Cisco makes the equipment and software that keeps the internet running. Routers, switches, wireless access points, security software, video conferencing tools through Webex, and now a whole platform of data analytics through Splunk, these are the products that businesses, governments, and internet providers pay for every day. Most of that money now comes in the form of subscriptions, meaning customers pay a regular fee rather than just buying hardware once. Cisco sells directly to large enterprises and governments, and also through channel partners who bundle Cisco gear into bigger technology solutions. The diagram below traces where the money goes.

Five years of financial data tell a story with a clear shape. Revenue climbed from $49.8 billion in fiscal 2021 to a peak of $57.0 billion in fiscal 2023, then dipped to $53.8 billion in fiscal 2024, then recovered to $56.7 billion in fiscal 2025. That dip happened because customers who had stocked up on networking hardware during supply shortages simply stopped ordering for a while. The underlying business did not collapse. Gross margins held in a tight band around 62 to 65 percent across all five years, which tells you the pricing power on software and services is real.

The bigger shift underneath the revenue line is what Cisco is becoming. In fiscal 2025, total software revenue reached $22.3 billion, up 21% from the year before. Subscription revenue grew 15%. Both jumps were driven mainly by Splunk, which Cisco acquired during fiscal 2024. Splunk is a platform that helps companies search, monitor, and analyze their data, especially for security and IT operations. Bringing Splunk in transformed Cisco's Security category: security product revenue jumped 59% in fiscal 2025, from $5.1 billion to $8.1 billion.

Free cash flow tells a more complicated story. In fiscal 2023, before the Splunk deal closed, free cash flow reached $19.0 billion. It then fell sharply to $10.2 billion in fiscal 2024, partly because of cash spent on the acquisition and integration costs, and recovered to $13.3 billion in fiscal 2025. The company paid $6.4 billion in dividends and repurchased $6.0 billion worth of its own shares in fiscal 2025, returning more than $12 billion to shareholders in a single year. That level of cash return is only possible because the core business generates reliable cash, even during a rough patch.

The net debt picture changed dramatically because of Splunk. Cisco carried a comfortable net cash position of $1.7 billion at the end of fiscal 2023. By the end of fiscal 2024 that had flipped to net debt of $23.5 billion. By fiscal 2025 it had come down to $19.7 billion, showing the company is paying down the borrowing, but it is a large number that reduces financial flexibility.

Now come the risks worth watching carefully. Cisco does not make its own products from scratch in its own factories. It relies on contract manufacturers and third-party suppliers for most of its hardware. When those suppliers face financial problems, run out of components, or cannot deliver on time, Cisco cannot fill customer orders. This happened in a painful way during the supply shortage years and left Cisco with large purchase commitments it could not easily cancel. In fiscal 2025, Cisco settled a legal dispute with a supplier over exactly these kinds of long-term supply obligations, which resulted in a charge that cut into product gross margin that quarter.

A second risk sits inside the Splunk deal itself. Integrating a large, complex software company is hard. Key employees can leave. Customers can hesitate. Systems that need to work together may not connect cleanly. Cisco has been integrating Splunk's security platform with its own Cisco XDR product, but this work is still ongoing, and the 10-K flags it as a high-severity risk. If Splunk's customers drift away during the transition, the security revenue growth that justified the acquisition price starts to look shakier.

A third risk is the lumpiness of the service provider and cloud customer group. Large webscale companies, the kind that build massive data centers, make huge purchases but on unpredictable schedules. In fiscal 2025, AI infrastructure revenue from these webscale customers was a real driver of growth. But the 10-K is direct about what happens when they pause: revenue and profits can drop significantly, and the weakness can last a long time. Cisco's Networking product category, its largest at $28.3 billion in fiscal 2025, already declined 3% that year partly because of normalized ordering patterns after the prior surge.

Tariffs add another layer of uncertainty. Cisco acknowledged in fiscal 2025 that it is exposed to new and proposed tariffs and other trade policies, and that the extent of this exposure is uncertain but could be significant. Hardware that crosses borders, which most of Cisco's products do at some point in the supply chain, is directly in the path of any escalation in trade policy between the United States and its trading partners, particularly China.