Cisco beats expectations and its stock rises on growing AI momentum

Cisco Systems Inc. enjoyed another quarter of growing demand amid the artificial intelligence boom, helping it to beat expectations on earnings and revenue as it posted its third-quarter financial results.

The company reported earnings before certain costs such as stock compensation of 96 cents per share on revenue of $14.15 billion, up 15% from the same period one year ago. The numbers were good, surpassing Wall Street’s forecasts of 92 cents per share and $14.08 billion in revenue. Net income for the quarter rose from $1.89 billion a year earlier to $2.49 billion today.

Cisco Chief Executive Chuck Robbins (pictured) hailed the company’s “strong” quarterly results, saying it was benefiting from “clear demand” for its technologies. “The momentum we are seeing with AI is fueled by the power of our secure networking portfolio, our trusted global partnerships and the value we bring to our customers,” he said.

The company said its AI infrastructure orders from web companies topped more than $600 million in the quarter, bringing the total in this fiscal year to more than $1.25 billion. According to Robbins, this meant the company surpassed the $1 billion mark a full quarter ahead of schedule.

On a conference call with analysts, numerous web companies are exploring its networking technologies for AI workloads. He called out Meta Platforms Inc. in particular, saying it has explored using Ethernet fabrics for AI clusters as an alternative to InfiniBand, which is the networking technology sold by Nvidia Corp. to link clusters of graphics processing units together.

“It has been the intent of these customers from day one to move away from InfiniBand,” Robbins told analysts. “And the gating factor was how soon did they feel good about the technology?”

The answer, according to Robbins, is that they “feel very good about the technology and how it’s enabling them to run these training models over, over native Ethernet or some enhanced Ethernet that we’re delivering.”

With regard to Cisco’s segments, the results were mixed. The company’s biggest business is networking hardware, which accounts for just over half of its total sales. Revenue there rose 8%, to $7.07 billion, easing past the Street’s target of $6.81 billion. However, the security segment was disappointing, with sales coming to just $2.01 billion, below the forecast of $2.17 billion.

Looking to the current quarter, Cisco said it’s targeting earnings of 96 to 98 cents on revenue of between $14.5 billion and $14.7 billion. That compares well with the analyst forecast of earnings of 95 cents on sales of $14.58 billion.

Robbins said the macroeconomic environment remains uncertain, but he added that the guidance still factors in the expected impact of President Donald Trump’s sweeping tariffs on products imported into the U.S.

Encouragingly, the tariffs don’t seem to have had much of an impact on customer’s buying habits, Robbins said. “We haven’t seen any meaningful change in their purchasing, and so we haven’t seen any customers really fundamentally slowing down,” he added.

During the previous quarter, Cisco announced a new Webex AI agent for customer service applications, unveiled a host of new security innovations at its annual RSAC Conference 2025 in San Francisco, plus the first prototype of its quantum networking chip, which is designed for quantum computing but also has applications for AI.

Robbins also revealed a couple of executive changes coming up, revealing that the company’s Chief Financial Officer Scott Herren will retire at the end of July. Herren joined Cisco in 2020, having previously held the CFO role at Autodesk Inc. Robbins said he has a successor lined up: Mark Patterson, a 25-year Cisco veteran who is currently the company’s chief strategy officer.

Cisco’s stock gained more than 2% in extended trading, and is up about 3.5% in the year to date. In contrast, the S&P 500 Index is more or less flat.

Photo: Fortune GLOBAL FORUM/Flickr