AI Is Supplying Blowout Earnings…Again
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We're talking earnings and investor questions on Motley Fool Hidden Gems Investing. Welcome to Motley Fool Hidden Gems Investing. I'm your host, Tyler Crowe, and today I'm joined by longtime contributors, Matt Frankel and John Quast. So today we're getting lots of questions from members, and we thought this would be a really good time to combine some listener questions as well as earnings reports that we've seen coming out in the past couple of days as a little bit of a marriage of good ideas. And so we're going to talk about Cisco's earnings, we're going to talk about Lumentum's earnings, and also we'll get into, hey, maybe we should talk about non-AI things for a little bit from our investor mailbag.
But as I said, we're going to start with Cisco. And we got a question a little while ago from one of our listeners, I hope I get the name right, Ahilish Shankar. And was asking about Cisco and what are our thoughts on it. And I thought it would be a great time to start the conversation today because Cisco reported earnings and the stock is up 13.8% as we were recording because numbers were pretty good. Revenue growth was up about 12% for the year earnings was up and obviously guidance was looking pretty good. John, why don't you run us through the numbers and what you guys saw in this particular earnings that I would say defied expectations of what Cisco has been for a while?
Yeah, it's so surprising to be talking about Cisco, one of the poster children of the dot-com bubble over 20 years ago, but really the business is booming unlike ever before. You look at the most recent quarter, 12% top-line growth. Really, all of the growth is coming from one part of the business. Cisco has various components, but there's one part of the business that's driving everything, and that is networking. So the company reported 25% year-over-year growth in the networking side of the business. Everything else is either down or basically flat. Essentially what is happening here, as the AI infrastructure build out marches on, all of these GPUs, the clusters, even the data centers themselves need to be connected.
And this really plays to Cisco's strengths. It's getting a ton of demand. in particular from the hyperscaler businesses. And so you think of the public cloud giants, the tech giants, the magnificent seven. These are the companies that are needing network solutions, such as the ones that Cisco provides. And what is fascinating here, when you look at the orders to the hyperscalers last fiscal year, about 2 billion total for Cisco. Going into this fiscal year, it was expecting 5 billion total. And so that was quite ambitious of a projection, more than doubling year over year. But we're three quarters into its fiscal year now. We're already surpassed that projection. And now management is saying, we're expecting 9 billion of orders.
in this fiscal year from the hyperscalers so incredible year-over-year growth there and it's not just hyperscalers it's also the neocloud businesses we just got report from nebius today signed a 27 billion dollar deal with meta i mean its business is growing like crazy it needs networking solutions as well but all in all good quarter for cisco
Yeah, I wanted to lean into something John just mentioned and emphasize the word orders. So product orders to hyperscalers are growing at a triple digit rate. AI infrastructure orders from hyperscalers were $1.9 billion in the third fiscal quarter. That's up from $600 million a year ago, so more than tripling. Overall, Cisco's orders... were up by 35%. John mentioned the top line only grew by 12% in the quarter, but overall product orders, which are very indicative of future revenue, were up 35%. Even excluding hyperscalers were up 19%. So we're seeing really strong demand across the business. Networking orders were up 50% year over year. As John mentioned, that was the strongest segment. And hyperscalers are the real story here.
What are the key highlights of Cisco's recent earnings report?
And just to kind of put this in perspective, John correctly mentioned that now Cisco expects $9 billion
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