Cisco Systems(CSCO) - 2025 FY - Earnings Call Transcript

Financial Data and Key Metrics Changes - Cisco reported revenue of $56.7 billion for fiscal year 2025, representing a 5% year-over-year increase [18] - Non-GAAP EPS was $3.81, up 2% year-over-year, with non-GAAP gross margins at 68.7% [18] - Non-GAAP operating income reached $19.5 billion, a 6% increase year-over-year, while non-GAAP net income was flat at $15.2 billion [18] - For Q1 of fiscal year 2026, revenue was $14.9 billion, an 8% increase year-over-year, with non-GAAP EPS at $1, up 10% year-over-year [19] Business Line Data and Key Metrics Changes - The growth in Q1 was driven by a 15% year-over-year increase in networking revenue, with SP routing being the largest contributor [26] - Product orders grew by 13% year-over-year across all geographies and customer markets [19] Market Data and Key Metrics Changes - Strong demand for AI infrastructure from hyperscalers and telcos was noted, as they scale data centers and increase network capacity to handle AI traffic [26] - Enterprise customers are modernizing their networks for AI, indicating a broad market trend towards upgrading infrastructure [26] Company Strategy and Development Direction - Cisco is focusing on capitalizing on AI opportunities, integrating Splunk to enhance digital resilience and unify customer data for AI model building [28][29] - The company aims to grow organically and inorganically, continue dividend growth, buy back shares, and return excess cash to shareholders [20] - Cisco is positioned to play a critical role in the AI transition, with a focus on AI infrastructure, security, data management, AI-native products, and customer services [21][22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting the strong performance in fiscal year 2025 and the record start to fiscal year 2026 [18][24] - The company anticipates significant growth opportunities driven by leadership in AI and secure networking [19][24] Other Important Information - Cisco returned 94% of free cash flow to shareholders in fiscal year 2025, with an annualized dividend per share of $1.64 and nearly $6 billion in share repurchases [20] - The board recommended stockholders vote against a proposal regarding the assessment of inclusion programs, which was not approved with approximately 99% of shares voting against it [16] Q&A Session Summary Question: Key trends driving recent strong growth - Cisco noted strong Q1 performance with 8% revenue growth driven by networking strength and demand for AI infrastructure from hyperscalers and telcos [26] Question: Cisco's strategy for capitalizing on AI opportunities - Cisco highlighted broad AI opportunities, emphasizing the need for customers to upgrade networks and embed security deeply into their infrastructure [28] Question: How Cisco's purpose influences business strategy - Cisco's purpose guides its operations, focusing on community resilience, responsible innovation, and energy sustainability, which are seen as beneficial for long-term shareholder value [30][31]