies, leading to profitability above guidance. The company is strategically positioned for the AI era with refreshed product portfolios and expanding partnerships, fueling confidence in its FY26 outlook despite some areas of slower growth.

    Highlights

    5

    • Record AI infrastructure orders from webscale customers exceeded $800 million in Q4, bringing FY25 total to over $2 billion, more than double the original $1 billion target.

    • Total product orders in Q4 grew 7% year-over-year, with double-digit growth in Networking product orders.

    • Non-GAAP EPS was $0.99, up 14% year-over-year, exceeding the high end of guidance.

    • Operating cash flow was $4.2 billion, up 14% in Q4, and $14.2 billion, up 30% for FY25.

    • Returned $2.9 billion in capital to shareholders in Q4, totaling $12.4 billion for FY25 (94% of FCF), surpassing FY24.

    Concerns

    3

    • Public sector orders were down 6% year-over-year in Q4, compared to strong double-digit growth in FY24.

    • Services revenue was flat year-over-year in Q4, decelerating from prior quarters.

    • Security order growth, while showing improvement in new products, was slower than anticipated, with overall security orders in mid-single digits.

    Guidance & targets

    7
    CategoryTargetConfidence
    Revenue
    $14.65 billion to $14.85 billion
    high materiality
    High
    Non-GAAP Gross Margin
    67.5% to 68.5%
    medium materiality
    High
    Non-GAAP Operating Margin
    33% to 34%
    medium materiality
    High
    Non-GAAP Earnings Per Share
    $0.97 to $0.99
    high materiality
    High
    Non-GAAP Effective Tax Rate
    approximately 19%
    low materiality
    High
    Revenue
    $59 billion to $60 billion
    high materiality
    High
    Non-GAAP Earnings Per Share
    $4 to $4.06
    high materiality
    High

    Segment performance

    10
    SegmentRevenueYoYQoQMargin
    Americas Product Orders
    Product orders in the Americas region.
    		—5%——
    EMEA Product Orders
    Product orders in the EMEA region, with strength in UK, Germany, Saudi. Enterprise up mid-teens, SP up mid-teens, Public Sector roughly flat.
    		—10%——
    APJC Product Orders
    Product orders in the APJC region.
    		—7%——
    Service Provider and Cloud Product Orders
    Product orders from service provider and cloud customers, driven by triple-digit webscale order growth for the fourth consecutive quarter.
    		—49%——
    Enterprise Product Orders
    Product orders from enterprise customers.
    		—5%——
    Public Sector Product Orders
    Product orders from public sector customers, compared with strong double-digit growth in FY24. Overall public sector demand grew sequentially in line with normal seasonality.
    		—-6%——
    Networking Product Revenue
    Revenue growth across most of the portfolio, led by Internet infrastructure and enterprise routing, as well as solid growth in switching, partially offset by a decline in servers.
    		—12%——
    Security Product Revenue
    Revenue growth primarily driven by offerings from Splunk and SASE.
    		—9%——
    Collaboration Product Revenue
    Revenue growth driven by solid growth in devices.
    		—2%——
    Observability Product Revenue
    Revenue growth led by strong growth in Splunk and ThousandEyes.
    		—4%——

    Operational metrics

    42
    Non-GAAP EPS
    $0.99up 14% YoY
    Q4 FY25

    Above the high end of guidance.

    Non-GAAP Net Income
    $4 billionup 12% YoY
    Q4 FY25

    Demonstrating good operating leverage with EPS growth outpacing revenue growth.

    Total Revenue
    $14.7 billionup 8% YoY
    Q4 FY25

    At the high end of guidance range.

    Total Product Revenue
    $10.9 billionup 10% YoY
    Q4 FY25

    Product revenue for the quarter.

    Services Revenue
    $3.8 billionflat YoY
    Q4 FY25

    Services revenue for the quarter.

    Non-GAAP Gross Margin
    68.4%up 50 bps YoY
    Q4 FY25

    At the high end of guidance range.

    Non-GAAP Product Gross Margin
    67.5%up 50 bps YoY
    Q4 FY25

    Driven by productivity improvements.

