Cisco announced its financial performance for the fourth quarter and full fiscal year of 2025. The investor relations officer introduced the meeting agenda, mentioning that they will discuss both GAAP and non-GAAP financial results, as well as product, geographic, and customer order status. They also emphasized the uncertainties of risk factors and forward-looking statements. The meeting also provided supplemental materials on the website and future financial guidance.

At the end of fiscal year 25, the company achieved strong performance, with both revenue and gross profit margins exceeding expectations. Profit performance was excellent, with earnings per share surpassing the upper limit of guidance. Annual recurring revenue, unfinished performance obligations, and subscription revenue all showed robust growth, laying a solid foundation for future development. The total capital return for fiscal year 25 reached $12.4 billion, accounting for 94% of free cash flow. Facing the advent of the AI era, the company, with its leading network systems and AI-native security solutions, meets the needs of enterprises upgrading their networks, especially in the AI infrastructure field. In the fourth quarter, the company received a record-breaking amount of orders, totaling over $2 billion for the whole year. Looking ahead to fiscal year 26, the company plans to achieve even stronger growth, focusing on AI networks and security solutions to address the increasing network traffic and threat environment.

The focus of the conversation was on the strong order performance of AI infrastructure, especially in the collaboration with NVIDIA and the layout in the three major areas of AI training, inference, and network connectivity. At the same time, it emphasized the synergies of network security and product innovation, such as Splunk's cross-selling results and the release of AI Canvas, aimed at building AI-ready data centers and future workplaces for enterprises.

Discussed Cisco's promotion of product innovation, optimization of customer experience, and enhancement of internal operational efficiency through AI and security technologies in FY25, emphasizing the core role of AI in product design and customer service, as well as its contribution to shareholder value. In addition, the five-year growth of software and subscription revenue was reviewed, as well as the key role of the team in driving business transformation.

Company Q4 performance was excellent, with revenue and non-GAAP net profits exceeding expectations. Product and service revenue increased, gross margins improved, and cash flow was strong. Overall, the performance throughout the year was steady, and shareholder returns were significant.

The company plans to achieve growth through innovative investments and strict cost control. It is expected that the revenue for the fiscal year 2026 will be between 59 billion and 60 billion. The non-GAAP earnings per share are estimated to be between $4 and $4.06. Additionally, the company expects the revenue for Q1 of 2026 to be between 14.65 billion and 14.85 billion. The non-GAAP gross margin is projected to be between 67.5% and 68.5%, with an operating profit margin of 33% to 34% and earnings per share of 97 cents to 99 cents. The company will leverage its global supply chain advantages to mitigate tariff impacts, while continuing to focus on sustainable growth and capital returns.

Discussed the income growth potential brought about by AI opportunities, as well as the expected impact of campus refresh cycles on next year's income. It was mentioned that despite the presence of AI opportunities, the forecasted decrease in income growth rate is mainly attributed to later year-over-year comparisons rather than changes in demand. Emphasized that the evaluation and deployment cycle for Cat 9K products is longer, and it is expected that campus refresh will become an important revenue driver in the next year. Additionally, it was pointed out that the growth in the first quarter was affected by the inclusion of Splunk, which made the previous growth rate appear higher.

The conversation discussed Splunk's growth in the security business, especially the strong order growth of new products such as Sassy XDR Hyper Shield and AI defense, as well as double-digit growth in security orders in non-US federal markets globally. It also mentioned the CFO's priorities, including financial planning and continuous optimization strategies for the security business.

The speaker reviewed the company's 25-year development history, thanking the previous leaders for driving the transformation of software and subscriptions. Looking forward to the future, they emphasized growth in AI infrastructure, enterprise AI, cloud services, network security, and campus network upgrades, promising to focus on sustainable profit growth, financial discipline, and shareholder value return. In the field of network security, they mentioned attracting over 300 new customers through Splunk, demonstrating the effectiveness of the strategy and the team's efforts, and strengthening confidence in security strategies.

The conversation revolves around whether orders are placed ahead of schedule due to budget cuts or concerns about tariffs. The analysis team, through monitoring data from multiple dimensions, has not found any significant early ordering trend. At the same time, the discussion also touched upon the long-term ratio expectations between the system and optical parts in the AI business. It is believed that the current ratio of two to three parts is expected to remain stable, with no signs of major adjustments.

The discussion focused on the recovery of the network industry cycle, particularly the impact of the AI revolution on cloud service providers, enterprises, and telecommunications operators in modernizing their networks. It emphasized the role of AI in driving network upgrades, as well as the increasing demand from enterprises for AI services to enhance usage and build inference capabilities. Additionally, it mentioned the yet-to-be-launched campus upgrades by enterprises, as well as the new technological applications in data center network business by Cisco and the significant growth of WiFi 7. Finally, it expressed confidence in maintaining a growth rate of 2%-5% in core network business.

