01—Abstract
Summary
Summary of the 10-Q filed February 18, 2025. Cited figures are marked; the original filing is the authoritative source.
Cisco Systems, Inc. (CSCO) filed its quarterly report for the period ending January 24, 2025.
The company reported total revenue of $13.99 billiona, a 9% increase year-over-year, primarily driven by an 11% rise in product revenue, significantly boosted by the inclusion of Splunk's contributions. Services revenue also saw a 6% increase. Despite revenue growth, net income declined by 8% to $2.43 billion, leading to a diluted EPS of $0.61, down from $0.65 in the prior year period.
This decline was influenced by a significant increase in operating expenses, including higher R&D, Sales & Marketing, and G&A, as well as higher amortization of purchased intangible assets and restructuring charges. For the six-month period, total revenue grew 1% to $27.83 billionb, while net income saw a more substantial decrease of 18% to $5.14 billion.
The company continues to invest heavily in R&D, with a 19% increase in R&D expenses for the six-month period. Cisco highlighted its strategic focus on integrating AI across its portfolio and its commitment to returning capital to shareholders through dividends and stock repurchases, recently authorizing an additional $15 billionc for share repurchases.
02—Key points
Key Highlights
- Total revenue for the quarter reached $13.99 billion, an increase of 9% year-over-year, with product revenue up 11% and services revenue up 6%.
- The inclusion of Splunk significantly boosted revenue, particularly in the Security and Observability product categories, and contributed to a 23% increase in total subscription revenue.
- Despite revenue growth, net income for the quarter decreased by 8% to $2.43 billion, and diluted EPS fell to $0.61 from $0.65 year-over-year.
- Operating expenses increased across R&D (18%), Sales and Marketing (9%), and G&A (17%) for the quarter, leading to a decrease in operating income as a percentage of revenue from 24.2% to 22.3%.
- The company announced a restructuring plan impacting approximately 7% of its global workforce, with estimated pre-tax charges of up to $1 billion.
- Cisco's Board of Directors authorized an additional $15 billion for its stock repurchase program, demonstrating continued commitment to returning capital to shareholders.
- Remaining Performance Obligations (RPO) increased slightly to $41.27 billion, indicating a solid pipeline of future revenue.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2025, Cisco Systems, Inc. kept $0.17.
- Revenue$13.99B100.0%
- Cost of revenue−$4.88B34.9%
- Gross profit$9.11B65.1%
- Operating costs−$6.00B42.9%
- Operating income$3.11B22.3%
- Interest, other & tax−$685.0M4.9%
- Net income$2.43B17.4%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2025filed February 18, 2025Financial Statements
Q2 FY2025 against Q2 FY2024
| Line item | Q2 FY2025Q2 FY2024 | Change |
|---|---|---|
| Revenue | $13.99B$12.79B | +9.4% |
| Cost of Revenue | $4.88B$4.57B | +6.7% |
| Gross Profit | $9.11B$8.22B | +10.9% |
| R&D Expenses | $2.30B$1.94B | +18.3% |
| Operating Expenses | $6.00B$5.12B | +17.1% |
| Operating Income | $3.11B$3.10B | +0.5% |
| Net Income | $2.43B$2.63B | −7.8% |
| EPS (Basic) | $0.61$0.65 | −6.2% |
| EPS (Diluted) | $0.61$0.65 | −6.2% |
| Shares Outstanding (Basic) | 3.98B4.05B | −1.8% |
| Shares Outstanding (Diluted) | 4.00B4.07B | −1.7% |
05—Questions
Frequently Asked Questions
What was Cisco's revenue performance for the quarter and how did Splunk's acquisition impact it?
Cisco reported total revenue of $13.99 billion for the quarter ending January 24, 2025, representing a 9% increase year-over-year. Product revenue increased by 11% and services revenue by 6%. The acquisition of Splunk significantly contributed to this growth, particularly driving the substantial 117% increase in the Security product category revenue and the 47% increase in Observability revenue. Overall subscription revenue also saw a significant jump of 23% due to Splunk.
Why did Cisco's net income and EPS decrease despite revenue growth?
Despite a 9% increase in revenue for the quarter, net income decreased by 8% to $2.43 billion, and diluted EPS fell to $0.61 from $0.65. This was primarily due to a significant increase in operating expenses, including higher R&D, Sales and Marketing, and General and Administrative costs, which rose by 18%, 9%, and 17% respectively for the quarter. The company also incurred higher amortization of purchased intangible assets, largely related to acquisitions like Splunk, and significant restructuring and other charges ($675 million in the first six months of fiscal 2025).
What is Cisco's outlook and capital allocation strategy?
Cisco remains focused on integrating AI across its product portfolio and driving innovation to support customer digital transformations. The company continues to invest in key growth areas. For capital allocation, Cisco's Board of Directors declared a quarterly dividend of $0.41 per common share and authorized an additional $15 billion for its stock repurchase program, indicating a continued commitment to returning capital to shareholders. They aim to return a minimum of 50% of free cash flow annually to stockholders.
06—Continue