Networking technology giant Cisco (NASDAQ: CSCO) met Wall Street’s revenue expectations in Q2 CY2025, with sales up 7.6% year on year to $14.67 billion. The company expects next quarter’s revenue to be around $14.75 billion, coming in 0.8% above analysts’ estimates. Its non-GAAP profit of $0.99 per share was 1.3% above analysts’ consensus estimates.

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"We delivered a strong close to fiscal 2025, driven by our accelerated innovation and solid execution," said Chuck Robbins, chair and CEO of Cisco.

Company Overview

Founded in 1984 by a husband and wife team who wanted computers at Stanford to talk to computers at UC Berkeley, Cisco (NASDAQ: CSCO) designs and sells networking equipment, security solutions, and collaboration tools that help businesses connect their systems and secure their digital operations.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $56.65 billion in revenue over the past 12 months, Cisco is a behemoth in the business services sector and benefits from economies of scale, giving it an edge in distribution. This also enables it to gain more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices. However, its scale is a double-edged sword because finding new avenues for growth becomes difficult when you already have a substantial market presence. To expand meaningfully, Cisco likely needs to tweak its prices, innovate with new offerings, or enter new markets.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Cisco’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

This quarter, Cisco grew its revenue by 7.6% year on year, and its $14.67 billion of revenue was in line with Wall Street’s estimates. Company management is currently guiding for a 6.6% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 5.1% over the next 12 months, an improvement versus the last two years. This projection is above the sector average and implies its newer products and services will fuel better top-line performance.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Cisco has been a well-oiled machine over the last five years. It demonstrated elite profitability for a business services business, boasting an average operating margin of 24.6%.

Looking at the trend in its profitability, Cisco’s operating margin decreased by 4.4 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Cisco generated an operating margin profit margin of 23.5%, up 4.3 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Cisco’s weak 3.5% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Cisco, its two-year annual EPS declines of 1% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q2, Cisco reported adjusted EPS of $0.99, up from $0.87 in the same quarter last year. This print beat analysts’ estimates by 1.3%. Over the next 12 months, Wall Street expects Cisco’s full-year EPS of $3.80 to grow 5.4%.

Key Takeaways from Cisco’s Q2 Results

It was good to see Cisco provide revenue guidance for next quarter that slightly beat analysts’ expectations. We were also happy its EPS guidance for next quarter narrowly outperformed Wall Street’s estimates. Overall, this print had some key positives. Investors were likely hoping for more, and shares traded down 2.2% to $68.74 immediately following the results.

Is Cisco an attractive investment opportunity at the current price? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.