Cisco's Q2 2025: Unpacking Contradictions in Federal Business, AI Revenue, and Data Center Dynamics

These are the key contradictions discussed in Cisco's latest 2025 Q2 earnings call, specifically including: Federal business impact, AI revenue realization, data center switching momentum, and federal exposure:



Strong Financial Performance:
- Cisco reported revenue of $14 billion for Q2, up 9% year-over-year, with margins and earnings per share exceeding high-end guidance ranges.
- This performance was driven by strong demand for Cisco's technology, marked by double-digit growth in annualized recurring revenue, remaining performance obligations, and subscription revenue, which accounted for 56% of total revenue.

AI Infrastructure Orders:
- In Q2, Cisco's AI infrastructure orders surpassed $350 million with webscalers, and for the year-to-date, the total reached approximately $700 million, on track to exceed $1 billion in fiscal year '25.
- The increase in AI infrastructure orders is attributed to the demand from large webscale customers seeking to scale their infrastructure for AI applications.

Product and Segment Growth:
- New product orders grew 29% year-over-year, with Enterprise product orders up 27% and Service Provider & Cloud up 75%, driven by triple-digit growth in webscale.
- The growth was fueled by strong demand in Service Provider & Cloud, particularly from webscale customers, and robust order growth in industrial networking and IoT products.

Capital Returns and Shareholder Value:
- Cisco returned $2.8 billion in value to shareholders during the quarter, totaling $6.4 billion year-to-date.
- This was accompanied by an increase in Cisco's dividend and an authorization for an additional $15 billion in share repurchases, reflecting the company's commitment to returning capital to shareholders.