Cisco Systems Inc Earnings - Q3 2025 Analysis & Highlights
Key Takeaways
Cisco Systems Inc (CSCO) Q4 2025 earnings call highlighted strong financial performance, driven by growth in AI infrastructure orders, networking, and security. The company's focus on innovation, strategic partnerships, and capital returns were also key themes. Management provided guidance for Q1 2026 and full fiscal year 2026, indicating continued growth and profitability.
Key Financial Results
Q4 2025 revenue was $14.7 billion, up 8% year-over-year.
Non-GAAP net income was $4 billion, up 12%.
Non-GAAP earnings per share (EPS) was $0.99, up 14%.
Total RPO was $43.5 billion, up 6%.
Product RPO grew 8%.
Total short-term RPO was $21.7 billion, up 4%.
Total ARR ended the quarter at $31.1 billion, an increase of 5%, with product ARR growth of 8%.
Total subscription revenue increased 3% to $7.9 billion, representing 54% of Cisco's total revenue.
Total software revenue was up 5% at $5.6 billion, with software subscription revenue also up 5%.
Non-GAAP gross margin came in at 68.4%, up 50 basis points year-over-year.
Non-GAAP operating margin at 34.3%.
Operating cash flow was $4.2 billion, up 14%.
FY 2025 revenue was $56.7 billion, up 5%.
Total non-GAAP gross margin was 68.7%, up 120 basis points.
Non-GAAP net income was $15.2 billion, flat year-over-year.
Non-GAAP earnings per share was $3.81, up 2%.
Operating cash flow was $14.2 billion, up 30% compared to FY 2024.
Business Segment Results
Networking was up 12%, with growth across most of the portfolio, led by double-digit growth in Internet Infrastructure and Enterprise Routing, as well as solid growth in switching, partially offset by a decline in servers.
Security was up 9%, primarily driven by growth in offerings from Splunk and SASE.
Collaboration was up 2%, driven by solid growth in devices.
Observability was up 4%, led by strong growth in Splunk and ThousandEyes.
Americas product orders were up 5%.
EMEA product orders were up 10%.
APAJC product orders were up 7%.
Service provider and cloud product orders were up 49%.
Enterprise product orders were up 5%.
Public sector product orders were down 6%.
Capital Allocation
Returned $2.9 billion to shareholders during the quarter, comprised of $1.6 billion for quarterly cash dividend and $1.3 billion of share repurchases.
$14.2 billion now remaining under share repurchase program.
Returned $12.4 billion in value to shareholders in FY 2025 through cash dividends and share repurchases.
This was comprised of $6.4 billion in quarterly cash dividends and $6 billion of share repurchases.
Increased dividend for the 14th consecutive year in FY 25.
Industry Trends and Dynamics
97% of businesses believe they need to upgrade their networks to successfully deploy AI.
AI is expected to drive network modernization across all segments.
Customers are leveraging Cisco platforms to modernize, secure, and automate their network operations for AI deployment.
The introduction of new switches marks the beginning of a major multiyear refresh cycle opportunity for Cisco's large installed campus switching base.
Countries around the world are committing to US domestic investments as part of their trade agreements.
Competitive Landscape
Cisco's expanding partnership with NVIDIA positions them to deliver on new demands with completed integrations of Cisco Nexus switches with NVIDIA Spectrum-X architecture.
Cisco Secure AI factory with NVIDIA provides a trusted blueprint for building secure, AI-ready data centers for enterprises, sovereign cloud providers, and newly emerging neo cloud providers.
Cisco believes that Agentic AI can only be secured by fusing security deep into the network, and that only Cisco can deliver this capability.
Cisco AI Canvas is a revolutionary generative user interface for real-time collaboration between network and security teams, optimized for both human and agent interaction.
Macroeconomic Environment
The company is operating in a complex environment with some clarity on tariffs.
Q1 and fiscal year 2026 guidance assumes current tariffs and exemptions remain in place through the end of fiscal 2026.
These include China at 30%, partially offset by an exemption for semiconductors and certain electronic components, Mexico at 25% and Canada at 35%.
Other countries reverted to country-specific reciprocal rates, but largely offset by an exemption for semiconductors and certain electronic components, and a small impact from tariffs on copper, steel, and aluminum, and retaliatory tariffs.
Growth Opportunities and Strategies
Cisco is well-positioned to provide the critical infrastructure needed for the AI era.
AI Infrastructure orders received from webscale customers exceeded $800 million in the quarter, bringing the total for fiscal year 2025 to over $2 billion.
Cisco is expanding its partnership with NVIDIA to deliver low latency, high-speed networking for AI clusters.
Newly forged Middle East Strategic partnerships, including HUMAIN, G42 and Stargate UAE, are all progressing as planned, and the company expects the sovereign AI opportunity to build momentum in the second half of fiscal year 2026.
Cisco believes it will be a core system provider for significant AI training and inference cluster build-outs.
Cisco is framing the AI opportunity into three distinct but connected pillars: AI training infrastructure for webscale customers, AI inference and enterprise clouds, and AI network connectivity.
Splunk and Cisco Synergies delivered a 14% year-over-year increase in new logos for Splunk in Q4, demonstrating the benefit of cross-selling motions and joint innovation.
New and refreshed products, including Secure Access, XDR, Hypershield, and AI Defense, added 750 new customers collectively in the quarter.
Cisco is using gen AI and Agentic systems across its customer experience organization.
Financial Guidance and Outlook
For fiscal Q1 2026, revenue is expected to be in the range of $14.65 billion to $14.85 billion.
Non-GAAP gross margin is anticipated to be in the range of 67.5% to 68.5%, and non-GAAP operating margin is expected to be in the range of 33% to 34%.
Non-GAAP earnings per share is expected to range from $0.97 to $0.99.
The company is assuming a non-GAAP effective tax rate of approximately 19%.
For fiscal year 2026, revenue is expected to be in the range of $59 billion to $60 billion.
Non-GAAP earnings per share is expected to be in the range from $4 to $4.06.