Cisco Q3 Earnings Beat Estimates, Revenues Up Y/Y, Shares Rise

Cisco Systems CSCO reported third-quarter fiscal 2025 non-GAAP earnings of 96 cents per share, beating the Zacks Consensus Estimate by 5.49%. The figure increased 9.1% year over year.

Revenues of $14.15 billion surpassed the Zacks Consensus Estimate by 0.65%. The top line increased 11.4% year over year.

Cisco shares were up 4.13% in pre-market trading. In the year-to-date period, CSCO shares have gained 3.6%, outperforming the Zacks Computer & Technology sector’s 2.4% decline.

CSCO’s Top-Line Details

Revenues from Networking in the third quarter of fiscal 2025 were $7.06 billion, up 8% on a year-over-year basis. 

Cisco Systems, Inc. Price, Consensus and EPS Surprise

Cisco Systems, Inc. price-consensus-eps-surprise-chart | Cisco Systems, Inc. Quote

Security revenues were $2.01 billion, up 54% year over year. Collaboration revenues were $1.03 billion, up 4% year over year. Observability revenues were $261 million and grew 24% year over year.

Total Product revenues in the third quarter of fiscal 2025 were $10.37 billion, comprising 73.3% of Cisco’s total revenues. On a year-over-year basis, product revenues increased 15%. 

Service Revenues were $3.77 billion, comprising 26.7% of Cisco’s total revenues. On a year-over-year basis, service revenues increased 2.6%.

Annualized Recurring Revenues (ARR) for the quarter were $30.6 billion, increasing 5% on a year-over-year basis, with product ARR growth of 8%.

Region-wise, the Americas’ revenues increased 14% year over year to $8.38 billion. EMEA (Europe, Middle East and Africa) revenues jumped 8% year over year to $3.73 billion. APJC (Asia Pacific Japan China) revenues climbed 9% year over year to $2.03 billion. 

In the third quarter of fiscal 2025, AI Infrastructure orders from webscale customers exceeded $600 million, surpassing our $1 billion annual target a quarter ahead of schedule.

CSCO’s Operating Expenses Expand Y/Y

Non-GAAP gross margin was 68.6%, which expanded 30 basis points (bps) year over year. 

On a non-GAAP basis, the product gross margin increased 200 bps on a year-over-year basis to 49.6%. Service gross margin decreased 170 bps to 19%.

In the third quarter of fiscal 2025, Cisco reported total non-GAAP operating expenses of $4.82 billion, up 11.5% year over year. As a percentage of revenues, the figure was in line with 34%.

Consequently, CSCO reported a non-GAAP operating income of $4.88 billion, up 12.2% year over year. Operating margin expanded 30 bps to 34.5%.

CSCO’s Balance Sheet Details

As of April 26, 2025, cash and cash equivalents and investments totaled $15.6 billion, which decreased from $16.9 billion as of Jan. 25, 2025.

Total debt was $29.2 billion as of April 26, 2025, compared with $31.03 billion at the end of the prior quarter.

The remaining performance obligations (RPO) at the end of the third quarter of fiscal 2025 were $41.7 billion, up 7%, with 51% of the amount to be recognized as revenues over the following 12 months. Product RPO was up 10%, and services RPO was up 5%.

In the third quarter of fiscal 2025, CSCO returned $3.1 billion to stockholders through share buybacks and dividends. It repurchased approximately 25 million shares of common stock.

CSCO Offers Positive Guidance

For the fourth quarter of fiscal 2025, Cisco expects non-GAAP earnings between 96 cents per share and 98 cents.  (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Revenues are expected to be in the range of $14.5 billion-$14.7 billion. 

Non-GAAP gross margins are expected to be between 67.5% and 68.5%. Non-GAAP operating margin is anticipated to be between 33.5% and 34.5%. 

For fiscal 2025, Cisco expects non-GAAP earnings between $3.77 per share and $3.79. 

Revenues are expected to be in the range of $56.5 billion-$56.7 billion.

Zacks Rank & Stocks to Consider

Cisco currently carries a Zacks Rank #3 (Hold), which implies that investors should wait for a more favorable entry point to accumulate the stock. 

Advance Auto Parts AAP, PagerDuty PD and Canada Goose GOOS are some better-ranked stocks that investors can consider in the broader sector. While AAP sports a Zacks Rank #1 (Strong Buy), PD and GOOS presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Advance Auto Parts shares have lost 30.8% year to date. AAP is set to report its first-quarter 2025 results on May 22.

PagerDuty shares have lost 8.4% year to date. PD is set to report its first-quarter fiscal 2026 results on May 29.

Canada Goose shares have lost 9% year to date. GOOS is set to report its fourth-quarter fiscal 2025 results on May 21.

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