Cisco Systems(CSCO) - 2025 Q2 - Quarterly Results

Financial Performance - Q2 FY 2025 revenue was $14.0 billion, a 9% increase year over year, exceeding guidance[6] - GAAP net income was $2.4 billion, down 8% year over year, with GAAP EPS at $0.61, a decrease of 6%[17] - Non-GAAP net income increased by 6% to $3.8 billion, with non-GAAP EPS rising 8% to $0.94[10] - Total revenue for the three months ended January 25, 2025, was $13,991 million, representing a 9% year-over-year increase[31] - For the first half of FY 2025, GAAP net income was $5.139 billion, down 18% from $6.272 billion in the first half of FY 2024[57] - Non-GAAP net income for the first half of FY 2025 was $7.431 billion, reflecting an 8% decrease from $8.066 billion in the first half of FY 2024[57] - The company expects Q3 FY 2025 Non-GAAP EPS guidance to be between $0.90 and $0.92, with GAAP EPS expected between $0.57 and $0.61[62] Revenue Growth - Product orders grew by 29% year over year, with AI Infrastructure orders exceeding $350 million in Q2[6] - Revenue from Security products surged 117% and Observability grew 47% year over year[14] - Security revenue surged by 117% year-over-year to $2,111 million for the three months ended January 25, 2025[35] Operating Metrics - Operating income on a GAAP basis was $3.1 billion, with a GAAP operating margin of 22.3%[16] - Cash flow from operating activities reached $2.2 billion, a 177% increase compared to the same quarter last year[18] - Total revenue for Q2 FY 2025 was $9.111 billion, with a gross margin of 65.1%, compared to $8.217 billion and a gross margin of 64.2% in Q2 FY 2024[54] - Operating income for Q2 FY 2025 was $3.113 billion, reflecting a year-over-year increase of 1%[54] - Non-GAAP gross margin for the first half of FY 2025 was 69.0%, compared to 66.9% in the first half of FY 2024[57] Cash and Assets - Total assets decreased from $124,413 million on July 27, 2024, to $121,375 million on January 25, 2025[38] - Net cash provided by operating activities for the six months ended January 25, 2025, was $5,902 million, compared to $3,179 million for the same period in 2024[40] - Cash, cash equivalents, and restricted cash at the end of the period were $9,508 million, up from $8,842 million at the beginning of the period[40] Performance Obligations - Remaining Performance Obligations (RPO) totaled $41.3 billion, up 16%, with 51% expected to be recognized as revenue in the next 12 months[19] - Remaining performance obligations (RPO) increased by 16% year-over-year to $41,268 million as of January 25, 2025[42] - The company expects to recognize 51% of total RPO as revenue over the next 12 months[42] - Total deferred revenue as of January 25, 2025, was $27,795 million, up from $25,771 million a year earlier[44] Acquisitions and Investments - Cisco closed the acquisition of Deeper Insights AI Ltd., enhancing its AI capabilities[22] - The quarterly dividend was increased by 3% to $0.41 per share, with an additional $15 billion authorized for stock repurchases[11] Tax and Expenses - The effective tax rate for Q2 FY 2025 was 15.9%, slightly down from 16.7% in Q2 FY 2024[60] - Share-based compensation expense for Q2 FY 2025 was $151 million, up from $139 million in Q2 FY 2024[54] - The company reported a significant increase in acquisition-related costs, totaling $17 million in Q2 FY 2025 compared to $1 million in Q2 FY 2024[54] Strategic Focus and Risks - Cisco is providing guidance for Q3 FY 2025 and full year FY 2025, indicating potential risks and uncertainties in customer demand and financial performance[65] - The company emphasizes the importance of non-GAAP measures, which exclude share-based compensation and other costs, to evaluate its financial results[66] - Cisco's management uses non-GAAP measures for internal budgeting, which may exclude significant litigation settlements and costs related to the Russia-Ukraine war[70] - The company is focused on leveraging AI-powered solutions to enhance productivity and strengthen digital resilience for its customers[71] - Cisco acknowledges the limitations of non-GAAP measures, which may not reflect all amounts associated with its results of operations[67] - The company is subject to various risks, including supply constraints and increased competition in the data center market[65] - Cisco's future performance may be influenced by global economic conditions and geopolitical uncertainties[65] - The company aims to maintain leadership in networking and services while managing financial risks during economic downturns[65]