Core Viewpoint - Cisco Systems' stock price is expected to reach new highs in 2025 and continue to trend higher into 2026, driven by strong performance in Q3, positive guidance for Q4, and the impact of AI on business strength [1][4]. Financial Performance - Cisco reported Q3 net revenue of $14.15 billion, reflecting an 11.4% year-over-year increase and exceeding MarketBeat's consensus by 65 basis points [5]. - Product sales increased by 15%, while services saw a 3% rise, with all end markets showing growth, particularly a 54% increase in Security [6]. - Adjusted earnings were $0.96, approximately 200 basis points above consensus, indicating a 9% gain for investors [7]. Guidance and Analyst Sentiment - The guidance for Q4 and FY has been raised, with analysts' consensus at or below the lower end of the new targets [8]. - Analysts have increased their price targets for Cisco, with many projecting a range of $70-$75, representing a potential 15% upside [3][10]. Market Trends and Institutional Support - Institutional trends are favorable, with nearly 75% of the stock owned by institutions, providing a solid support base unlikely to sell [10]. - The stock price surged over 5% following the release of Q3 results, indicating positive market sentiment [11]. Dividend and Share Repurchase - Cisco maintains a dividend yield of 2.55% with an annual dividend of $1.64, supported by a solid cash flow and free cash flow [7]. - The company has $15 billion remaining under its share repurchase authorization, expected to last for about 10 quarters at the current pace [9].

Financial Performance - Cisco's Q3 FY25 revenue reached $14.149 billion, an increase of 11% year-over-year[7, 23, 36, 37] - Non-GAAP EPS stood at $0.96[7, 37] - Total software revenue increased by 25% year-over-year to $5.622 billion[7, 38] - Total ARR grew by 5% year-over-year to $30.6 billion[7, 26] - Total RPO increased by 7% year-over-year to $41.7 billion[7, 31] - The company returned $3.131 billion to shareholders through share repurchases and dividends in Q3 FY25[7, 39] AI Initiatives and Growth - Cisco secured over $600 million in AI infrastructure orders from webscale customers in Q3 FY25, exceeding the full-year FY25 target of $1 billion[7, 14] - Product orders increased by 20% year-over-year, or 9% excluding Splunk[7, 34] Q4 FY25 Guidance - Cisco projects Q4 FY25 revenue between $14.5 billion and $14.7 billion[47] - The company anticipates non-GAAP EPS between $0.96 and $0.98[47]

Core Insights - Cisco Systems reported revenue of $14.15 billion for the quarter ended April 2025, reflecting an 11.4% increase year-over-year and a surprise of +0.65% over the Zacks Consensus Estimate of $14.06 billion [1] - The earnings per share (EPS) was $0.96, up from $0.88 in the same quarter last year, with a surprise of +5.49% compared to the consensus estimate of $0.91 [1] Revenue Breakdown - Product revenue reached $10.37 billion, exceeding the six-analyst average estimate of $10.08 billion, marking a year-over-year increase of +15% [4] - Service revenue was reported at $3.78 billion, slightly below the $3.82 billion average estimate, with a year-over-year change of +2.6% [4] - Security product revenue was $2.01 billion, lower than the estimated $2.21 billion, but showed a significant year-over-year increase of +54.4% [4] - Observability product revenue was $261 million, compared to the average estimate of $276.09 million [4] - Networking product revenue was $7.07 billion, surpassing the estimated $6.76 billion, with a year-over-year increase of +8.4% [4] - Collaboration product revenue was $1.03 billion, exceeding the five-analyst average estimate of $1 billion, representing a year-over-year change of +4.5% [4] Gross Margin Performance - Non-GAAP gross margin for services was $2.69 billion, slightly below the estimated $2.72 billion [4] - Non-GAAP gross margin for products was $7.01 billion, exceeding the estimated $6.66 billion [4] Stock Performance - Cisco shares have returned +8% over the past month, compared to the Zacks S&P 500 composite's +9.9% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - In Q3, total revenue was $14.1 billion, up 11% year over year [25] - Non-GAAP net income was $3.8 billion, with non-GAAP earnings per share at $0.96 [25] - Total product revenue increased to $10.4 billion, up 15%, while services revenue rose to $3.8 billion, up 3% [25] - Total annual recurring revenue (ARR) ended at $30.6 billion, a 5% increase, with subscription revenue up 15% to $7.9 billion, representing 56% of total revenue [26] Business Line Data and Key Metrics Changes - Networking revenue grew 8%, driven by double-digit growth in switching and enterprise routing, but offset by a decline in servers [26] - Security revenue surged 54%, primarily due to growth in Splunk and SASE offerings [26] - Collaboration revenue increased by 4%, while observability revenue rose by 24% [26] - Product orders were up 20% year over year, with a 9% increase when excluding Splunk [27] Market Data and Key Metrics Changes - In geographic segments, The Americas saw a 27% increase, EMEA was up 4%, and APJC grew by 21% [27] - In customer markets, Service Provider and Cloud orders increased by 32%, Enterprise orders were up 22%, and Public Sector orders rose by 8% [27] Company Strategy and Development Direction - Cisco is focusing on AI infrastructure, with over $600 million in AI infrastructure orders from web scale customers in Q3, surpassing the fiscal year target a quarter early [6][11] - The company is expanding partnerships, including a significant collaboration with NVIDIA to enhance AI deployment capabilities [12][14] - Cisco is investing in the Kingdom of Saudi Arabia as a strategic technology partner for AI infrastructure, aligning with the country's Vision 2030 [13] Management's Comments on Operating Environment and Future Outlook - Management noted that customer purchasing behavior remains strong despite macroeconomic uncertainties, particularly in AI transitions [36] - The company anticipates continued growth in AI orders, with a focus on executing and increasing capacity to meet demand [84] - Management expressed confidence in the long-term growth opportunities in AI and cloud infrastructure, expecting sustained investment from customers [50][51] Other Important Information - Cisco returned $3.1 billion to shareholders in Q3 through dividends and share repurchases [7] - The company announced the retirement of CFO Scott Herren at the end of fiscal year 2025, with Mark Patterson set to take over [20][23] Q&A Session Summary Question: What are you seeing in terms of customer buying behavior given the uncertainty with tariffs? - Management indicated no significant changes in purchasing behavior, with customers still committed to technology transitions [36][37] Question: Can you elaborate on the public sector performance? - Public sector orders were up 8%, with double-digit growth in U.S. Federal orders, despite challenges in the civilian sector [45][46] Question: Is 2025 expected to be a peak year for cloud CapEx? - Management believes that global cloud CapEx will continue to grow, with significant opportunities in enterprise AI [49][51] Question: Can you provide insights on the $600 million AI orders? - The $600 million in AI orders was not from the new Saudi AI company, but management expects substantial future opportunities in that region [56][58] Question: What is the impact of tariffs on guidance for Q4? - Management has built in expectations for tariffs in the Q4 guidance, reflecting potential impacts on gross margins [96]

