Cisco ((CSCO)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Cisco’s recent earnings call highlighted a strong quarter, marked by significant growth in AI orders, security, and shareholder returns. Despite challenges such as a decline in networking revenue and potential impacts from proposed tariffs, the company demonstrated robust business momentum, with positive aspects outweighing the negatives.
Strong Financial Performance
Cisco reported impressive financial results, with revenue, margins, and earnings per share all meeting or exceeding the high-end of guidance ranges. The total revenue for the quarter was $14 billion, representing a 9% increase year-over-year. Non-GAAP net income reached $3.8 billion, and non-GAAP earnings per share was reported at $0.94.
Robust AI Infrastructure Orders
AI infrastructure orders with web scalers surpassed $350 million in Q2, contributing to a year-to-date total of approximately $700 million. Cisco is on track to exceed $1 billion in AI infrastructure orders by fiscal year ’25, underscoring its strategic focus on AI advancements.
Record Order Growth
New product orders saw a significant rise of 29%, with organic growth hitting 11% when excluding Splunk. Enterprise product orders increased by 27%, while Service Provider & Cloud product orders soared by 75%, reflecting strong demand across various segments.
Significant Security Growth
Cisco’s security segment experienced remarkable growth, with orders more than doubling, driven by advanced data management, analytics, and threat detection capabilities from Splunk. Excluding Splunk, security growth was 4%, highlighting the company’s focus on strengthening its security offerings.
Substantial Shareholder Returns
In Q2, Cisco returned $2.8 billion in value to shareholders, bringing the year-to-date total to $6.4 billion. The company announced an increase to its dividend and received board authorization for an additional $15 billion in share repurchases, enhancing shareholder value.
Networking Segment Decline
The networking segment faced a 3% revenue decline, with growth in Wireless and Switching offset by a downturn in servers. This area remains a challenge amidst overall company growth.
Impact of Proposed Tariffs
Cisco addressed the added costs from increased tariffs on China and potential tariffs on Mexico and Canada, which impacted gross margins. The company is navigating these challenges while maintaining strong financial performance.
Challenges in On-Prem Webex Suite
The collaboration segment saw modest growth of 1%, with Contact Center and CPaaS offerings showing strength. However, this was partially offset by a decline in the On-Prem Webex Suite offerings, indicating an area for improvement.
Forward-Looking Guidance
Looking ahead, Cisco provided guidance for Q3 revenue between $13.9 billion and $14.1 billion, with expectations for fiscal year 2025 revenue to range from $56 billion to $56.5 billion. The company anticipates continued growth in AI infrastructure orders, aiming to surpass $1 billion by fiscal year-end, and maintains a strong outlook on shareholder returns and revenue growth.
In summary, Cisco’s earnings call reflected a positive sentiment with strong growth in key areas despite some challenges. The company’s strategic focus on AI and security, along with substantial shareholder returns, underscores its robust business momentum and optimistic outlook for future growth.
