Cisco Raises Forecast as AI Boom Drives Networking Demand

Cisco raises annual revenue forecast as AI boom boosts networking gear demand

Earlier this week, Cisco partnered with French AI firm Mistral to jointly launch an AI agent for automating tasks and streamlining workflow. It launched Cisco AI Defense in January to safeguard enterprises against the misuse of AI tools.Cisco Systems raised its annual revenue forecast on Wednesday, betting on higher demand for its cloud networking gear amid an artificial intelligence boom, sending its shares up nearly 7% in extended trading. Corporate customers have been investing heavily to build their AI infrastructure, boosting demand for data centers, which use Cisco's products such as ethernet switches and routers. "Cisco's solid forecast should lift its share price and be a boost in the arm for AI and technology companies in general," said Michael Ashley Schulman, chief investment officer at Running Point Capital. Earlier this week, Cisco partnered with French AI firm Mistral to jointly launch an AI agent for automating tasks and streamlining workflow. It launched Cisco AI Defense in January to safeguard enterprises against the misuse of AI tools. "Business customers are upgrading their networks to support AI initiatives, offsetting reduced federal government spending following the administration change; this shift in customer mix has helped maintain momentum despite Washington's project delays," Schulman said. Cisco also approved an increase of $15 billion for its share buyback program, taking the total remaining authorized fixed amount for stock repurchases to $17 billion. The company expects fiscal 2025 revenue to be between $56 billion and $56.5 billion, compared with the $55.3 billion to $56.3 billion forecast earlier. Analysts estimate $55.99 billion, according to data compiled by LSEG. It forecast third-quarter revenue at $13.9 billion to $14.1 billion, compared with the estimate of $13.87 billion. Cisco's adjusted gross margin forecast for the quarter has the cost of the proposed tariffs built into it, Chief Financial Officer Scott Herren said on a conference call. US President Donald Trump announced 25% tariffs on most goods from Canada and Mexico on February 1, but then paused them for a month while he negotiates with the country's two biggest trading partners. An additional 10% tariff on China was effective February 4. Cisco's second-quarter revenue was $14 billion, ahead of analysts' estimate of $13.87 billion.

Cisco shares rise on strong demand for AI gear as Trump tariffs weigh

(Reuters) - Cisco Systems shares rose 6.4% in premarket trading on Thursday after the company raised its annual revenue forecast on robust demand for its cloud networking gear, while addressing any potential impact from the latest U.S. tariffs. Demand for the telecom equipment maker's ethernet switches and routers used in data centers has surged as companies ramp up their investments in artificial-intelligence infrastructure. Despite macro uncertainty, Cisco is seeing strong cloud demand including triple-digit order growth from hyperscalers and improving demand from telco customers to equip their networks for AI-led traffic demand, said J.P.Morgan analysts led by Samik Chatterjee. U.S. businesses have warned of the fallout from the tariffs President Donald Trump has imposed on Canada, Mexico and China, as well as on steel and aluminum. Levies on Canada and Mexico have been paused for a month, but not on China. Chief Financial Officer Scott Herren said on a conference call that the company's adjusted gross margin forecast for the third quarter has the cost of the proposed tariffs built into it. "We would expect the majority of the reason for the slightly weaker gross margin outlook for Q3 is due to expected tariff impact in the near term," said Morgan Stanley analysts. At least six analysts have raised their price targets on the stock, according to data compiled by LSEG. Cisco has a 12-month forward price-to-earnings ratio of 16.23, compared with Arista Networks 43.21. Cisco has gained over 17% in 2024, while ANET has risen more than 87% in the same period. (Reporting by Kanchana Chakravarty and Siddarth S in Bengaluru; Editing by Sriraj Kalluvila)

