Cisco's Q3 2025 Financial Performance: Riding the AI Wave
Highlights
- Revenue: $14.1 billion (+11% YoY)
- Non-GAAP net income: $3.8 billion
- Non-GAAP earnings per share: $0.96
- Total product orders: +20% YoY
- Total ARR: $30.6 billion (+5%)
- Total software revenue: $5.6 billion (+25%)
- AI infrastructure orders: Over $600 million in Q3, exceeding $1 billion year-to-date
- Total subscription revenue: $7.9 billion (+15%)
- Non-GAAP gross margin: 68.6%
- Cash returned to shareholders: $3.1 billion
Cisco delivered a robust set of financial results for its third quarter of fiscal year 2025, recording a sharp rise in revenues and reinforcing its committed relationship with advancing AI technologies. The quarter saw revenues climb to $14.1 billion, a significant 11% increase year-over-year, surpassing the high end of its guidance range. This impressive performance was mirrored by a non-GAAP net income of $3.8 billion and non-GAAP earnings per share of $0.96.
Surge in Orders and AI Momentum
Cisco's success this quarter is underscored by a notable 20% year-over-year increase in total product orders. A critical focal point for Cisco continues to be its foray into AI infrastructure, where noteworthy developments were observed. With AI orders surpassing $600 million in Q3 alone, the company exceeded its fiscal year '25 target of $1 billion one quarter ahead of schedule. This highlights the robust demand for AI solutions, which, coupled with strategic partnerships like that with NVIDIA, underscores Cisco's strong positioning in the AI era.
Strong Software and Recurring Revenue Growth
Cisco continues to make strides in its software and subscription business, which now represents a substantial 56% of total revenue. Total software revenue soared by 25% to reach $5.6 billion, demonstrating growing reliance on Cisco's comprehensive suite of software solutions. Cisco's annualized recurring revenue (ARR) totaled $30.6 billion, up 5% year-over-year, reflecting steady progress in its transformation to a more predictable revenue model driven by software and subscription offerings.
Financial Discipline and Shareholder Returns
Cisco maintained solid financial discipline with a non-GAAP gross margin of 68.6%, buoyed by productivity improvements despite tariff pressures. Cisco's robust operating cash flow of $4.1 billion enabled the company to return $3.1 billion to shareholders in Q3 through share repurchases and dividends, highlighting its commitment to returning value to investors. As AI and other technological advancements continue to shape Cisco's strategic trajectory, the company is poised to leverage these opportunities to maintain strong growth momentum.