Financial Data and Key Metrics Changes - In Q3, total revenue was $14.1 billion, up 11% year over year, with non-GAAP net income at $3.8 billion and non-GAAP earnings per share at $0.96 [25][28] - Total product revenue increased to $10.4 billion, up 15%, while services revenue rose to $3.8 billion, up 3% [25][28] - Total annual recurring revenue (ARR) ended at $30.6 billion, a 5% increase, with subscription revenue up 15% to $7.9 billion, representing 56% of total revenue [26][28] Business Line Data and Key Metrics Changes - Networking revenue grew 8%, driven by double-digit growth in switching and enterprise routing, partially offset by a decline in servers [26][28] - Security revenue surged 54%, primarily due to growth in offerings from Splunk and SASE [26][28] - Collaboration revenue increased by 4%, while observability revenue rose by 24% [26][28] Market Data and Key Metrics Changes - Product orders grew 20% year over year, with a 9% increase when excluding Splunk [27] - In geographic segments, The Americas saw a 27% increase, EMEA was up 4%, and APJC grew by 21% [27] - In customer markets, Service Provider and Cloud orders increased by 32%, Enterprise orders were up 22%, and Public Sector orders rose by 8% [27] Company Strategy and Development Direction - Cisco is focusing on AI infrastructure, with over $600 million in AI infrastructure orders from web scale customers in Q3, surpassing the original target for the fiscal year [6][11] - The company is expanding partnerships, including a significant collaboration with NVIDIA to enhance AI capabilities [12][14] - Cisco is investing in the Kingdom of Saudi Arabia as a strategic technology partner for AI infrastructure, aligning with the country's Vision 2030 [13][14] Management's Comments on Operating Environment and Future Outlook - Management noted that customer purchasing behavior remains strong despite macroeconomic uncertainties, particularly in AI transitions [36][40] - The company expects continued growth in AI orders and infrastructure, with a focus on executing and increasing capacity [86] - Management anticipates that the sovereign AI cloud opportunity will ramp up in the near term, positioning Cisco as a core system provider [14][15] Other Important Information - Cisco returned $3.1 billion to shareholders in Q3 through dividends and share repurchases, with a total of $9.6 billion returned year to date [7][29] - The company announced the retirement of CFO Scott Herren at the end of fiscal year 2025, with Mark Patterson set to take over [19][20] Q&A Session Summary Question: What are you seeing in terms of customer buying behavior given the uncertainty with tariffs? - Management indicated no significant change in purchasing behavior, with customers committed to technology transitions, particularly in AI [36][37] Question: Is 2025 expected to be a peak year for cloud CapEx? - Management believes that global cloud CapEx will continue to grow, driven by sovereign cloud strategies and enterprise AI opportunities [48][50] Question: Can you elaborate on the $600 million in AI orders? - Management clarified that the $600 million in AI orders does not include any from the new Saudi AI company, which is just starting [55][57] Question: What is the impact of tariffs on guidance for Q4? - Management has built in expectations for tariffs in the Q4 guidance, reflecting the full cost without mitigation [88][97] Question: How is Cisco participating in the Middle East AI opportunities? - Management expects significant spending in the Middle East, with discussions focused on networking, compute, security, and observability [64][66]

