01—Abstract
Summary
Summary of the 10-Q filed May 20, 2025. Cited figures are marked; the original filing is the authoritative source.
Cisco Systems, Inc. (CSCO) reported solid performance for the third quarter of fiscal year 2025, with total revenue increasing by 11% year-over-year to $14.15 billiona.
This growth was driven by a 15% increase in product revenue, notably bolstered by the full quarter inclusion of Splunk's results, and a 3% increase in services revenue. Gross margin improved by 0.5 percentage points to 65.6%, reflecting productivity gains and the contribution of Splunk, partially offset by pricing erosion. Net income saw a significant jump of 32% to $2.49 billionb, leading to diluted earnings per share of $0.62, a 35% increase.
The company's operational efficiency improved, with operating income as a percentage of revenue rising to 22.6%. Cisco continues to invest in AI integration across its portfolio and remains focused on its strategic priorities, demonstrating resilience amidst a challenging macroeconomic environment. The company maintained a strong liquidity position with $15.64 billionc in cash and investments.
02—Key points
Key Highlights
- Total revenue increased 11% year-over-year to $14.15 billion.
- Product revenue surged by 15%, driven by the full quarter inclusion of Splunk, while services revenue grew by 3%.
- Gross margin improved to 65.6% from 65.1% in the prior year's quarter.
- Net income rose 32% to $2.49 billion, and diluted EPS increased 35% to $0.62.
- Operating income margin expanded to 22.6% from 17.2% in the prior year's quarter.
- Security and Observability product categories saw significant revenue increases, largely due to Splunk.
- The company returned $3.13 billion to stockholders through dividends and share repurchases in the quarter.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2025, Cisco Systems, Inc. kept $0.18.
- Revenue$14.15B100.0%
- Cost of revenue−$4.87B34.4%
- Gross profit$9.28B65.6%
- Operating costs−$6.08B42.9%
- Operating income$3.20B22.6%
- Interest, other & tax−$711.0M5.0%
- Net income$2.49B17.6%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2025filed May 20, 2025Financial Statements
Q3 FY2025 against Q3 FY2024
| Line item | Q3 FY2025Q3 FY2024 | Change |
|---|---|---|
| Revenue | $14.15B$12.70B | +11.4% |
| Cost of Revenue | $4.87B$4.43B | +10.0% |
| Gross Profit | $9.28B$8.27B | +12.1% |
| R&D Expenses | $2.33B$1.95B | +19.9% |
| Operating Expenses | $6.08B$6.08B | −0.1% |
| Operating Income | $3.20B$2.19B | +46.1% |
| Net Income | $2.49B$1.89B | +32.1% |
| EPS (Basic) | $0.63$0.47 | +34.0% |
| EPS (Diluted) | $0.62$0.46 | +34.8% |
| Shares Outstanding (Basic) | 3.97B4.04B | −1.7% |
| Shares Outstanding (Diluted) | 4.00B4.06B | −1.4% |
05—Questions
Frequently Asked Questions
What was the primary driver of Cisco's revenue growth in the third quarter of fiscal 2025?
Cisco's revenue growth was primarily driven by a 15% increase in product revenue, significantly boosted by the inclusion of a full quarter's results from its acquisition of Splunk. The Security and Observability product categories, in particular, saw substantial growth attributed to Splunk's contribution.
How did Cisco's profitability metrics perform in the quarter?
Profitability improved notably. Gross margin increased to 65.6% due to productivity gains and Splunk's contribution. Operating income as a percentage of revenue expanded significantly to 22.6%, driven by revenue growth and lower restructuring charges. Net income rose 32% year-over-year, and diluted earnings per share increased by 35%.
What is Cisco's strategy regarding AI and future investments?
Cisco is integrating artificial intelligence (AI) across its product portfolios in networking, security, collaboration, and observability to simplify delivery, management, and optimization, and to help customers maximize business value and accelerate digital transformation. The company plans to continue investing in key growth opportunities and strategic priorities, including AI, cloud, and cybersecurity.
What is Cisco's approach to returning capital to shareholders?
Cisco targets returning a minimum of 50% of its free cash flow annually to shareholders through cash dividends and stock repurchases. In the third quarter of fiscal 2025, the company returned $3.13 billion to stockholders through these means.
06—Continue