To The Moon

$Cisco(CSCO)$ fiscal Q3 2025 earnings, which is expected to be reported on Wednesday, 14 May 2025, after the market closes.

Revenue: Cisco's leadership has guided Q3 2025 revenues to be in the range of $13.9 billion to $14.1 billion. This is broadly in line with analysts' consensus estimate, which is around $14.05 billion.

Earnings Per Share (EPS):

Non-GAAP (Adjusted) EPS: Cisco's guidance is $0.90 to $0.92 per share. Market watchers are forecasting Q3 adjusted EPS around $0.92.

GAAP EPS: Cisco estimates GAAP EPS to be between $0.57 and $0.61 for Q3 2025.

Some analyst estimates for adjusted EPS are slightly different, with one source mentioning an expectation of $0.75 per share, reflecting a 4.2% growth from the $0.72 reported in the same quarter last year. It's important to note that different analysts may have slightly varying predictions.

Gross Margin (Non-GAAP): Expected to be between 67% and 68%.

Operating Margin (Non-GAAP): Expected to be between 33% and 34%.

Cisco Systems (CSCO) Last Positive Earnings Call Saw Share Price Decline By 4.67%

Cisco Systems had a positive earnings call on 12 Feb 2025 which saw its share price declined by 4.67%. Cisco reported a strong quarter with significant growth in AI orders, security, and shareholder returns. Key challenges include a decline in networking revenue and potential impacts from proposed tariffs. Overall, the positive aspects outweigh the negatives, indicating strong business momentum.

Cisco Systems (CSCO) Guidance

Cisco reported stronger-than-expected Q2 2025 results.

Q2 Revenue: $14.0 billion (an increase of 9% year-over-year).

Q2 Adjusted EPS: $0.94 (an increase of 8% year-over-year), beating estimates.

The company has a history of consistently beating earnings estimates for over three years.

Product orders in Q2 were up 29% year-over-year (or 11% excluding Splunk).

AI Infrastructure orders in Q2 were over $350 million, bringing the first-half fiscal 2025 total to approximately $700 million.

The acquisition of Splunk was reported to be accretive to second-quarter adjusted earnings, ahead of management's expectations.

Cisco raised its full-year revenue and adjusted EPS guidance after the Q2 results. Full-year FY2025 Revenue Guidance: $56.0 billion to $56.5 billion. Full-year FY2025 Adjusted EPS Guidance: $3.68 to $3.74.

Key Factors to Watch for in the Q3 Earnings Report

Revenue, margins, and earnings per share all came in at or above the high-end of guidance ranges. Total revenue was $14 billion, up 9% year-over-year. Non-GAAP net income was $3.8 billion, and non-GAAP earnings per share was $0.94.

Demand for AI and Security: Continued growth in these areas, particularly the contribution of Splunk and AI infrastructure orders, will be crucial. Cisco has been actively integrating AI into its products.

AI infrastructure orders with web scalers in Q2 surpassed $350 million, bringing the year-to-date total to approximately $700 million. Cisco is on track to exceed $1 billion of AI infrastructure orders in fiscal year '25.

Networking Segment: While overall product orders were strong in Q2, the Networking segment was down 3%. Its performance in Q3 will be closely watched.

Networking revenue was down 3%, with growth in Wireless and Switching offset by a decline in servers.

Integration of Splunk: Further details on how Splunk is contributing to revenue and profitability. Security orders more than doubled, driven by advanced data management, analytics, and threat detection capabilities from Splunk. Total security was up 117%, excluding Splunk, security grew 4%.

Product Innovation Pipeline: Updates on new products and technologies. New product orders grew 29%, up 11% organically when excluding Splunk. Enterprise product orders were up 27%, and Service Provider & Cloud product orders soared 75%.

Geographic Performance: Revenue growth across different regions (Americas, EMEA, APJC).

Cisco accounted for the added cost driven by increased tariffs on China, and proposed tariffs on Mexico and Canada, impacting gross margins. Collaboration was up only 1%, with growth in Contact Center and CPaaS offerings partially offset by a decline in On-Prem Webex Suite offerings.

Shareholder Returns: Cisco increased its quarterly dividend to $0.41 per share in Q2 and authorized an additional $15 billion for stock repurchases. Any updates on capital allocation will be noted.

Returned $2.8 billion in value to shareholders in Q2, totaling $6.4 billion year-to-date. Announced an increase to Cisco’s dividend, and the Board authorized an additional $15 billion in share repurchases.

Broader Industry Trends for 2025

The networking industry in 2025 is being shaped by several key trends that could impact Cisco:

AI-Powered Network Operations (AIOps): The integration of AI for network monitoring, predictive maintenance, and automation is becoming standard.

Zero Trust Architecture: Accelerated adoption of "never trust, always verify" security models.

Network Automation and Programmability: Growing demand for efficiency and reduced human error.

Multi-Cloud Networking: Need for solutions to integrate different cloud providers securely and efficiently.

Network-as-a-Service (NaaS): A flexible, subscription-based model gaining traction, especially with budget uncertainties.

5G and Private 5G Networks: Transforming connectivity and enabling new applications.

Edge Computing and IoT Integration: Processing data closer to its source.

Wi-Fi 7 Adoption: The next generation of Wi-Fi offering improved speed and capacity.

SASE (Secure Access Service Edge): Converging network and security functions into a single cloud-based service.

Cisco Systems (CSCO) Price Target

Based on 17 analysts from Tiger Brokers offering 12 month price targets for Cisco Systems in the last 3 months. The average price target is $68.44 with a high forecast of $80.00 and a low forecast of $55.43. The average price target represents a 15.56% change from the last price of $59.22.

Technical Analysis - Exponential Moving Average (EMA)

Even though we can see Cisco's stock reached an all-time high in mid-February 2025 after the Q2 earnings but saw a decline to a six-month low in April. However, it has shown a significant gain over the past 12 months (26% as of early May 2025).

From the RSI, we can see that momentum is building up nicely and Cisco bulls are currently above the 50-day period, but we need to see the bulls building a daily uptrend continuation this week ahead of the earnings, and with the analysts expecting a moderate buy, I would think Cisco might make a good gap up post earnings if it continue to show demand for AI and Security.

We are seeing a decline in short interest, which could mean that investors are bullish for this stock ahead of its earnings, and we should be able to continue to see strong buying momentum for Cisco, except that the tariffs concern might derail any positive upside move.

Summary

Analysts and Cisco's own guidance suggest a continuation of solid performance in Q3 2025, building on the positive momentum from the first half of the fiscal year.

Key areas of focus will be the growth in AI and security-related revenues, the integration of Splunk, and the overall demand for Cisco's networking solutions in the context of evolving industry trends.

Appreciate if you could share your thoughts in the comment section whether you think Cisco could provide a positive earnings and good guidance for 2025 as the growth in AI and security-related revenues might surprise.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.