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Cisco Systems (NASDAQ: CSCO) reiterated its expectation of $1 billion in ai product orders in fiscal year 2025 and noted that investments companies are making in ai infrastructure are not included in this.
Scott Herren, Cisco's CFO, spoke at the On Tuesday, he spoke at Goldman Sachs' Communacopia+ technology conference, answering questions about ai and future growth, among other things.
Herren noted that in the second half of fiscal year 2024, the company saw growth of more than 30% thanks to hyperscalers.
He added that companies are investing to be ai-ready, highlighting four large transactions (also discussed during the company's earnings call) with sales of $100 million each. Herren noted that if you look at why they bought the products (such as switches, routers, and Wi-Fi, among other things), it was because companies are revamping their core infrastructure to be ai-ready.
“That's one of the things that's driving demand over the long term and it's not part of the billions of dollars that we're talking about in ai, think of that as hyperscalers. That's a significant opportunity that drives the core business for years to come,” Herren said.
The executive noted that the partnership with Nvidia (NVDA) is still in the early stages, after having recently launched the “hyperfabric” capability.
In June, Cisco announced Nexus HyperFabric ai Clusters, a new data center infrastructure solution powered by Nvidia for generative ai.
Herren said Cisco is spending just over $8 billion a year on research and development. He also said the company's capital allocation strategy has not changed.
Additionally, Herren said Cisco has been financially disciplined and expects this to continue, noting that the recently announced restructuring was aimed at refocusing resources.
“Right now, our operating expense rate is somewhere between $19 billion and $20 billion a year. We're spending enough money. What we need to do is prioritize the fastest-growing areas that we're working in, like artificial intelligence, of course, cybersecurity in general, cloud and networking,” Herren said.
