Cisco Systems (NASDAQ: $CSCO) released its Q2 fiscal 2025 results on Wednesday, February 12, 2025, after markets closed, to a positive market reaction. The giant tech firm, with a focus on networking hardware, beat earnings and revenue estimates after four consecutive quarters of slowed growth. Let us take a deep dive into the results for the second quarter.
Cisco Systems Q2 Results
For the second quarter, Cisco reported a 9% YoY increase in revenue to $14 billion, beating estimates of 13.87 billion. Net income rose 6% YoY to $3.8 billion for a non-GAAP EPS of $0.94, beating estimates of $0.91.
Other Financial Highlights
Cisco reported a non-GAAP gross margin of 68.7%, compared to 66.7% the previous year. Non-GAAP operating expenses rose 10% YoY to $4.8 billion, representing 34% of revenue. Meanwhile, non-GAAP operating income came in at $4.9 billion, a 15% YoY increase for a non-GAAP operating margin of 34.7%.
The company reported a 177% YoY increase in cash flow from operating activities to $2.2 billion compared to $0.8 billion in Q2 fiscal 2024.
Cisco reported a 3% increase in quarterly dividend to $0.41, and the board authorized an additional $15 billion for share buybacks. In total, it returned $2.8 billion to shareholders via dividends and share buybacks.
Balance Sheet
The company ended Q2 fiscal 2025 with $16.9 billion in cash and cash equivalents, compared to $17.9 billion at the end of Q2 fiscal 2024.
It reported a 16% jump in Remaining Performance Obligations (RPO) to $41.3 billion, with 51% of this set to be recognized as revenue in the upcoming 12 months. Product RPO rose 25%, while services RPO rose 8% YoY.
Cisco reported an 8% YoY increase in deferred revenue to $27.8 billing, with deferred product revenue up 12% while deferred services revenue was up 4%.
Q3 And Fiscal 2025 Guidance
In the upcoming quarter, Cisco expects revenue of $13.9 billion to $14.1 billion, which is above estimates of $13.88 billion at the midpoint. It expects a non-GAAP EPS of $0.90 to $0.92 in Q3 fiscal 2025, a non-GAAP gross margin of 67% to 68%, and a non-GAAP operating margin of 33% to 34%.
For the full year, the company expects revenue of $56.0 billion to $56.5 billion and full-year non-GAAP EPS of $3.68 to $3.74.
Earnings Call Highlights
During the earnings call, the company highlighted broad-based strength in product orders, highlighting rising demand for its technologies. For instance, product orders were up 29% YoY, with AI infrastructure orders of over $350 million in Q2, bringing the total AI order to around $700 million in the first half of fiscal 2025.
Cisco Systems (CSCO) Market Performance
Following the stellar Q2 results and guidance, CSCO shares gained 6.11% in premarket trading to $66.35 as of 8:17 AM EST. The stock is up 39.39% in the past six months and 25.09% in the past 12 months.
It has outperformed the S&P 500, which is up 13.24% in the past six months and 20.51% in the past 12 months. Thursday’s closing price of $62.53 is above both its 50-and 200-day moving averages of $59.88 and $52.65, respectively.
Analysts are optimistic about the stock’s future, giving it an overall moderate buy rating. They forecast an average price of $65.33, which is a 4.48% upside based on Thursday’s closing price. On the high end of the forecast, analysts expect a price of $73.00, while on the low end, they forecast a price of $56.00.
Is Cisco Systems A Good Investment In 2025?
Cisco has seen a surge in demand for products used to build AI infrastructure. As major customers build out large data centers, its ethernet switches and routers have experienced a surge in demand. With Trump announcing a $500 billion investment in AI, the industry will likely keep rising in the coming years, providing more business opportunities for Cisco’s products. Consequently, adding CSCO to your portfolio could potentially pay off.
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