    Non-GAAP Services Gross Margin
    70.8%up 50 bps YoY
    Q4 FY25

    Services gross margin for the quarter.

    Non-GAAP Operating Margin
    34.3%
    Q4 FY25

    At the high end of guidance range.

    Non-GAAP Tax Rate
    18.1%
    Q4 FY25

    Non-GAAP effective tax rate for the quarter.

    Cash and investments balance
    $16.1 billion
    Q4 FY25

    Total cash, cash equivalents and investments.

    Capital Returned to Shareholders
    $2.9 billion
    Q4 FY25

    Total capital returned to shareholders during the quarter.

    Share Repurchases
    $1.3 billion
    Q4 FY25

    Amount of share repurchases during the quarter.

    Remaining Share Repurchase Authorization
    $14.2 billion
    Q4 FY25

    Remaining amount under the share repurchase program.

    Quarterly Cash Dividend
    $1.6 billion
    Q4 FY25

    Amount of quarterly cash dividend paid.

    Total Revenue
    $56.7 billionup 5% YoY
    FY25

    Full fiscal year revenue.

    Total Non-GAAP Gross Margin
    68.7%up 120 bps YoY
    FY25

    Full fiscal year non-GAAP gross margin.

    Non-GAAP Net Income
    $15.2 billionflat YoY
    FY25

    Full fiscal year non-GAAP net income.

    Non-GAAP EPS
    $3.81up 2% YoY
    FY25

    Full fiscal year non-GAAP earnings per share.

    Capital Returned to Shareholders
    $12.4 billion94% of FCF, surpassed FY24 ($12.1B)
    FY25

    Total capital returned to shareholders for the full fiscal year.

    Dividend Increase Streak
    14th consecutive year
    FY25

    Reinforcing confidence in the strength and stability of ongoing cash flows.

    AI Infrastructure Orders
    >$800 million
    Q4 FY25

    Record AI infrastructure orders received from webscale customers.

    AI Infrastructure Orders
    >$2 billionmore than double original $1 billion target
    FY25

    Total AI infrastructure orders from webscale customers for the full fiscal year.

    AI Infrastructure Revenue
    ~$1 billion
    FY25

    Revenue recognized in FY25 related to AI back-end orders from webscale customers.

    Total Product Orders
    7%YoY
    Q4 FY25

    Solid growth across all geographies despite a complex environment.

    Enterprise Product Orders
    5%YoY
    Q4 FY25

    Enterprise product orders for the quarter.

    Networking Product Orders
    double digitsfourth consecutive quarter of double-digit growth
    Q4 FY25

    Driven by webscale infrastructure, switching, enterprise routing, industrial IoT and servers.

    Industrial IoT Product Orders
    double digitsfifth consecutive quarter of double-digit growth
    Q4 FY25

    Comprised of ruggedized catalyst products, with solid demand signals continuing into FY26.

    AI Infrastructure Orders Product Mix
    >2/3 Systems, remainder Optics
    Q4 FY25

    Product mix of AI infrastructure orders from webscale customers.

    Security Order Growth
    >20%
    Q4 FY25

    Order growth for new and refreshed security products, which represent about 2/3 of the organic security portfolio.

    Security Order Growth
    double digits
    Q4 FY25

    Security order growth excluding the U.S. Federal segment.

    New Hypershield Customers
    80
    Q4 FY25

    New Hypershield customers, mostly bundling with N9,300 smart switch.

    New SSE Customers
    480+
    Q4 FY25

    New Secure Services Edge (SSE) customers.

    Splunk New Logos
    >300
    Q3 & Q4 FY25

    New customers for Splunk through cross-selling motions.

    Support Cases Touched by AI and Automation
    >2/3
    current

    Proportion of support cases handled by AI and automation, increasing complex cases solved within one day.

    Data Center Networking Orders
    mid-teens
    FY25

    Order growth in the enterprise data center networking business.

    WiFi 7 Orders
    triple digitsYoY
    FY25

    Order growth for WiFi 7 products.

    EMEA Product Orders
    10%YoY
    Q4 FY25

    Overall product order growth in EMEA.

