Cisco Reports Fourth Quarter Earnings

Cisco reported strong Q4 FY2025 results, with revenue up 8% year-over-year to $14.7 billion and non-GAAP EPS of $0.99, both exceeding guidance ranges. Full fiscal year 2025 revenue reached $56.7 billion, a 5% increase. A key driver was exceptional demand for AI infrastructure, with orders from webscale customers surpassing $800 million in Q4 and totaling over $2 billion for the full year, more than double the original target, signaling a significant growth opportunity. The company also noted robust product order growth across all geographies, strong profitability, and provided an optimistic FY2026 revenue guidance of $59.0 billion to $60.0 billion.

Analysis

Cisco Systems reported a strong close to its 2025 fiscal year, with Q4 results surpassing the high end of its guidance. Revenue for the quarter grew 8% year-over-year to $14.7 billion, while non-GAAP EPS increased 14% to $0.99. A standout metric was the significant acceleration in AI-related business, with AI infrastructure orders from webscale customers exceeding $800 million in Q4, bringing the full-year total to over $2 billion—more than double the company's initial $1 billion target. This indicates a successful strategic pivot and a substantial new growth catalyst. The underlying business also showed robust demand, evidenced by a 7% year-over-year increase in total product orders. Profitability remained strong, with Q4 non-GAAP gross margin at 68.4% and operating margin at 34.3%. Looking forward, Cisco provided optimistic guidance for fiscal 2026, projecting revenue between $59.0 billion and $60.0 billion and non-GAAP EPS of $4.00 to $4.06, signaling management's confidence in sustained performance. The company's financial health is further supported by a 30% increase in full-year operating cash flow to $14.2 billion and a 6% rise in Remaining Performance Obligations (RPO) to $43.5 billion.

Key Decisions for Investors

• Investors should re-evaluate Cisco's valuation in light of its rapidly expanding role in the AI infrastructure market, as the $2 billion in FY2025 orders significantly de-risks its pivot to this high-growth sector.
• The solid FY2026 guidance, underpinned by strong margins and a growing $43.5 billion backlog in Remaining Performance Obligations, offers improved visibility and may warrant a constructive stance on the company's medium-term earnings power.
• Consider the stock's shareholder yield, as the consistent dividend, recently declared at $0.41 per share, and the substantial $14.2 billion remaining in the share repurchase authorization provide a tangible capital return floor.
• Monitor the conversion of the strong order book into revenue, particularly as Q1 FY2026 guidance suggests a sequential plateau, to confirm that the AI-driven momentum translates into sustained top-line acceleration beyond the initial surge.