Industry Updates

Cisco reported second quarter results for the period ended January 25, 2025. Cisco reported second quarter revenue of $14.0 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.4 billion or $0.61 per share, and non-GAAP net income of $3.8 billion or $0.94 per share.

"Cisco's strong quarterly results were driven by accelerating customer demand for our technology," said Chuck Robbins, chair and CEO of Cisco. "As AI becomes more pervasive, we are well positioned to help our customers scale their network infrastructure, increase their data capacity requirements, and adopt best-in-class AI security."

"Q2 was another quarter of solid execution which drove revenue and EPS above our guidance ranges. Splunk continues to perform in line with our expectations on the top line, and was accretive to Q2 non-GAAP EPS, earlier than we had planned," said Scott Herren, CFO of Cisco. "Our strong cash flows have led us to increase our annual dividend again this year, as well as our overall share repurchase authorization."

Reconciliations between net income, EPS, and other measures on a GAAP and non-GAAP basis are provided in the tables located in the section entitled "Reconciliations of GAAP to non-GAAP Measures."

Cisco Increases Quarterly Dividend; Stock Repurchase Program Authorization Increased

Cisco has declared a quarterly dividend of $0.41 per common share, a 1-cent increase or up 3% over the previous quarter's dividend, to be paid on April 23, 2025, to all stockholders of record as of the close of business on April 3, 2025. Future dividends will be subject to Board approval.

Cisco's board of directors has also approved a $15 billion increase to the authorization of the stock repurchase program. There is no fixed termination date for the repurchase program. The remaining authorized fixed amount for stock repurchases including the additional authorization is approximately $17 billion.

Financial Summary

All comparative percentages are on a year-over-year basis unless otherwise noted.

Q2 FY 2025 Highlights

Revenue -- Total revenue was $14.0 billion, up 9%, with product revenue up 11% and services revenue up 6%. Excluding the contribution from Splunk, total revenue was down 1%.

Revenue by geographic segment was: Americas up 9%, EMEA up 11%, and APJC up 8%. Product revenue performance reflected growth in Security up 117%, Observability up 47%, and Collaboration up 1%. Networking was down 3%. Excluding Splunk, Security and Observability grew 4% and 3%, respectively, in the second quarter of fiscal 2025.

Gross Margin -- On a GAAP basis, total gross margin, product gross margin, and services gross margin were 65.1%, 63.7%, and 68.9%, respectively, as compared with 64.2%, 62.7%, and 68.2%, respectively, in the second quarter of fiscal 2024.

On a non-GAAP basis, total gross margin, product gross margin, and services gross margin were 68.7%, 67.7%, and 71.6%, respectively, as compared with 66.7%, 65.2%, and 70.5%, respectively, in the second quarter of fiscal 2024.

Total gross margins by geographic segment were: 67.6% for the Americas, 71.3% for EMEA and 68.3% for APJC.

Operating Expenses -- On a GAAP basis, operating expenses were $6.0 billion, up 17%, and were 42.9% of revenue. Non-GAAP operating expenses were $4.8 billion, up 10%, and were 34.0% of revenue.

Operating Income -- GAAP operating income was $3.1 billion, up 1%, with GAAP operating margin of 22.3%. Non-GAAP operating income was $4.9 billion, up 15%, with non-GAAP operating margin at 34.7%.

Provision for Income Taxes -- The GAAP tax provision rate was 15.9%. The non-GAAP tax provision rate was 19.0%.

Net Income and EPS -- On a GAAP basis, net income was $2.4 billion, a decrease of 8%, and EPS was $0.61, a decrease of 6%. On a non-GAAP basis, net income was $3.8 billion, an increase of 6%, and EPS was $0.94, an increase of 8%.

Cash Flow from Operating Activities -- $2.2 billion for the second quarter of fiscal 2025, an increase of 177%, compared with $0.8 billion for the second quarter of fiscal 2024.

Balance Sheet and Other Financial Highlights

Cash and Cash Equivalents and Investments -- $16.9 billion at the end of the second quarter of fiscal 2025, compared with $17.9 billion at the end of fiscal 2024.

Remaining Performance Obligations (RPO) -- $41.3 billion, up 16% in total, with 51% of this amount to be recognized as revenue over the next 12 months. Product RPO up 25% and services RPO up 8%.

Deferred Revenue -- $27.8 billion, up 8% in total, with deferred product revenue up 12%. Deferred services revenue up 4%.

Capital Allocation -- In the second quarter of fiscal 2025, we returned $2.8 billion to stockholders through share buybacks and dividends. We declared and paid a cash dividend of $0.40 per common share, or $1.6 billion, and repurchased approximately 21 million shares of common stock under our stock repurchase program at an average price of $58.58 per share for an aggregate purchase price of $1.2 billion.

Acquisitions

In the second quarter of fiscal 2025, we closed the acquisition of Deeper Insights AI Ltd., a privately held AI services company.

Guidance

Cisco estimates the following results for the third quarter of fiscal 2025:

Gross margin guidance includes the estimated impact of proposed tariffs on Mexico, Canada, and China.

Cisco estimates that GAAP EPS will be $0.57 to $0.61 for the third quarter of fiscal 2025.

Cisco estimates the following results for fiscal 2025:

Gross margin guidance includes the estimated impact of proposed tariffs on Mexico, Canada, and China.

Cisco estimates that GAAP EPS will be $2.40 to $2.52 for fiscal 2025.

Our Q3 FY 2025 guidance assumes an effective tax provision rate of approximately 17% for GAAP and approximately 19% for non-GAAP results. Our FY 2025 guidance assumes an effective tax provision rate of approximately 9% for GAAP and approximately 19% for non-GAAP results.

A reconciliation between the guidance on a GAAP and non-GAAP basis is provided in the tables entitled "GAAP to non-GAAP Guidance" located in the section entitled "Reconciliations of GAAP to non-GAAP Measures."

Source: https://newsroom.cisco.com/c/r/newsroom/en/us/a/y2025/m02/cisco-reports-second-quarter-earnings.html