Cisco Systems Inc Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Meta Marshall - Morgan Stanley & Co. LLC - Analyst : Great. And congrats on the quarter. Maybe the two questions for me. Just one, what are you seeing in terms of customer buying behavior right now, just given the uncertainty kind of with some of the tariffs that you laid out and just whether you kind of saw any pull forward potentially in April. And then just maybe as a second question, just any commentary around public sector and federal kind of around the same questions.

Question: Tal Liani - BofA Securities - Analyst : So this year, Meta is growing CapEx by 70%, and you see very strong growth across the board. And the question is I know you're only now ramping networking, but the question is whether 2025, you think is a peak year. CapEx will likely slow down materially slow down. What happens to Cisco in an environment where cloud CapEx is slowing down?

Question: Aaron Rakers - Wells Fargo & Company. - Analyst : And congrats on the quarter and Scott on the future retirement. I guess I'll ask my kind of two quick questions in conjunction here. So I want to -- I think, Chuck, in the prepared comments, you referenced a large sovereign deployment opportunity that is coming here soon. I guess the first question on that is that is that currently in your order book, the $600 million you saw this last quarter? And if not, how do you think about the size of those opportunities? And then a quick follow-on is I think this last quarter, you launched or you started shipping your 51.2 (technical difficulty) I think it's the G200 silicon. Can you just give us an update on what you're seeing in the data center switching side and if that really becomes a catalyst year as we look out over the next couple of quarters?

Question: Joseph Cardoso - JPMorgan Chase & Co. - Analyst : This is Joseph Cardoso on for Samik Chatterjee. I also wanted to follow up on the Middle East announcements. Maybe a two-parter here is just, can you elaborate on how Cisco is looking to participate here, particularly as it relates to the portfolio? And I know it's early days, but any early insights that you can share into the timing and magnitude of these opportunities for the company as kind of investors are looking to embed it potentially into the model? And then I have a follow-up.

Question: Joseph Cardoso - JPMorgan Chase & Co. - Analyst : Yes, sure. And the follow-up is actually just more on the enterprise vertical, particularly campus. Obviously, orders are coming in good on the enterprise vertical. But just curious if you could what are you hearing from customers on this front and the momentum that you're seeing in kind of the order backlog order backlog here and how you're thinking about the opportunity around the recovery relative to when we last put 90 days ago.

Question: Michael Ng - The Goldman Sachs Group, Inc. - Analyst : Congratulations, Scott, on the upcoming retirement. I really appreciate all your time and help throughout the years. As it relates to my two questions. First, I was just wondering if you could talk a little bit more about the networking orders strength in the quarter. How much of that was the broad recovery and things like campus how much did the product cycle of Wi-Fi 7 contribute? And could we expect that to continue over the next 12 to 18 months here or so. And then second, just a housekeeping question. I was wondering if you could just share the organic revenue growth rates for the company and the segment ex Splunk, if you have that off hand.

Question: Matthew Niknam - Deutsche Bank AG - Analyst : And Scott, thank you again for all your help over these last couple of years. My question is on web scale. So obviously, you continue to see very impressive growth here. Maybe, Chuck, if you can talk to what's driving some of the sustained success, the pace of transition away from InfiniBand towards Ethernet and maybe some of the bigger differentiators that are helping you win incremental share across these hyperscalers?

Question: Amit Daryanani - Evercore ISI - Analyst : I guess I have two as well. Starting with your AI orders at $1 billion. It came in, I think, a quarter ahead of what you had expected and it looks like you're seeing some continued momentum as you go forward with sovereign and enterprise that you talked about. I'm just wondering, how should we think about the growth rates as we move forward on AI orders or AI revenues? It would be helpful to just kind of phase that out-- frame that out a little bit in terms of the forward growth rates. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 14, 2025 / 8:30PM, CSCO.OQ - Q3 2025 Cisco Systems Inc Earnings Call And then if I could just follow up for Scott, your July quarter guide, cut, if I'm not mistaken, it implies revenues are up sequentially, but operating margins are down 50 basis points. Maybe just push out why the margins are coming down in July, while revenues are going up and best luck in your retirement as well.

Question: Simon Leopold - Raymond James & Associates, Inc - Analyst : I'll ask both upfront. The first one is, Chuck, I think last quarter, you had sort of alluded to an upcoming campus refresh. And I would think Cisco's sort of do. What I'd like some help with is understanding the maybe historic perspective of when you've had these refreshes how to think about that? Because when I reflect on the last one, 2017, 2018, that occurred when you were shifting customers to subscription. So I feel like that's a tough metric to use to understand the potential. And then the follow-up may be a bit simpler, which is how do we think about the impact of tariffs, understanding they're changing every day. But given everything we know, after July 9, what would be the effect of tariffs based on the July 9 end of the pause? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 14, 2025 / 8:30PM, CSCO.OQ - Q3 2025 Cisco Systems Inc Earnings Call

Question: James Fish - Piper Sandler & Co - Analyst : Nice quarter. And Scott, congrats on your upcoming retirement here. And look, I don't want to rain on the freight here. But if I look at networking here, it returned to growth, but it was also against a very easy compare and even still down versus a couple of years ago. If AI really isn't substitutionary of existing non-AI networking real estate with some of these web scales and enterprise is growing the rates are calling out, why isn't this sort of growing faster than even the 8% on the comp here? And then just following up on Simon's question before, as my follow-up. Can we just an update as to the exposure between data center versus campus within networking? And how we should think about the price per port kind of playing out here as we're seven, eight years now down the road? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 14, 2025 / 8:30PM, CSCO.OQ - Q3 2025 Cisco Systems Inc Earnings Call

Question: David Vogt - UBS Securities LLC - Analyst : This is Andrew for David. I wanted to ask a question about the text of the $600 million of AI orders. You mentioned that they tend to be nonlinear and they're very large customers. I'm wondering if you're starting to see bigger orders is a large component of that $600 million and with the customers where you're having the most success? Or are you really seeing sort of a diffuse kind of large growing orders across a number of customers that you mentioned you had three going triple digits. And the follow-up question I wanted to ask is just -- I'm not sure if I missed it, but could you give an estimate of roughly what you think the impact of tariffs are in your guidance for Q4 for gross margin?

Question: Karl Ackerman - BNP Paribas Securities Corp - Analyst : I have two, and I'll just ask them at the same time as well, please. So the extended partnership with NVIDIA is an endorsement of your Silicon One family and certainly underscores your opportunity as enterprises deploy AI compute. I was hoping you could quantify your AI orders for enterprise at our incremental to the $1 billion of AI order target you have for cloud. And then second, when might Silicon One offer co-packaged optics solutions as you seek to broaden your data center switch offering.

Question: Adrienne Colby - Citigroup Inc. - Analyst : It's Adrienne Colby for Atif. It's been a while since you talked about your AI pipeline versus your AI orders. So I was hoping you could update us on what that part of the funnel is looking like. And secondly, I was hoping with the departure of parcel you could update us on the search there for a

Question: Sebastien Naji - William Blair & Company, L.L.C. - Analyst : I wanted to ask about your networking business and in particular, your hyperscaler customers, and in particular, the usage of a white box given that Cisco can provide that broad range of offerings from the chip to white box to the full system. Can you maybe just comment on whether you see white box eating up a big part of the spending pie? And is it AI that's driving that share shift or something else that's happening?