Cisco’s CEO says it is seeing strong momentum in service providers and the cloud
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Cisco is riding a new wave on the service provider and cloud side as these segments are enhancing their networks to accommodate the growth of artificial intelligence (AI).
Speaking to investors during Cisco's second-quarter 2025 earnings call, Chuck Robbins, CEO, said several of its top service provider and cloud provider customers are ramping up purchases.
“We continue to see very strong momentum in service providers and cloud, with product orders up 75% driven by triple-digit growth in webscale,” he said. “Three of the top 6 web scalers each grew orders in the triple digits, and two of the 6 each grew more than 50%. This shows our increasing relevance to this high-growth customer market as they scale their infrastructure for AI.”
Within the service provider and cloud segments, Cisco saw orders from its telco customers grow by over 20%, with forecasts of new demand as they reinvest in core networks to ready them for AI connectivity.
The vendor is also seeing ongoing momentum in the webscaler market.
“Our AI infrastructure orders with web scalers in Q2 surpassed $350 million, bringing our year-to-date total to approximately $700 million, and we are on track to exceed $1 billion of AI infrastructure orders in fiscal year '25,” Robbins said.
Telcos, enterprises brace for AI
Service providers and enterprises continue to brace for AI.
While the service provider segment has struggled in recent years, Cisco’s international provider customers continued to ramp orders in anticipation of what Cisco’s CFO Richard Herren said is “demand on their networks driven by AI.”
“In many cases, they've sweated those assets for some time because of the state of the financials in that industry, and they're coming back to the table to build out their networks in anticipation of the increased demand,” he said. “I think we'll continue to see that for some time.”
Herren added that the “nature and the size of the telco customers that we have can be a little bit episodic, big deals in one quarter and not in the next.”
Enterprises are also bracing to figure out what AI means for their businesses.
Cisco has observed that enterprise customers are still figuring out how to use AI in their business operations.
The vendor has developed a series of products targeting enterprise applications, including its AI PODs and hyper shield product lines.
Cisco’s AI PODs offer streamlined infrastructure with management tools. Some key elements include MLOps with Red Hat OpenShift AI to simplify machine learning operations and model deployment and Digital Twin frameworks, supported by NVIDIA AI Enterprise and integrated data systems.
“What we're seeing on the enterprise side relative to AI is customers are still in the very early days, and they all realize they need to figure out exactly what their use cases are,” Robbins said. “We're starting to see some spending, though, on specific AI-driven infrastructure. And we think as we get AI PODs out there, we got Hyperfabric coming, we got AI Defense coming, we have Hypershield in the market, and we got this new DPU switch, they are all going to be a part of the infrastructure to support these AI applications.”
One segment of enterprise that is making progress with AI is the public sector. Cisco noted that public sector orders worldwide rose 13%.
Robbins said the public sector saw “growth in all geographies as governments worldwide turn to Cisco as their trusted end-to-end partner mainly as they develop and deploy sovereign AI clouds to transform government services digitally.”
Security, services take revenue charge
From a revenue perspective, Cisco’s security and services were dominant sources of revenue growth during the quarter.
Cisco reported total product revenue was $10.2 billion, up 11%.
Driven by growth from its Splunk offerings, SASE, and network security, security rose 117% while service revenue was $3.8 billion, up 6%.
However, networking declined by 3%, with growth in wireless and switching offset by a decline in servers.
Taking out Splunk, security grew 4%, while collaboration was up 1%, driven by growth in contact centers, CPaaS offerings, and collaboration devices. This was partially offset by a decline in our on-prem Webex suite offerings.
Cisco’s total revenue for the quarter was $14 billion, up 9% year-over-year.
“It's important to note that our Q2 '2024 included the last portion of elevated backlog shipments,” Herren said.
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Sean Buckley
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