Cisco says it’s already dug in to protect itself – and customers – if trade war breaks out

Also reckons it can dodge DOGE

Cisco has prepared for trade war and thinks it can ride things out by reconfiguring its supply chain if that becomes necessary.

CFO Scott Herren on Wednesday volunteered info on Cisco’s preparations for the imposition of increased tariffs by the Trump administration during the company’s Q2 FY 2025 earnings call.

In our guidance, we have accounted for the added cost driven by the increased tariffs on China, and proposed tariffs on Mexico and Canada,” he told investors. “This is a dynamic environment, but one we have spent a significant amount of time planning for. We are prepared to take actions to mitigate the impact as and when tariffs go into effect.” Herren said Cisco has already “reduced exposure” in China by 80 percent and has “planned out several scenarios” for other tariff increases, including the 25 percent impost that Washington imposed on Mexico and Canada before temporarily pausing their implementation.

We have price as a lever, but there's a number of considerations to go through before we got there

Cisco has also modelled the impact of the tariffs the Trump administration has announced on steel and aluminium imports.

Herren said customers aren’t rushing to buy before tariffs commence, and hinted that if tariffs are introduced, Cisco won't rush to drop prices.

“As we look at the steps we would take to mitigate the impact of demand, there are a number of steps we can take to offset the cost,” he said. “We obviously would have price as a lever, but there's a number of considerations that we have to go through before we got there. Right now, I don't envision that.”

Wall Street analysts who get to ask questions on earnings calls were also interested to know if Cisco is worried by Elon Musk’s Department of Government Efficiency.

CEO Chuck Robbins said Cisco has “obviously been following this very significantly. And I think it's important to understand that this effort is really about driving efficiency, and productivity in government, which in many cases is actually delivered via the use of technology. So we think that there could be some positives for us.”

He noted that Cisco wins less than ten percent of its revenue from the US federal government, and 75 percent of that comes from the Department of Defense which seems largely insulated from DOGE’s cost-cutting.

The networking giant is therefore confident its federal government business will be steady.

Robbins thinks other Trump administration policies could benefit Cisco.

“As the United States takes steps to onshore strategic infrastructure, such as semiconductor fabrication plants, manufacturing, and scaled AI power sources, we have the market-leading secure networking portfolio to help connect and protect these capital-intensive investments at scale,” he said.

Return-to-office mandates may also help, with the CEO predicting they’ll drive demand for Wi-Fi 7 hardware.

AI FOMO drives demand

The CEO expects other buyers will also remain active.

“I think one thing our customers understand is that their need to continue spending on technology is just there,” the CEO said. “And there's so much change going on right now from a technology perspective that there's both excitement about the opportunity and, candidly, there's a little bit of fear of slowing down too much and letting your competition get too much ahead of you. So we saw solid demand.”

Robbins thinks telcos are set to spend up big, as they sweat their kit for unusually long periods but now want to refresh networks to handle AI workloads.

He also admitted mainstream enterprises haven’t acquired Cisco networks to connect their AI infrastructure.

“It's not really Ethernet under GPUs in the enterprise today, [it] hasn't been a major opportunity to date,” he said (Nvidia’s networking revenue is now about $3 billion a quarter and growing).

Cisco expects its AI networking business will pick up as more customers deploy on-prem AI, and its partnership with Nvidia deepens.

One AI market Cisco thinks is already roaring is Industrial Internet-of-Things products, as orders for ruggedized Catalyst products grew more than 40 percent in the first half of 2025. Robbins reckons that was “an acceleration as customers prepare for the deployment of AI-powered robotics and industrial security.”

Security is also soaring, with orders doubling this quarter.

Q2 revenue landed at $14.0 billion, a nine percent jump compared to the same period last year. Net income dipped eight percent to $2.4 billion. Investors were told to expect revenue of $13.9 billion to $14.1 billion in Q3, and $56.0 billion to $56.5 billion for the full year.

The Q2 result was at the high end of guidance and the markets rewarded Cisco with a 6.5 percent share price bump in after-hours trading.

Maybe they were also impressed by Cisco’s Tuesday announcement of an “AI Renewals Agent” that Cisco thinks can “reduce the time spent building a renewal proposal and preparing for a customer engagement by as much as 20 percent, a figure poised to grow as the AI agent improves based on usage and more workflows are automated.”

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