Cisco’s Earnings Call: AI Growth and Tariff Concerns

Cisco ((CSCO)) has held its Q3 earnings call. Read on for the main highlights of the call.

Cisco’s recent earnings call painted a picture of robust financial health and promising growth, particularly in the realm of AI infrastructure. The company reported impressive financial performance, with strategic partnerships and shareholder returns adding to the positive sentiment. However, concerns linger over tariff uncertainties and challenges in specific sectors such as servers and the public sector.

Record Order Growth

Cisco reported a remarkable 20% year-over-year growth in total product orders, with a 9% increase on an organic basis. This surge in demand across various sectors underscores the company’s resilience in navigating an uncertain macroeconomic environment.

AI Infrastructure Orders Surpass Expectations

A standout highlight from the earnings call was the performance of AI infrastructure orders, which exceeded $600 million in Q3 alone. This brings the year-to-date total to over $1 billion, surpassing the initial fiscal year 2025 target ahead of schedule.

Strong Shareholder Returns

Cisco demonstrated its commitment to shareholder value by returning $3.1 billion in capital through share repurchases and dividends in Q3, contributing to a year-to-date total of $9.6 billion.

Security Orders Growth

The company saw high double-digit growth in security orders during Q3, highlighted by a significant multiyear deal with a major financial services company for Splunk’s security and observability platforms.

New Strategic Partnerships

Cisco announced several new partnerships and investments aimed at enhancing AI capabilities. Notable collaborations include those with NVIDIA and Saudi Arabia’s HUMAIN, positioning Cisco at the forefront of AI infrastructure development.

Positive Financial Performance

Cisco’s financial performance was strong, with total revenue reaching $14.1 billion, an 11% increase year-over-year. Non-GAAP earnings per share stood at $0.96, surpassing guidance expectations.

Tariff Concerns

Despite the positive financial results, Cisco expressed concerns over ongoing tariff uncertainties, particularly potential impacts from China, Mexico, and Canada, which could affect gross margins.

Challenges in Public Sector

While overall growth was robust, Cisco noted challenges within the U.S. public sector, particularly on the civilian side, due to agency shutdowns and employment concerns.

Decline in Server Revenue

Cisco’s networking segment grew by 8%, but this was partially offset by a decline in server revenues, indicating challenges within this particular segment.

Forward-Looking Guidance

Looking ahead, Cisco provided guidance for its fourth quarter and fiscal year 2025. The company expects fourth-quarter revenue between $14.5 billion and $14.7 billion, with non-GAAP earnings per share projected between $0.96 and $0.98. For the full fiscal year 2025, revenue is anticipated to range from $56.5 billion to $56.7 billion, with earnings per share between $3.77 and $3.79. This guidance reflects assumptions about tariffs and macroeconomic uncertainties.

In summary, Cisco’s earnings call highlighted a strong financial performance and strategic growth initiatives, particularly in AI infrastructure. While the company faces challenges from tariff uncertainties and sector-specific issues, its robust order growth and strategic partnerships position it well for future success.