Financial Data and Key Metrics Changes - Total revenue for Q3 was $14.1 billion, an increase of 11% year over year [24] - Non-GAAP net income was $3.8 billion, with non-GAAP earnings per share at $0.96 [24] - Total product revenue was $10.4 billion, up 15%, while services revenue was $3.8 billion, up 3% [24] - Total annualized recurring revenue (ARR) ended at $30.6 billion, a 5% increase [25] - Total subscription revenue increased by 15% to $7.9 billion, representing 56% of total revenue [25] - Non-GAAP gross margin was 68.6%, up 30 basis points year over year [27] - Non-GAAP operating margin was 34.5%, above the high end of guidance [28] Business Line Data and Key Metrics Changes - Networking product orders grew by 8%, with double-digit growth in switching and enterprise routing [25] - Security orders surged by 54%, driven by offerings from Splunk and SASE [25] - Collaboration revenue increased by 4%, while observability revenue rose by 24% [25] - Product orders were up 20% year over year, with a 9% increase when excluding Splunk [26] Market Data and Key Metrics Changes - In the Americas, product orders increased by 27%, while EMEA saw a 4% increase and APJC grew by 21% [26] - Service Provider and Cloud orders were up 32%, Enterprise orders increased by 22%, and Public Sector orders rose by 8% [26] Company Strategy and Development Direction - Cisco is focusing on AI infrastructure, with over $1 billion in AI orders received year to date, surpassing the original target [5][11] - The company is enhancing its partnerships, particularly with NVIDIA, to deliver integrated AI solutions [12] - Cisco is investing in strategic partnerships in Saudi Arabia to support AI infrastructure development [13][14] Management's Comments on Operating Environment and Future Outlook - Management noted that customer purchasing behavior remains stable despite tariff uncertainties, with continued commitment to technology transitions [35] - The company anticipates sustained demand for AI infrastructure and does not expect a significant slowdown in cloud CapEx [47] - Management expressed confidence in the ongoing growth opportunities in AI and enterprise markets [49] Other Important Information - Scott Herron, CFO, announced retirement at the end of fiscal year 2025, with Mark Patterson set to take over [21][22] - Cisco closed the acquisition of Snap Attack to enhance its security operations capabilities [29] Q&A Session Summary Question: Customer buying behavior amid tariff uncertainties - Management indicated no significant changes in purchasing behavior, with customers still committed to technology transitions [35][36] Question: Impact of cloud CapEx slowing down - Management does not anticipate a slowdown in global cloud CapEx, citing ongoing investments in sovereign cloud strategies [47][48] Question: AI orders and future growth rates - AI orders are expected to continue growing, with management emphasizing the need for execution and capacity increases [81][84] Question: Networking orders strength and product cycle contributions - Networking orders showed broad strength across various segments, with expectations for continued growth driven by product refresh cycles [70][71] Question: Tariff impact on guidance for Q4 - Management confirmed that the guidance for Q4 includes assumptions about tariffs, reflecting potential impacts on gross margins [106][107]

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Core Insights - Cisco Systems Inc is set to report its third-quarter earnings, with Wall Street anticipating earnings per share of 92 cents and revenue of $14.08 billion [1] - The stock has increased by 25.4% over the past year, although it has seen a decline of 3.87% year-to-date and 6.92% in the last month [1] - Recent trading shows a recovery of 2.53% in the last five days, indicating potential bullish momentum [1][4] Company Developments - Cisco appointed Kevin Weil, Chief Product Officer at OpenAI, to its board, enhancing its AI credibility [3] - The company is expanding its partnership with Saudi Arabia's HUMAIN AI to support the Kingdom's AI infrastructure under Vision 2030 [3] - Collaborations with G42 and the AI Infrastructure Partnership (AIP) in the UAE and the U.S. further position Cisco in the global AI landscape [3] Technical Analysis - Cisco stock is trading at $61.38, above its eight-, 20-, 50-, and 200-day simple moving averages, indicating bullish technical signals [4] - The eight-day SMA is at $60.30, the 20-day at $58.07, the 50-day at $59.13, and the 200-day at $56.79, all below the current price [4] - The Moving Average Convergence Divergence (MACD) is at 0.79, supporting bullish momentum, while the Relative Strength Index (RSI) is at 64.67, indicating it is not yet overbought [5] Analyst Sentiment - The consensus rating for Cisco stock is "Buy," with an average price target of $62.65 [6] - Recent analyst updates suggest a price target of $66.67, indicating an upside of approximately 8.66% from current levels [6]

Core Insights - Cisco has joined the AI Infrastructure Partnership (AIP) alongside major players like BlackRock, Microsoft, and NVIDIA to enhance AI data center innovation and scalability [1][3] - AIP aims to unlock $30 billion in initial capital, with a total investment potential of up to $100 billion when including debt financing [2] - Cisco's involvement is based on the belief that AI will serve as an economic multiplier, necessitating specialized technology infrastructure for effective implementation [3] Company Overview - Cisco is recognized as a global technology leader, focusing on secure connectivity and protection in the AI era, with over 40 years of experience [4] - The company emphasizes its commitment to innovation, productivity enhancement, and digital resilience through AI-powered solutions and services [4]