Cisco (CSCO) reported a strong third quarter for fiscal year 2025, showcasing robust momentum across key business areas, particularly AI and security, and delivering results that exceeded expectations. Revenue rose 11% year-over-year (YoY) to $14.1 billion, topping the high end of guidance. This growth was underpinned by strength in product sales and continued traction in high-priority areas. GAAP net income surged 32% YoY to $2.5 billion, while GAAP EPS climbed 35% to $0.62. On a non-GAAP basis, net income rose 8% to $3.8 billion, with EPS increasing 9% to $0.96. Cisco also generated $4.1 billion in operating cash flow, up 2% YoY, and maintained a strong balance sheet with $15.6 billion in cash and investments. Shareholders benefited from $3.1 billion in capital returns, including $1.6 billion in dividends and $1.5 billion in buybacks.

Segment performance was equally impressive. Product revenue grew 15% YoY to $10.4 billion, led by broad-based demand, while services revenue edged up 3% to $3.8 billion. In its business units, security revenue soared 54% to $2.0 billion, powered by Splunk and SASE, while networking revenue reached $7.1 billion, up 8%, thanks to double-digit growth in switching and enterprise routing. Observability posted a 24% YoY increase to $261 million, and collaboration rose 4% to $1.0 billion.

Geographically, growth was balanced: Americas revenue increased 14% YoY to $8.4 billion, EMEA rose 8% to $3.7 billion, and APJC climbed 9% to $2.0 billion. Cisco’s strategic shift to recurring and software-based models also continued to gain ground. Total product orders jumped 20% YoY, or 9% excluding Splunk, while annualized recurring revenue (ARR) hit $30.6 billion, up 5%. Subscription revenue rose 15% to $7.9 billion, now 56% of total revenue, and software revenue surged 25% to $5.6 billion, with software subscriptions up 26%. Remaining performance obligations (RPO) grew 7% to $41.7 billion.

AI and security are increasingly central to Cisco’s growth story. AI infrastructure orders exceeded $600 million in Q3 alone, pushing the year-to-date total past $1 billion, beating the company’s FY25 goal ahead of schedule. Most of these orders came from web-scale customers and spanned full systems, not just optics, reinforcing Cisco’s deepening role in AI buildouts. Enterprise AI demand is also ramping up, albeit still smaller in scale. Cisco’s participation in sovereign AI cloud projects like Saudi Arabia’s HUMAIN signals long-term opportunity. In security, Cisco booked its largest-ever Splunk deal and added over 370 new customers for new products like Secure Access, XDR, and Hypershield.

Executives remained upbeat. CEO Chuck Robbins emphasized Cisco’s leadership in secure networking and the accelerating demand in AI, noting the non-linear nature of AI infrastructure orders. CFO Scott Herren highlighted a clean beat across revenue, margins, and earnings, and confirmed that the Splunk integration is complete and outperforming expectations. Despite tariff headwinds, customer buying patterns remain stable with no signs of order volatility.

Looking ahead, Cisco guided for Q4 revenue of $14.5–$14.7 billion and non-GAAP EPS of $0.96–$0.98. Full-year expectations include revenue of $56.5–$56.7 billion and non-GAAP EPS of $3.77–$3.79. Tariff-related impacts are baked into this outlook, but Cisco’s flexible supply chain is expected to soften the blow. The company also declared a $0.41 quarterly dividend, payable July 23.

Strategically, Cisco is staying aggressive in innovation and leadership. The now-complete Splunk integration is enhancing security capabilities, while partnerships with NVIDIA, HUMAIN, and G42, along with initiatives like WiFi 7 and quantum networking, reflect Cisco’s forward-looking investments. Leadership transitions are underway, with CFO Scott Herren set to retire at year-end and Chief Strategy Officer Mark Patterson stepping into the CFO role. Jeetu Patel has been promoted to President and Chief Product Officer, and Kevin Weil, formerly of OpenAI, has joined Cisco’s Board.