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Cisco Systems (CSCO +1%) is trading higher after reporting EPS upside for Q2 (Jan). Revenues grew 9.4% yr/yr to $13.99 bln, halting four consecutive quarters of yr/yr revenue declines. The Q3 (Apr) guidance was solid with in-line EPS but upside revs. Q2 is typically a seasonal slow period for Cisco, so these results were good to see. In addition, Cisco announced a $15 bln increase to its share buyback authorization and it slightly increased its dividend.

• New product orders grew 29%, up 11% organically when excluding Splunk, marking Cisco's fourth consecutive quarter of accelerating order growth. Enterprise product orders were up 27% with double-digit growth across all geographic segments. Cisco continues to see very strong momentum in Service Provider & Cloud, with product orders up 75%, driven by triple-digit growth in webscale. Within SP & Cloud, orders from telco customers grew more than 20% as they reinvest in their core networks to be ready for AI connectivity.
• Importantly, AI infrastructure orders with webscalers in Q2 surpassed $350 mln, bringing its YTD total to approximately $700 mln. Cisco says it's on track to exceed $1 bln of AI infrastructure orders in FY25. Cisco also noted that three of the top six webscalers each grew orders in the triple digits, which shows Cisco's increasing relevance in this high-growth market as they scale their infrastructure for AI.
• From a product perspective, networking product orders grew double digits, driven by switching, enterprise routing, webscale infrastructure, and industrial networking applications in its IoT products. Campus switching orders were up double digits, and Cisco expects its campus switching portfolio as well as its WiFi 7 access points to gain traction with increasing return-to-office policies. Cisco also continues to see robust order growth for data center switching.
• Cisco also touched on the recently proposed US tariffs. The company noted that its guidance includes the added cost, driven by increased tariffs on China and the proposed tariffs on Mexico and Canada. Cisco says it has spent a significant amount of time planning for the possibility of tariffs. It is prepared to take actions to mitigate the impact if and when tariffs go into effect.

Overall, this was a very good quarter for Cisco. That was particularly evident in the strong order growth numbers, including its expectations to exceed $1 bln in AI infrastructure orders in FY25. However, we are not seeing a huge move today. We think a good quarter/guidance was priced into the shares somewhat, given its 35% move since mid-August. However, the stock remains in a solid uptrend.