Cisco Systems Inc Q4 2025 Earnings Call Transcript

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

Question: Aaron Rakers - Wells Fargo Securities LLC - Analyst : I guess my first question is, looking at your guidance and given the commentary around the AI opportunity and reflective of sovereign starting to kick in into the second half of the fiscal year, just kind of taking the midpoint, it would seem to assume you've got some deceleration of growth from, call it, 6.5%, 7%. We guided for fiscal first quarter to about 4.5% going into the remaining three quarters. I'm curious, does that reflect conservatism? Is there any change in the demand environment that you're factoring in? I'm kind of curious how we bridge maybe that deceleration through the remaining quarters of the fiscal year. . REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 13, 2025 / 8:30PM, CSCO.OQ - Q4 2025 Cisco Systems Inc Earnings Call

Question: Meta Marshall - Morgan Stanley - Analyst : Great. Appreciate the question. Maybe a couple for me. Just one, how are you looking at security and business maybe in particular, you're now anniversary at Splunk as you guys just mentioned, but just kind of how are you looking at the growth outlook there as you have some kind of new products and old products cascading in? And then maybe second, just new CFO priorities would be great to kind of level set.

Question: Simon Leopold - Raymond James - Analyst : First one, I wanted to ask about this idea of pull forward. I appreciate customers may not communicate their rationale and reasons for placing particular orders. But I'm concerned that particularly in the federal vertical with potential budget cuts and enterprise is worried about the implications from tariffs may have accelerated some of the orders, therefore, pulling them from the later quarters. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 13, 2025 / 8:30PM, CSCO.OQ - Q4 2025 Cisco Systems Inc Earnings Call And then as my follow-up, I'm wondering if you could talk about your expectations over the longer term for the composition of the AI business. We've got the two-thirds, one-third split between systems and optics -- and I'm wondering how you expect that to trend? Or is this an expected steady state?

Question: Samik Chatterjee - JPMorgan Chase & Co - Analyst : Maybe, Chuck, if I can sort of ask you more on the networking cycle here, particularly that there was a period of time that you went through a digestion with customers and then you started to see the recovery in the networking cycle. There's been two quarters of solid growth on that front. As you think about next year or fiscal '26, how do you sort of see that growth sustaining, particularly if you sort of put aside the new upgrades in relation to Cat 9K upgrades that you're looking at like where are customers in terms of their intent to upgrade legacy infrastructure? And basically, what I'm trying to get to is at the Investor Day, you had talked about 2% to 5% being the range of networking through the medium term. And where do you think you land on that front in fiscal '26. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 13, 2025 / 8:30PM, CSCO.OQ - Q4 2025 Cisco Systems Inc Earnings Call

Question: Michael Ng - Goldman Sachs Group Inc - Analyst : I just have two as well. First on AI, I was wondering if you could talk about the greater than $2 billion AI orders this year. Did that translate into revenue in the year? And how should we think about that translating into revenue for next -- and then second, just on networking. I was wondering if you could talk a little bit about the orders in the quarter by subsegment, campus and data center switching, wireless, routing, and any kind of notable inflections that you would call out in any of those product categories?

Question: Tal Liani - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Two questions I asked on both together. Service revenues, kind of 25% of revenues, flat this quarter. And if you look at the trend line over the last five quarters, the growth decelerated from 6.5% to 5.5% to 2.5, now 0. What are the trends in service revenues? And what should we expect going forward? That's question number one. And question number two is the networking growth, it's driven by spending of spending in investments by cloud, how much risk is there that this year is a phenomenal year for spending and trends would slow down next year just because Oracle is not going to grow again another 150% and Meta is not going to grow again another 70%, 80%, et cetera. So what's the sustainability of these growth rates in your view? .

Question: James Fish - Piper Jaffray Inc - Analyst : I know, Chuck, Meta asked about this a little bit earlier. Is there a way to think about for every dollar of Cat 9K refresh, how many dollars are kind of coming off of the other solutions, be it wireless LAN firewall, other security products -- and just a follow-up on the last question here, anniversary in Splunk. How are you guys thinking about your own use of capital given big M&A and security, once again, I'm surprised I'm the first one to ask about this given the CyberArk deal? And how are you thinking about that identity and privileged access space, given you're going to have more AI to AI or machine to machine interaction occurring in the future?

Question: David Vogt - UBS AG - Analyst : I have two as well. So Chuck, I recognize you don't buy two specific product growth. But if I think about your order intake has been averaging at least kind of roughly 50% on average for SP. And if I use that as a proxy in fiscal '26, it looks like AI could add about 2 points of revenue growth just sort of the networking business. in '26. And is that kind of the right way to frame it? And the rest is really the recovery or maybe the refresh cycle in campus and strength in enterprise? And then, Mark, my second question for you is I appreciate all the detail on the tariff impact, I appreciate that in the slide, but can you help us frame from a gross margin impact, is it a 50 basis point headwind in your guide for fiscal '26 based on where current tariff rates are and how you're thinking about it for the full year?

Question: Adrienne Colby - Citibank Cameroon SA - Analyst : It's Adrienne Colby for Atif. The EMEA orders accelerated in the quarter, and I was hoping you could provide some color there. And I also wanted to just circle back on the sovereign AI opportunities about your expectations in terms of order flow and revenue recognition there.