Cisco says it's already dug in for trade war

Cisco has prepared for trade war and thinks it can ride things out by reconfiguring its supply chain if that becomes necessary. CFO Scott Herren on Wednesday volunteered info on Cisco's preparations for the imposition of increased tariffs by the Trump administration during the company's Q2 FY 2025 earnings call. In our guidance, we have accounted for the added cost driven by the increased tariffs on China, and proposed tariffs on Mexico and Canada," he told investors. "This is a dynamic environment, but one we have spent a significant amount of time planning for. We are prepared to take actions to mitigate the impact as and when tariffs go into effect." Herren said Cisco has already "reduced exposure" in China by 80 percent and has "planned out several scenarios" for other tariff increases, including the 25 percent impost that Washington imposed on Mexico and Canada before temporarily pausing their implementation. We have price as a lever, but there's a number of considerations to go through before we got there Cisco has also modelled the impact of the tariffs the Trump administration has announced on steel and aluminium imports. Herren said customers aren't rushing to buy before tariffs commence, and hinted that if tariffs are introduced, Cisco won't rush to drop prices. "As we look at the steps we would take to mitigate the impact of demand, there are a number of steps we can take to offset the cost," he said. "We obviously would have price as a lever, but there's a number of considerations that we have to go through before we got there. Right now, I don't envision that." Wall Street analysts who get to ask questions on earnings calls were also interested to know if Cisco is worried by Elon Musk's Department of Government Efficiency. CEO Chuck Robbins said Cisco has "obviously been following this very significantly. And I think it's important to understand that this effort is really about driving efficiency, and productivity in government, which in many cases is actually delivered via the use of technology. So we think that there could be some positives for us." He noted that Cisco wins less than ten percent of its revenue from the US federal government, and 75 percent of that comes from the Department of Defense which seems largely insulated from DOGE's cost-cutting. The networking giant is therefore confident its federal government business will be steady. Robbins thinks other Trump administration policies could benefit Cisco. "As the United States takes steps to onshore strategic infrastructure, such as semiconductor fabrication plants, manufacturing, and scaled AI power sources, we have the market-leading secure networking portfolio to help connect and protect these capital-intensive investments at scale," he said. Return-to-office mandates may also help, with the CEO predicting they'll drive demand for Wi-Fi 7 hardware. The CEO expects other buyers will also remain active. "I think one thing our customers understand is that their need to continue spending on technology is just there," the CEO said. "And there's so much change going on right now from a technology perspective that there's both excitement about the opportunity and, candidly, there's a little bit of fear of slowing down too much and letting your competition get too much ahead of you. So we saw solid demand." Robbins thinks telcos are set to spend up big, as they sweat their kit for unusually long periods but now want to refresh networks to handle AI workloads. He also admitted mainstream enterprises haven't acquired Cisco networks to connect their AI infrastructure. "It's not really Ethernet under GPUs in the enterprise today, [it] hasn't been a major opportunity to date," he said (Nvidia's networking revenue is now about $3 billion a quarter and growing). Cisco expects its AI networking business will pick up as more customers deploy on-prem AI, and its partnership with Nvidia deepens. One AI market Cisco thinks is already roaring is Industrial Internet-of-Things products, as orders for ruggedized Catalyst products grew more than 40 percent in the first half of 2025. Robbins reckons that was "an acceleration as customers prepare for the deployment of AI-powered robotics and industrial security." Security is also soaring, with orders doubling this quarter. Q2 revenue landed at $14.0 billion, a nine percent jump compared to the same period last year. Net income dipped eight percent to $2.4 billion. Investors were told to expect revenue of $13.9 billion to $14.1 billion in Q3, and $56.0 billion to $56.5 billion for the full year. The Q2 result was at the high end of guidance and the markets rewarded Cisco with a 6.5 percent share price bump in after-hours trading. Maybe they were also impressed by Cisco's Tuesday announcement of an "AI Renewals Agent" that Cisco thinks can "reduce the time spent building a renewal proposal and preparing for a customer engagement by as much as 20 percent, a figure poised to grow as the AI agent improves based on usage and more workflows are automated." Do let us know if you enjoy being sold to by a Cisco-bot. ®

