Cisco Systems forecasts higher-than-expected revenue and profit for the coming quarter, following a strong performance in the first quarter (Q1) for fiscal year 2025 (FY25) that saw growing demand for its networking equipment, supported by the growth of AI infrastructure.
The California-headquartered computer networking equipment manufacturing company is grappling with a post-pandemic slowdown in demand. The goal now is to capitalize on the growing need for data center infrastructure that supports AI technologies, a shift that has spurred interest in the company’s product line, including its switches and routers Ethernet.
However, Cisco shares fell 1.4% in after-hours trading as the company forecast annual revenue growth in line with analyst estimates despite upbeat quarterly results.
For the second quarter of FY25, Cisco forecasts revenue between $13.75 billion and $13.95 billionas well as non-GAAP earnings of $0.89 to $0.91 per share, both slightly above market expectations set by LSEG. The company’s non-GAAP gross margins in Q2 FY25 are estimated at 68% to 69% and operating margins at 33.5% to 34.5%. For the full fiscal year, the company expects revenue to be between $55.3 billion and $56.3 billion.
Cisco’s strategic shift towards AI and cybersecurity
As the rise of AI has contributed to increased sales of networking products, Cisco is actively diversifying to reduce its reliance on its core networking equipment business. Supply chain disruptions and falling demand have recently impacted this segment, prompting the company to shift its focus to cybersecurity, cloud systems and AI-driven offerings.
As part of this strategic shift, Cisco completed the $28 billion acquisition of cybersecurity company Splunk in March, a move that strengthened its software business amid growing interest in cloud-based applications. AI while improving its security capabilities.
“Cisco is off to a strong start to fiscal 2025,” said Chuck Robbins, Cisco Chairman and CEO. “Our customers are investing in critical infrastructure to prepare for AI, and with the breadth of our portfolio, we are uniquely positioned to capitalize on this opportunity. »
In the first quarter ended Oct. 26, Cisco reported revenue of $13.8 billion, down 6% year over year but above analysts’ forecasts of $13.77 billion. Non-GAAP earnings per share were $0.91, beating expectations of $0.87.
For the full fiscal year, Cisco raised its revenue forecast to between $55.3 billion and $56.3 billion, up from $55.3 billion to $56.2 billion previously. The company also raised its adjusted annual earnings per share projection to between $3.60 and $3.66, compared to the previously expected $3.52 to $3.58. Cisco’s net profit for the reporting period was $2.7 billion, down 25% from $3.6 billion in the year-ago quarter.
Cisco’s financial health across several segments revealed contrasting trends in the first quarter of FY25. While networking product revenue declined 23%, its security division recorded a remarkable 100% growth, fueled by largely through Splunk integration. Observability also increased by 36%.
In geographic terms, Q1FY25 revenue in the Americas declined by 9%, while Europe, the Middle East and Africa (EMEA) saw a decline of 2%. , with the Asia Pacific, Japan and China (APJC) regions showing a marginal decline of 1%. % increase.
The first quarter also saw robust cash flow, with operating activities generating $3.7 billion, an increase of 54% over last year’s figures.
