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]

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 Viewpoint - Cisco Systems (CSCO) shares have declined 10.8% in the past month, slightly outperforming the Zacks Computer Networking industry's decline of 11% and the Zacks Computer & Technology sector's decline of 13.9% [1] Group 1: Market Challenges - Cisco's share price has been affected by a challenging macroeconomic environment and the rising threat of recession due to tariffs on China, Mexico, and Canada, increasing the possibility of a trade war [1] - The company is facing stiff competition in the networking business [1] Group 2: AI and Security Growth - Cisco is aggressively pushing into AI, expanding its portfolio with AI factory architecture developed in collaboration with NVIDIA, which is expected to drive AI-driven revenues [2] - At the end of the first half of fiscal 2025, Cisco had AI infrastructure orders worth over $700 million and is on track to surpass $1 billion in AI infrastructure orders for fiscal 2025 [2] - Orders for AI-powered robotics and industrial security have grown more than 40% in the first half of fiscal 2025, with over 50% growth in the second quarter alone [3] Group 3: Strategic Partnerships - Cisco's expanded partnership with NVIDIA aims to offer solutions for building AI-ready data center networks, with security being a core component [7] - The launch of 800-gig Nexus switches based on Cisco's 51.2 terabit Silicon One chip is expected to drive orders from AI-based cloud customers [7] Group 4: Security Business Performance - Cisco's security business is benefiting from strong demand for Cisco Secure Access and XDR, gaining over 1,000 customers in the past 12 months, with each product having roughly one million enterprise users [10] - The company has integrated Talos into Splunk's Enterprise Security 8.0 and launched several new solutions, including Cisco AI Defense, which addresses security challenges associated with AI adoption [11][12] Group 5: Financial Guidance - For fiscal 2025, Cisco expects revenues to be between $56 billion and $56.5 billion, with non-GAAP earnings projected between $3.68 and $3.74 per share [13] - The Zacks Consensus Estimate for Cisco's fiscal 2025 revenues is $56.42 billion, indicating a year-over-year growth of 4.86% [13] Group 6: Valuation and Stock Performance - Cisco shares are trading at a premium with a forward 12-month price/sales ratio of 3.72X, higher than the industry average of 3.54X and competitors like NETGEAR and Extreme Networks [14] - The stock is currently trading below the 50-day and 200-day moving averages, indicating a bearish trend [17] Group 7: Investment Outlook - Cisco's expanding and innovative portfolio positions the company for sustained growth in the evolving tech landscape, particularly with its AI initiatives and security footprint [19] - The company carries a Zacks Rank 2 (Buy), suggesting it may be a good time for investors to accumulate the stock [19]

Core Insights - Cisco's 2025 Data Privacy Benchmark Study highlights the critical role of data privacy in establishing business value and trust, particularly in the context of AI readiness [2][3] - The study reveals a complex landscape where local data storage is perceived as safer, yet organizations still rely on global providers for their expertise in data protection [3][4] Data Privacy Trends - 90% of organizations view local data storage as inherently safer, while 91% trust global providers for better data protection, indicating a dual reliance on both local and global data strategies [3] - Privacy legislation positively impacts customer trust, with 86% of respondents noting its benefits, an increase from 80% the previous year [4] Consumer Awareness - The 2024 Cisco Consumer Privacy Survey indicates that 53% of global consumers are aware of their country's privacy laws, with 81% of those feeling confident in their ability to protect their data [5] AI and Data Privacy - Familiarity with Generative AI (GenAI) is rising, with 63% of respondents being very familiar, yet concerns about data privacy risks remain significant [6] - 64% of respondents worry about inadvertently sharing sensitive information, highlighting the need for tools like Cisco's AI Defense to mitigate risks [6] Investment Shifts - 99% of respondents anticipate reallocating resources from privacy budgets to AI initiatives, indicating a significant shift in focus towards AI governance [7] - IT budget allocations for AI are expected to nearly double in the coming year as companies aim to safely deploy AI technology [7] Strategic Importance - The study emphasizes the need for organizations to balance local data storage, global expertise, and privacy as essential strategic investments for sustainable growth and consumer trust in an AI-driven world [9]

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]

Core Insights - Cisco and NVIDIA have launched the Cisco Secure AI Factory, focusing on integrating security into AI infrastructure to simplify enterprise AI adoption [1][2] - The partnership aims to provide a validated reference architecture that enhances the deployment, management, and security of AI workloads [1][4] Group 1: AI Factory Architecture - The Cisco Secure AI Factory is designed to simplify the deployment of AI infrastructure while embedding security at all layers, from applications to workloads and infrastructure [4][11] - AI factories are modular and scalable, addressing complex security challenges while providing high-performance infrastructure for AI applications [3][6] Group 2: Security Solutions - Cisco is integrating security solutions such as Cisco Hypershield and Cisco AI Defense to protect AI workloads and applications throughout their lifecycle [2][11] - The Hybrid Mesh Firewall will provide unified security management across various enforcement points, ensuring comprehensive security coverage [11] Group 3: Technology Components - The architecture includes Cisco UCS AI servers based on NVIDIA HGX and MGX for accelerated computing, alongside Cisco Nexus networking solutions powered by NVIDIA Spectrum-X [5][6] - High-performance storage solutions from partners like Pure Storage and NetApp will complement the architecture [5] Group 4: Deployment Options - The Secure AI Factory will offer flexible deployment models, allowing enterprises to customize their AI infrastructure according to specific needs [6][12] - Solutions are expected to be available for purchase by the end of 2025, with some components already accessible [9]