Cisco Systems, Inc. Q4 FY2025 earnings call

• Strong Q4 performance with revenue and gross margin at the high end of guidance ranges.
• Continued operating leverage leading to strong profitability, with earnings per share above guidance.
• Record AI infrastructure orders from web scale customers, exceeding $800 million in Q4 and over $2 billion for FY 2025.
• Total product orders in Q4 grew 7% year over year across geographies.
• Innovation in AI with products like Cisco Systems, Inc. Cat 9K smart switches and partnerships with NVIDIA.
• Security saw mid-single-digit growth in orders, with Splunk synergies driving new logos and new/refreshed products ramping.
• Returned $2.9 billion in capital to shareholders in Q4, totaling $12.4 billion for FY 2025.

In the fourth quarter, total revenue was $14.7 billion, up 8% year over year. Total product revenue was $10.9 billion, up 10%, with services revenue at $3.8 billion, flat year over year. Networking saw a 12% increase, driven by growth in Internet infrastructure and enterprise routing. Security was up 9%, primarily from Splunk and SASE offerings. Collaboration rose 2% due to solid device growth, and observability increased 4% led by Splunk and ThousandEyes. Recurring metrics included total RPO at $43.5 billion, up 6%, total ARR ending the quarter at $31.1 billion, an increase of 5%, and total subscription revenue at $7.9 billion, up 3% and representing 54% of total revenue.

• Fiscal Q1 2026 guidance: Revenue expected in the range of $14.65 billion to $14.85 billion, non-GAAP gross margin 67.5% to 68.5%, non-GAAP operating margin 33% to 34%, and non-GAAP earnings per share ranging from $0.97 to $0.99.
• Fiscal 2026 guidance: Revenue expected in the range of $59 billion to $60 billion, non-GAAP earnings per share from $4 to $4.06.
• Guidance assumes current tariffs and exemptions remain in place through fiscal 2026.

• Complex business environment impacting growth rates.
• Tariffs potentially affecting gross margin.
• Potential pull forward of orders affecting future revenue streams.
• Market dynamics and comps affecting sustainability of growth rates.

Q: Looking at your guidance and AI opportunity, how does the deceleration in growth through the remaining quarters reflect?

A: Aaron Rakers asked about guidance and deceleration. Chuck Robbins responded that the AI opportunity execution is strong, and the deceleration is strictly related to year-over-year comps later in the year, not a change in demand. Mark Patterson added that prior year Q4 was apples to apples with Splunk inclusion.

Q: How are you looking at security and new CFO priorities?

A: Meta Marshall inquired about security growth and new CFO priorities. Chuck Robbins discussed security growth with new/refreshed products seeing order growth over 20% and rest of world security order growth in Q4 up double digits. Mark Patterson thanked Scott Herren and discussed focus on durable, profitable growth, financial discipline, and returning value to shareholders.