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]

Core Insights - Cisco announced transformative innovations and partnerships aimed at enhancing security professionals' ability to secure and leverage AI in response to a complex threat landscape and talent shortages [2][3] - The upcoming 2025 Cybersecurity Readiness Index indicates that 86% of organizations have faced AI-related security incidents in the past year, highlighting the urgency for improved security measures [2] Group 1: Innovations and Partnerships - Cisco XDR integrates agentic AI to improve threat detection and response, correlating data across various platforms to prioritize alerts and automate responses [4][5] - The collaboration with Splunk enhances network visibility and detection capabilities, allowing organizations to build a more efficient Security Operations Center (SOC) [5][6] - Cisco's Foundation AI initiative aims to democratize AI security through open-source tools and models, fostering collaboration among security experts [9][10] Group 2: AI Security and Risk Management - Cisco's AI Defense integrates with ServiceNow to provide comprehensive AI risk management and governance, facilitating secure AI adoption [8] - New AI Supply Chain Risk Management controls are introduced to protect against vulnerabilities in AI model files and datasets, ensuring secure deployment of AI applications [10] Group 3: Industrial IoT Security - Enhancements to Cisco's Industrial Threat Defense solution aim to secure critical infrastructure and industrial networks against cyber threats, integrating IT security measures into operational technology [11]

Core Insights - Cisco and ServiceNow have announced a deepened partnership aimed at enabling secure and confident AI adoption for businesses at scale, combining Cisco's infrastructure and security platforms with ServiceNow's AI-driven solutions [2][6] - The integration of Cisco's AI Defense capabilities with ServiceNow's SecOps will provide a more comprehensive approach to AI risk management and governance, addressing the complexities and risks associated with AI applications [4][5] Partnership Details - The partnership builds on seven years of collaboration between Cisco and ServiceNow, responding to increasing customer demand for joint solutions that simplify technology and enhance operational workflows [8] - Initial field trials for the integration are set to begin soon, with mutual customers expected to benefit from this integration in the second half of 2025 [7] Market Context - A recent survey indicated that security practitioners spend an average of 36% of their budget with a single vendor, reflecting a desire to reduce complexity in tools and suppliers [3] - The rapid growth of enterprise AI presents both opportunities and challenges, necessitating changes in infrastructure, security frameworks, and governance requirements [3] Solution Features - The integration will provide customers with capabilities such as visibility into AI workloads, automated vulnerability assessments, real-time protection for AI applications, and enhanced incident response [13] - Customers will be able to map Cisco AI Defense controls to relevant standards in ServiceNow's Integrated Risk Management platform, facilitating compliance measurement [13]

Core Insights - Cisco Systems is expanding its AI portfolio through collaboration with NVIDIA, aiming to increase AI-driven revenues, with orders exceeding $700 million by the end of the first half of fiscal 2025 and projected to surpass $1 billion in the same fiscal year [1][3] - The company is experiencing significant growth in AI-driven enterprise orders, with over 40% growth in the first half of fiscal 2025 and more than 50% in the second quarter alone [2][3] - Despite the positive outlook for AI growth, Cisco shares have declined 6.2% year-to-date due to macroeconomic challenges and competitive pressures in the networking sector [3][18] AI and Security Developments - Cisco's partnership with NVIDIA focuses on creating AI-ready data center networks, enhancing security and management of AI infrastructure [7][10] - The introduction of various AI-driven products, including the Webex AI Agent and Cisco AI Defense, aims to improve customer experience and address security challenges associated with AI adoption [9][15] - Security orders have more than doubled in the fiscal second quarter, with revenues reaching $2.11 billion, driven by advanced analytics and threat detection capabilities [12][15] Financial Performance and Guidance - For fiscal 2025, Cisco expects revenues between $56 billion and $56.5 billion, with non-GAAP earnings projected between $3.68 and $3.74 per share, indicating a year-over-year revenue growth of 4.88% [16][18] - Cisco has consistently beaten earnings estimates in the past four quarters, with an average surprise of 4.07% [17] - The stock is currently trading at a premium price/sales ratio of 4.13X, higher than its historical median and the industry average, suggesting a stretched valuation [18][19]