Cisco Systems just dropped its Q3 FY2025 earnings report today, May 14th, sending ripples through the tech investment community. The networking giant posted revenue of approximately $14.06 billion, a solid 10% year-over-year growth, while delivering an adjusted EPS of $0.92.
These numbers tell just part of the story. Behind the figures lies Cisco’s aggressive push into artificial intelligence and quantum computing, potentially reshaping the company’s future trajectory.
Revenue Rises as Cisco Beats Expectations Again
For the fourth consecutive quarter, Cisco has surpassed Wall Street’s expectations. The $14.06 billion revenue marks another milestone in the company’s growth story, building on momentum from previous quarters.
The adjusted EPS of $0.92 represents modest but steady growth from the same period last year. This consistency in beating analyst estimates suggests strong execution by management in an increasingly competitive landscape.
Cisco’s stock closed at $61.29 on the day of the announcement, showing a slight daily decrease of 0.79%. Throughout the past year, the stock has traded between $44.50 and $66.50, demonstrating both volatility and resilience.
Year-to-date, Cisco shares have gained about 3%, slightly underperforming the broader market but showing stability that many tech companies lack in today’s uncertain economic environment.
AI Infrastructure Drives Forward Momentum
Perhaps most telling for Cisco’s future is the company’s growing footprint in AI infrastructure. Orders in this segment have exceeded $700 million in just the first half of FY2025, with projections suggesting they’ll surpass $1 billion by year-end.
This represents a staggering 29% year-over-year growth in product orders (excluding Splunk), highlighting the company’s successful pivot toward next-generation technologies.
“The strong demand for AI infrastructure demonstrates Cisco’s successful positioning in one of tech’s fastest-growing segments,” noted several analysts in their post-earnings commentary.
Cisco’s transition to recurring revenue models continues to bear fruit as well. Software and subscription revenue now accounts for 54% of total revenue when including Splunk, providing more predictable cash flows and potentially higher margins over time.
Quantum Computing: Cisco’s Bold New Frontier
In a move that caught many industry observers by surprise, Cisco recently announced a quantum computing chip that could dramatically accelerate practical applications.
This breakthrough technology could potentially reduce the timeline for practical quantum computing from decades to just 5-10 years, positioning Cisco at the forefront of the next computing revolution.
While revenue impacts remain speculative at this stage, the strategic importance cannot be overstated. Quantum computing represents a potential paradigm shift in processing capabilities that could open entirely new markets for Cisco’s products and services.
Wall Street Remains Divided on Cisco’s Prospects
Analyst sentiment on Cisco presents a study in contrasts. Recent weeks have seen notable upgrades, including Cleveland Research moving from “Neutral” to “Buy” on May 9, 2025.
Meanwhile, other analysts maintain more cautious positions. Piper Sandler held their “Hold” rating with a $60 price target in early April, and Barclays similarly maintained a neutral stance with targets in the low $60s.
The consensus rating stands at “Hold” based on 20 buy ratings, 34 hold ratings, and just 1 sell rating. The average price target of approximately $67 suggests a potential 10% upside from current levels.
This mixed sentiment reflects both optimism about Cisco’s AI and security growth and concerns over revenue pressures in more traditional business segments.
Shareholder Returns Remain a Priority
Despite heavy investments in future technologies, Cisco continues to reward shareholders. In Q2 FY2025, the company increased its quarterly dividend to $0.41 per share, representing a 3% increase from the previous quarter.
This dividend, payable since April 23, 2025, provides investors with a respectable 2.65% yield at current prices.
Even more significant was the authorization of an additional $15 billion for stock repurchases. With approximately $17 billion in total repurchase authorization remaining, Cisco clearly signals confidence in its financial position and commitment to returning capital to shareholders.
Strategic Partnerships Enhance Market Position
Cisco’s expanded collaboration with ServiceNow, announced in April 2025, represents another strategic move to strengthen its enterprise offerings. This partnership aims to enhance digital transformation solutions for joint customers, potentially opening new revenue streams.
The ongoing integration of Splunk, acquired in a high-profile deal last year, continues to progress. Synergies between Splunk’s data analytics capabilities and Cisco’s networking expertise create compelling offerings in security and operational intelligence.
These partnerships highlight Cisco’s strategy of combining organic growth with strategic alignments to address evolving customer needs.
Looking Ahead: Growth Drivers and Challenges
Cisco’s guidance for the upcoming quarters suggests continued momentum, though perhaps at a more moderate pace than seen in Q3. Management remains confident in the company’s strategic direction, particularly in high-growth areas like AI infrastructure and security.
Industry trends favor Cisco’s positioning, with enterprise digital transformation initiatives showing no signs of slowing. The ongoing shift to cloud-native architectures and increasing cybersecurity concerns play directly to Cisco’s strengths.
Yet challenges remain. Competition intensifies across all segments, with companies like Extreme Networks showing impressive growth. Extreme Networks reported a 35% revenue increase recently, indicating the dynamic nature of the networking space.
Global economic uncertainties and potential IT spending constraints could also impact growth trajectories in coming quarters.
Investment Perspective: Risk and Reward
From an investment standpoint, Cisco presents an interesting profile. Current valuation metrics include a P/E ratio of 27.07 and a P/S ratio of 4.54, according to recent data.
These figures suggest a premium to some traditional networking peers but a discount to many high-growth technology companies. This middle ground may reflect Cisco’s hybrid nature—part established networking leader, part emerging AI and quantum computing innovator.
For investors, the key question remains: Will Cisco’s investments in next-generation technologies drive sufficient growth to justify current valuations?
The impressive AI infrastructure order growth suggests promising momentum. If the quantum computing initiatives deliver on their potential, today’s valuation could prove modest in retrospect.
The Bottom Line
Cisco’s latest earnings report reveals a company in transition—maintaining strength in core businesses while aggressively pursuing tomorrow’s growth opportunities. The $700+ million in AI infrastructure orders demonstrates real traction in new markets, not just strategic aspirations.
With solid revenue growth, consistent earnings performance, and strategic initiatives gaining momentum, Cisco appears well-positioned despite mixed analyst sentiment. The company’s balance between growth investments and shareholder returns offers something for both growth and value investors.
As enterprise technology needs evolve, Cisco’s strategic direction suggests a company determined to remain relevant and central to the next wave of digital transformation. The coming quarters will prove critical in determining whether this tech stalwart can indeed transform itself into a leader for the AI and quantum computing age.
For additional information on Cisco’s performance and strategy, investors can review the detailed materials available through the company’s investor relations website and monitor upcoming investor events where management will likely provide further insights into the company’s evolution.
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