Cisco Systems projected stronger-than-expected revenue and profit for the upcoming quarter, following a solid first-quarter (Q1) performance for the financial year 2025 (FY25) that saw rising demand for its networking equipment, bolstered by growth in AI infrastructure.
The California-headquartered computer networking equipment manufacturing company has been grappling with a post-pandemic slowdown in demand. It now aims to capitalise on the soaring need for data centre infrastructure that supports AI technologies, a shift that has boosted interest in the company’s product line, including its ethernet switches and routers.
However, Cisco’s shares dipped by 1.4% in after-hours trading as the company predicted annual revenue growth in line with analyst estimates, despite upbeat quarterly results.
For the second quarter of FY25, Cisco anticipates revenue between $13.75bn and $13.95bn, along with non-GAAP earnings of $0.89 to $0.91 per share, both slightly above market expectations compiled by LSEG. The company’s non-GAAP gross margins in Q2 FY25 are estimated to be between 68% and 69% and operating margins from 33.5% to 34.5%. For the full financial year, the company expects its revenue to be in the range of $55.3bn and $56.3bn.
Cisco’s strategic shift towards AI and cybersecurity
While the AI surge has contributed to higher sales for networking products, Cisco is actively diversifying to reduce reliance on its core networking equipment business. Supply chain disruptions and weaker demand have impacted this segment recently, prompting the company to pivot towards cybersecurity, cloud systems, and AI-oriented offerings.
As part of this strategic shift, Cisco finalised its $28bn acquisition of cybersecurity firm Splunk in March, a move that bolstered its software business amid rising interest in AI-driven applications while enhancing its security capabilities.
“Cisco is off to a strong start to fiscal 2025,” said Cisco chair and CEO Chuck Robbins. “Our customers are investing in critical infrastructure to prepare for AI, and with the breadth of our portfolio, we are uniquely positioned to capitalise on this opportunity.”
In the first quarter ending 26 October, Cisco reported revenue of $13.8bn, a 6% year-over-year (YoY) decrease but above analysts’ forecasts of $13.77bn. Non-GAAP earnings per share came in at $0.91, surpassing expectations of $0.87.
For the full fiscal year, Cisco raised its revenue forecast to between $55.3bn and $56.3bn, up from its prior estimate of $55bn to $56.2bn. The company also raised its annual adjusted earnings per share projection, now ranging from $3.60 to $3.66, compared to the previously expected $3.52 to $3.58. Cisco’s net income for the reported period was $2.7bn, a decline of 25% from $3.6bn posted in the corresponding quarter of the prior year.
Cisco’s financial health across multiple segments revealed contrasting trends in the first quarter of FY25. While revenue from networking products declined by 23%, its security division recorded a remarkable 100% growth, fuelled largely by the integration of Splunk. Observability also grew by 36%.
In geographic terms, Q1 FY25 revenue in the Americas declined by 9%, while Europe, the Middle East, and Africa (EMEA) saw a 2% dip, with Asia-Pacific, Japan, and China (APJC) regions showing a marginal 1% increase.
The first quarter also saw robust cash flow, with operating activities generating $3.7bn, a 54% increase compared to last year’s figures.
Read more: Cisco finds security flaw in URWB access points for industrial wireless automation
