Networking technology giant Cisco (NASDAQ: CSCO) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 7.5% year on year to $14.88 billion. Guidance for next quarter’s revenue was optimistic at $15.1 billion at the midpoint, 3% above analysts’ estimates. Its non-GAAP profit of $1 per share was 1.9% above analysts’ consensus estimates.

Is now the time to buy CSCO? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Cisco’s third quarter performance was met with a positive market reaction, as revenue and non-GAAP profit both exceeded Wall Street’s expectations. Management credited robust demand for AI infrastructure and campus networking solutions as primary drivers of growth, highlighting that total product orders grew across all geographies and customer segments. CEO Chuck Robbins noted, “Our strong top-line performance combined with operating efficiencies and solid execution by our teams contributed to non-GAAP EPS growth of 10% as we continue to grow earnings faster than revenue.” The quarter also benefited from an acceleration in orders for advanced networking, enterprise routing, and industrial IoT products.

Looking forward, Cisco’s guidance reflects confidence in sustained demand for AI-driven networking solutions and a multiyear cycle of product refreshes. Management pointed to a growing pipeline of AI infrastructure opportunities and increasing adoption of new products, such as the Unified Edge platform and next-generation security solutions. Robbins stated, “With our industry-leading networking portfolio, powered by Silicon One, AI-native security solutions, and operating systems, we are well-positioned today to provide the critical infrastructure for the AI era.” The company expects continued expansion in hyperscale and enterprise markets, supported by new partnerships and evolving customer needs.

Key Insights from Management’s Remarks

Management attributed the strong quarter to surging demand for AI-related networking, rapid adoption of refreshed products, and positive order trends across key markets.

• AI infrastructure momentum: Cisco saw significant growth in AI-related orders, particularly from hyperscale customers, with $1.3 billion in new orders from the same customers as last year and expectations to at least double orders from that specific group in fiscal 2026. The company’s Silicon One chips and pluggable optics now serve all major hyperscalers, reflecting a broadening customer base for advanced networking infrastructure supporting AI workloads.

• Campus networking and product refresh: The company experienced heightened demand for campus switching, enterprise routing, and Wi-Fi 7 products. Robbins highlighted that the ramp of new product generations is outpacing historical trends, driven by end-of-support for older Catalyst models and the need for AI-ready networking in enterprises.

• Security portfolio transition: Next-generation security products, including refreshed firewalls and AI-native solutions, saw mid-teens order growth. However, overall security revenue declined due to a shift from on-premise to cloud-based Splunk subscriptions, which impacts timing of revenue recognition but is seen as a positive for long-term expansion.

• Industrial IoT and edge computing: Orders for industrial IoT solutions grew over 25%, supported by trends such as onshoring of manufacturing and increased AI workloads at the network edge. The launch of Unified Edge, integrating compute, networking, and storage for real-time inferencing, targets emerging use cases in industries like retail and healthcare.

• Strategic partnerships and global expansion: Cisco expanded partnerships with firms like G42 in the UAE and NVIDIA, aiming to strengthen its position in AI infrastructure and sovereign cloud markets. These alliances are expected to support growth in new regions and address complex AI deployment needs.

Drivers of Future Performance

Cisco’s outlook centers on sustained AI infrastructure demand, accelerated product refresh cycles, and expanding cloud-based security offerings.

• AI infrastructure scaling: Management expects continued momentum from hyperscale customers deploying AI infrastructure, with a forecasted doubling of AI-related orders from the same hyperscale customer group as last year. The pipeline also includes opportunities across sovereign and neo cloud providers, supported by Silicon One’s scalability and new partnerships.

• Product refresh cycle acceleration: Demand for next-generation networking products, including the Catalyst 9K series and Wi-Fi 7, is expected to remain strong as organizations update legacy infrastructure to support AI and security requirements. The company anticipates this refresh cycle to be multi-year, underpinning durable growth.

• Cloud security adoption: A shift toward cloud-based security solutions, particularly within the Splunk portfolio, is expected to drive recurring revenue growth as customers adopt subscription models. Management noted this transition may temporarily impact revenue recognition but supports greater long-term expansion and product innovation.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be monitoring (1) the pace of AI infrastructure order growth, particularly from hyperscale and sovereign cloud customers, (2) adoption rates of next-generation networking and edge platforms like Unified Edge, and (3) stabilization in security revenue as the Splunk cloud transition progresses. Execution on global partnerships and continued development of AI-ready solutions will also be key areas to watch.

Cisco currently trades at $77.44, up from $73.98 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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