    EMEA Enterprise Orders
    mid-teens
    Q4 FY25

    Enterprise order growth in EMEA.

    EMEA Service Provider Orders
    mid-teens
    Q4 FY25

    Service Provider order growth in EMEA.

    EMEA Public Sector Orders
    roughly flat
    Q4 FY25

    Public Sector order performance in EMEA.

    Total Product Orders (Ex-Federal)
    10%YoY
    Q4 FY25

    Overall product order growth excluding the U.S. Federal segment.

    Industry KPIs

    10
    MetricValueDetails
    Capital return$2.9 billionUSD
    Backlog order book$43.5 billionUSD
    Orders backlog qualityNo indication of any pull forwards
    Product orders order growth7%%
    Segment growth margin targets—
    Ai cloud infrastructure orders>$800 millionUSD
    Recurring software service revenue$7.9 billionUSD
    Revenue mix by product customer typeNetworking up 12%; Security up 9%; Collaboration up 2%; Observability up 4%%
    Design wins product cycle transitionsNew Cat9k smart switches
    Front end vs back end scale up vs scale across m—

    Orderbook & backlog

    8
    Total RPO$43.5 billionQ4 FY25

    up 6% YoY

    Product RPOup 8%Q4 FY25

    YoY

    Total Short-Term RPO$21.7 billionQ4 FY25

    up 4% YoY

    Total ARR$31.1 billionQ4 FY25

    up 5% YoY

    Product ARRup 8%Q4 FY25

    YoY

    Total Subscription Revenue$7.9 billionQ4 FY25

    up 3% YoY

    represents 54% of Cisco's total revenue

    Total Software Revenue$5.6 billionQ4 FY25

    up 5% YoY

    Software Subscription Revenueup 5%Q4 FY25

    YoY

    Product announcements

    3
    ProductTypeDetails
    AgenticOps (Cisco AI Canvas)launch
    New Cat9k Smart Switcheslaunch
    Hypershieldlaunch

    Deals & partnerships

    5
    NVIDIAExpanding partnership for AI infrastructure, including integration of Cisco Nexus switches with NVIDIA's Spectrum-X architecture and the Cisco Secure AI factory.

    Completed integrations of Cisco Nexus switches with NVIDIA's Spectrum-X architecture. Cisco Secure AI factory with NVIDIA provides a blueprint for secure AI-ready data centers for enterprises, sovereign cloud providers, and Neocloud providers.

    HUMAINStrategic partnership for sovereign AI build-outs in the Middle East.

    One of Cisco's newly forged Middle East strategic partnerships. Partners are working through getting licenses for GPUs.

    G42Strategic partnership for sovereign AI build-outs in the Middle East.

    One of Cisco's newly forged Middle East strategic partnerships. Partners are working through getting licenses for GPUs.

    Stargate UAEStrategic partnership for sovereign AI build-outs in the Middle East.

    One of Cisco's newly forged Middle East strategic partnerships. Partners are working through getting licenses for GPUs.

    AMDVery tight partnership for sovereign AI opportunities, particularly in the Middle East.

    Working closely with AMD on several sovereign AI projects. Lisa Su (AMD CEO) has a great relationship with Cisco's CEO.

    Risks & headwinds

    4
    Public Sector Order DeclineQ4 FY25

    down 6% YoY in Q4

    Mitigation: Overall public sector demand grew sequentially in line with normal seasonality; teams are forecasting a return to growth for federal during FY26.

    Tariff Impactthrough FY26

    China at 30%, Mexico at 25%, Canada at 35% (for non-USMCA eligible components)

    Mitigation: Partially offset by exemptions for semiconductors and certain electronic components; leveraging world-class supply chain team to mitigate impact; building flexibility and agility into operations.

    Legacy Security Products Dragongoing, expected to lessen through FY26

    Older products are not huge investment areas and are the 'long tail of the life cycle'

    Mitigation: New and refreshed security products (2/3 of organic portfolio) are growing over 20%, expected to become a bigger part and reduce the negative impact of legacy products.