Discussed the impact of AI infrastructure orders on income and future expectations, as well as the performance of orders in various segments of the network business, including data center switches, wireless routers, etc., emphasizing strong growth in web-scale businesses.

The conversation involves the revenue and shipment status of AI backend orders, indicating that these orders are progressing smoothly in fiscal year 25 as expected, with approximately 1 billion US dollars in revenue expected for the whole year. These orders mainly come from large network customers, and the revenue confirmation situation is in line with expectations.

Discussed the adoption of AI applications by companies, as well as the potential benefits brought by collaboration with NVIDIA. Mentioned the initial growth in AI orders from companies, and anticipated more applications and proof of concept projects driving the demand for network connectivity and security in the future. Emphasized progress in collaboration with NVIDIA, expecting significant financial returns in the coming years.

Discussed the growth deceleration trend of service revenue decreasing from 6.5% to 0% and future expectations, while evaluating the risks of network growth slowdown driven by cloud investments, especially considering the potential impact of slowing growth of large customers such as Oracle and Meta.

Discussed the growth of service business over the past year, pointing out that services usually follow product growth, and it is expected that future service revenue will increase with the growth of the network. At the same time, analyzed the growth of capital expenditure, indicating that AI investment is not a temporary trend, and the company adjusts its strategy based on customer demand signals.

Analysts are concerned about the short-term performance of the security business, believing that it needs to accelerate significantly to reach the long-term growth target of 15% to 17%. There was a discussion on whether to reassess the growth expectations for the business, and doubts were raised about its future growth potential.

Discussed the close collaboration with AMD, aiming to provide highly integrated solutions, especially in the AI defense and identity management fields, which have shown strong growth in the security sector. By the end of the year, it is expected that these emerging technologies will account for more than two-thirds of the security portfolio, becoming the main driver of growth. The collaboration will focus on providing customers with a seamless experience, ensuring the seamless integration of security and technology.

Discussed the amount reduced by each $9,000 category refresh corresponding to other solutions, involving security products such as wireless LAN and firewalls. Analyzed capital utilization strategies, especially in large mergers and acquisitions as well as in the security sector. Mentioned considerations for the identity and privilege access space following the CyberArk transaction, predicting the growth of interactions between AI and machines in the future.

The discussion revolves around whether the Cat 9K can be linked to other devices on campus. Although the idea is considered good, it is pointed out that implementation would be difficult due to the consideration of numerous new devices such as smart routers, switches, and WiFi access points. It is then mentioned that the capital expenditure plan remains unchanged, and discussions on identity authentication-related issues are held.

Discussed returning $12.4 billion to shareholders in the 2025 fiscal year, emphasizing business growth, dividend increases, and offsetting dilution as top priorities. Mentioned the core role of identity verification in a zero-trust architecture, as well as strengthening platform strategy through acquisitions like Duo and Orc, showcasing the advantages of real-time network, security, and identity integration, demonstrating technological leadership without waiting for mergers and acquisitions to be completed.

The conversation discussed the contribution of AI technology to the future growth of companies, especially its impact on online businesses, as well as the potential effects of the current tariff policies on company costs and gross profit margins. The company expects AI to significantly improve performance, while also explaining in detail the specific assumptions of different countries' tariffs on costs, emphasizing that the duty-free policy for certain goods such as semiconductors offsets some of the negative impacts.

The conversation revolved around the growth expectations of different business departments in the company, focusing on the prospects of service providers, enterprises, and public sectors. It also mentioned the goal for the future market share of Silicon One technology in Nexus smart switches, with an estimated target of reaching half within three years.

The conversation focuses on the acceleration of orders for sovereign AI projects in Europe, the Middle East, and Africa, as well as market opportunities in the sovereignty and technology solutions field. It is mentioned that despite some weakness in public sector orders, security and enterprise orders in regions such as the UK, Germany, and Saudi Arabia are strong. Additionally, due to a focus on data sovereignty and autonomous technology stacks, there is an increasing demand for locally deployed solutions such as Splunk and Webex in this region. It is expected that sovereign AI projects will start generating order flow in the second half of the year, leading to corresponding revenue.

Discussed the long-term potential of enhancing Ethernet connectivity in backend AI networks and potential new chips that could be introduced for this opportunity. Additionally, the impact of the integration of the Meraki and Catalyst platforms on hardware procurement behavior in campus networks was analyzed, pointing out that the convenience of cloud management may encourage more users to switch to the Catalyst platform.

Thank you for your team's outstanding performance in the fourth quarter of the 25th fiscal year, laying a solid foundation for the 26th fiscal year. Emphasizing opportunities in areas such as AI, Web scale, enterprise, sovereignty, and Neo Cloud, we are confident in the business success of the 26th fiscal year. We will announce the performance of the first quarter of the 26th fiscal year on November 12, 2025, and invite investors to stay tuned.