Cisco's AI Momentum Driving Infrastructure Deals To The Tune Of $700M in 2025: CEO

Cisco is on track to surpass $1 billion worth of AI infrastructure orders in 2025, the tech giant announced during its Q2 2025 earnings call on Wednesday evening. Cisco CEO Chuck Robbins also thanked former Splunk CEO and Cisco's current president of go-to-market, Gary Steele, who is departing in April to pursue a CEO position elsewhere. Cisco Systems' second fiscal quarter of 2025 saw a surge in deals requiring network upgrades for incoming AI applications, CEO Chuck Robbins said during the tech giant's Q2 2025 earnings call on Wednesday. Cisco reported AI infrastructure orders of more than $350 million during its second quarter, bringing the total for the first half of Cisco's fiscal 2025 to approximately $700 million. The company is on track to surpass $1 billion of AI infrastructure orders in 2025, Robbins said. "AI security is top of mind for customers, especially in light of the emergence of new AI models. These have reinforced that the battle for AI leadership will be on a global playing field... The adoption of AI network infrastructure, data capacity investments, and best-in-class AI security are all tailwinds for Cisco," Robbins said. While AI traction has mainly been driven by hyperscale cloud buildouts, enterprise opportunity is on the rise as businesses plan to bolster their infrastructure for the AI era, Robbins said. [Related: Cisco Agile Services Networking: What Partners Should Know] Robbins highlighted momentum in Hypershield, the company's AI-powered security architecture for data center protection. Cisco booked two eight-figure deals during the second fiscal quarter of 2025, which the company said signaled commitment from large customers for a "transformative" approach to security. Cisco's data center switching portfolio had its fourth consecutive quarter of double-digit order growth as enterprises ready themselves for AI deployments, Robbins said. The company's product revenues, which is led by the core networking business, increased 11 percent excluding Splunk and service revenues climbed 6 percent during Q2 2025. Including Spunk, the company saw its fourth consecutive quarter of accelerating growth in product orders with 29 percent growth year over year. "This is a testament to our power of our portfolio and value we bring to customers," Robbins said. Robbins also took to the call to share that Gary Steele, Cisco's president of go-to-market, will resign as of April 25 to pursue a CEO position elsewhere. Cisco Q2 2025 Financial Results Cisco's networking segment includes the core switching and routing businesses, as well as the company's telecommunications, cloud, and optical networking products. Networking, a typically strong category for Cisco, declined 3 percent with revenues of $6.85 billion compared to Q2 2024's result. The segment was impacted primarily by declines in server sales, said Cisco CFO R. Scott Herren. Cisco's security segment rose a whopping 117 percent year over year with revenues of $2.11 billion, which was attributed to the company's offerings such as zero trust and extended detection and response (XDR) and Secure Access, Robbins said. The observability segment continued its strong momentum, posting 47 percent revenue growth quarter over quarter of $277 million. Excluding Splunk, the security and observability segments grew 4 percent and 3 percent, respectively, in the second quarter of fiscal 2025, according to the company. Cisco's collaboration segment increased 1 percent year over year to $996 million in revenue compared to Q2 2024, driven by strength in contact center and CPaaS, Herren said. Subscriptions now make up about 56 percent of Cisco's total revenue, which grew 23 percent year over year, Robbins said. For Cisco's fiscal Q2 2025, which ended January 25, revenue was up 9 percent to $13.99 billion compared to the same period a year ago. Cisco posted non-GAAP earnings per share of 94 cents, an 8 percent increase compared to a year ago and non-GAAP net income of $3.8 billion in the second fiscal quarter of the year, which was up 6 percent year over year. In the first quarter of fiscal 2025, Cisco closed the acquisition of Deeper Insights AI Ltd., a privately held AI services company. Cisco's stock was up nearly 7 percent in after-hours trading Wednesday following the networking giant's earnings release.