    Complex Global Environmentongoing

    Operating in a complex environment

    Mitigation: Focus on durable growth with financial discipline, driving operating leverage, and continued capital returns; positioned for success based on controllable factors.

    What to watch in Q1 FY26

    5

    Security Order Growth

    FY26
    CurrentMid-single-digit overall, >20% for new/refreshed products (2/3 of organic portfolio), double-digit ex-Fed.
    TargetContinued improvement, exiting FY26 near or on path to 15-17% long-term target.

    Why it matters

    Security is a key growth area, and management expects acceleration as new products gain share and legacy products' drag diminishes.

    I don't think we should change those ranges. Number two, do I believe we'll exit the year at it? I think we're going to exit the year either near it or on a path to get there pretty soon after that.

    Q&A highlights

    6

    Why does FY26 guidance imply growth deceleration despite AI opportunity, especially with sovereign AI kicking in later in the year?

    Management clarified that the implied deceleration is primarily due to tougher year-over-year comparisons later in the year, not a signal of changing demand. Q4 FY25 was the first 'apples-to-apples' quarter with Splunk in the prior year, making prior growth rates appear higher.

    “I think the dynamic that you're talking about is strictly connected to just year-over-year comps later in the year. I don't think it's got -- it hasn't -- it's not meant to signal any change in demand or anything that we think.”

    asked by Aaron Rakers · answered by Charles Robbins

    2 min read6 chapters

    Detailed Narrative

    01

    AI Opportunity and Strategy

    Cisco frames its AI opportunity into three pillars: AI training infrastructure for webscale customers (Cisco 8K, Silicon One, optics), AI inference and enterprise clouds (accelerated innovation, NVIDIA partnership), and AI network connectivity (modernizing, securing, automating networks for pervasive AI agents). The company expects demand for these technologies to increase in FY26, particularly from Neocloud providers and sovereign customers, with sovereign AI momentum building in the second half of FY26.

    02

    Product Portfolio Refresh and AI Readiness

    Cisco has refreshed almost its entire product portfolio, including networking systems powered by Silicon One, AI-native security solutions, and software operating systems. This positions the company to provide critical infrastructure for the AI era. New Cat9k smart switches, powered by Silicon One, deliver enhanced performance and simplified operations, marking the beginning of a major multiyear refresh cycle opportunity for its large installed campus switching base.

    03

    Security Business Evolution

    The security business is showing improved momentum, with new and refreshed products (SASE, XDR, Hypershield, AI Defense, refreshed firewalls) seeing over 20% order growth. The integration of Splunk has led to over 300 new logos in Q3 and Q4, demonstrating successful cross-selling motions. Management expects growth rates to continue improving as the impact of legacy products diminishes, aiming to exit FY26 near or on track for its 15-17% long-term target.

    04

    Webscale and Service Provider Momentum

    Product orders from service provider and cloud customers were up 49% year-over-year, driven by triple-digit order growth in webscale for the fourth consecutive quarter. Two webscale customers each placed total orders over $1 billion in FY25 across Cisco's portfolio. Demand from telco and cable customers also grew more than 20% year-over-year in Q4, indicating broad network modernization in preparation for AI.

    05

    Capital Allocation and Shareholder Returns

    Cisco generated strong cash flows, returning $2.9 billion to shareholders in Q4 through share repurchases ($1.3 billion) and dividends ($1.6 billion). For FY25, total capital returned was $12.4 billion (94% of free cash flow), surpassing the $12.1 billion returned in FY24. The company increased its dividend for the 14th consecutive year, reinforcing confidence in ongoing cash flows and commitment to shareholder value.

    06

    Tariff Assumptions in Guidance

    The FY26 guidance assumes current tariffs and exemptions remain in place, including China at 30% (partially offset by semiconductor and electronic components exemption), Mexico at 25%, and Canada at 35% for non-USMCA eligible components. Other countries revert to reciprocal rates, largely offset by exemptions. Cisco continues to leverage its supply chain team to mitigate tariff impact🌐s and build flexibility into operations.

    AI-generated summary of the company’s earnings call. Not investment advice.