Cisco Q2 powered by Splunk; AI infrastructure sales pick up

Larry Dignan

Editor in Chief of Constellation Insights
Constellation Research

Larry Dignan is Editor in Chief of Constellation Insights at Constellation Research, where he leads editorial coverage focused on enterprise technology, digital transformation, and emerging trends shaping the future of business. He oversees research-driven news, analysis, interviews, and event coverage designed to help technology buyers and vendors navigate complex markets with clarity and context. ...

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Cisco delivered strong second quarter results powered by Splunk and strong demand for AI infrastructure.

The company has been a work in progress as it added Splunk to bolster its software and security reach with a lag in AI infrastructure sales. That lag appears to be over.

Cisco reported second quarter earnings of 61 cents a share on revenue of $14 billion, up 9% from a year ago. Non-GAAP earnings were 94 cents a share. Wall Street was looking for Cisco to report second quarter non-GAAP earnings of 91 cents a share on revenue of $13.78 billion.

For the third quarter Cisco projected revenue between $13.9 billion to $14.1 billion with non-GAAP earnings of 90 cents a share to 92 cents a share. For fiscal 2025, Cisco projected revenue of $56 billion to 56.5 billion with non-GAAP earnings of $3.68 to $3.74 a share.

CEO Chuck Robbins said that "as AI becomes more pervasive, we are well positioned to help our customers scale their network infrastructure, increase their data capacity requirements, and adopt best-in-class AI security."

Splunk adds genAI tools, more Cisco touchpoints across observability and security

Robbins added that Cisco is seeing strong demand despite macroeconomic concerns:

"Despite the uncertainty that's going on in the in the US and in the marketplace around the world, I think the one thing our customers understand is that their need to continue spending on technology is just there."

Regarding tariffs, Robbins said that the company has built them into its guidance. 

"It's such a fluid environment right now, it's very difficult to say what's actually going to happen. I wanted to protect the guide and ensure that we built in the 25% that's been proposed. We have a supply chain team that, over the last several years, has built a lot of muscle around the tariff that we had in China and how do we work our way around that. We've game planned out several scenarios and steps we can take, depending on what actually goes into effect."

By the numbers:

• Cisco product orders in the second quarter were up 29% from a year ago and up 11% excluding Splunk.
• The company raised its dividend to 41 cents per share and stock buyback program with an additional $15 billion authorized.
• Security revenue in the second quarter was up 117% due to Splunk with observability up 47%. Networking revenue was down 3% from a year ago.

New switches, new demand

Cisco also recently launched new smart switches that aim to meld AI, security and networking together. Cisco announced the Cisco N9300 Series Smart Switches, which feature embedded DPUs for AI data centers. The switches features Cisco Silicon One E100 and AMD Pensando DPUs that can handle data processing to improve overall performance.

In addition, Cisco Hypershield is being embedded into the new switches in a move that brings together networking and security.

The launch of new switches is part of Cisco’s plan to reimagine data centers for AI training and inferencing. The first available Cisco N9300 Smart Switch, which features 24 100G ports, will ship in spring 2025. A higher-end model, which will feature 48 25G ports, two 100G ports, and six 400G ports, is targeted for summer 2025.

On the new switches, Robbins said that there are strong demand for networking gear that's more integrated. "This switch is a great example of the innovation that we are going to drive in our core networking portfolio," he said. "Security needs to be deployed everywhere. And it this really allows us to integrate security deeply into the network and at the speed of the network."

Robbins added that there will be more demand for networking as agentic AI tax networks. He said: "It's clear that agentic AI work streams are going to put more capacity onto the network."

Freshworks delivers strong Q4: Is it a giant killer?

Larry Dignan

Editor in Chief of Constellation Insights
Constellation Research

Larry Dignan is Editor in Chief of Constellation Insights at Constellation Research, where he leads editorial coverage focused on enterprise technology, digital transformation, and emerging trends shaping the future of business. He oversees research-driven news, analysis, interviews, and event coverage designed to help technology buyers and vendors navigate complex markets with clarity and context. ...

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Freshworks is planning to expand by courting enterprises fed up with their SaaS providers and layering in AI in its platform. Freshworks is also looking to land ServiceNow defectors.

Speaking on Freshworks fourth quarter earnings call, CEO Dennis Woodside portrayed the company as a giant killer. He said:

"We ended the year with over 72,200 customers who’ve chosen Freshworks CX and EX (customer and employee experience) software to transform their business. Time and again, overpriced legacy software vendors with overcomplicated products drive customers directly into our hands.

More mid-market and enterprise customers are turning to Freshworks as they leave behind our largest IT competitors. We believe that’s because big SaaS vendors are overcharging and underserving their customers, particularly in the mid-market."

Freshworks offers customer experience software and IT service, operations and asset management applications, which fall under the company's EX category.

Woodside specifically focused on Freshworks ability to poach ServiceNow customers for its Freshservice software. He cited wins over ServiceNow from a hard-drive manufacturer, the city and county of San Francisco and Mesa Airlines.

The Freshworks CEO added:

"Coherent, a global manufacturer of industrial and laser equipment, transitioned 500 internal agents and all ITSM workflows from multiple tools, including ServiceNow to Freshservice. Coherent recently expanded its use of Freshservice beyond IT to their HR department, supporting 25,000 employees. They have plans to expand Freshservice to additional teams, such as facilities and procurement."

Constellation Research analyst Liz Miller said:

"What we are seeing with Freshworks is the result of focus and doubling down on solving real experience issues through a service-driven automated approach. Freshworks had been attempting to compete in a very broad market swath and courting a broad list of customers…the we can be everything to anyone approach. In reality, the midmarket and small business needs focused solutions that can implement fast and scale even faster without breaking the bank at a critical time of growth and velocity."

To reinforce Freshworks' giant killer strategy, the company is also looking to monetize its Freddy Copilot. "We expect AI to be a tailwind for our business as customers are realizing tangible business value," said Woodside. "After launching Freddy Copilot in February, we ended the year with more than 2,200 customers, reflecting quarterly net adds of more than 500 or 30% growth quarter-over-quarter."

For new deals, Freshworks had more than 50% Copilot attach rates in new deals worth more than $30,000. For customer experience, Freshworks saw more than 1,300 customers using Freddy AI Agent.

Freshworks plans employee experience push to land midmarket companies

To keep momentum, Freshworks is also adding executives from some of the giants it is hunting. The company recently hired Srini Raghavan as chief product officer. Raghavan is an alum of RingCentral, Five9 and Cisco. Freshworks also hired Venki Subramanian, SVP of Product Management and an alum of SAP and ServiceNow.

Strong quarterly results

Freshworks reported a fourth quarter net loss of $23.8 million, or 7 cents a share, on revenue of $194.6 million, up 22% from a year ago. Non-GAAP earnings in the quarter were 14 cents a share.

For 2024, Freshworks reported a net loss of 32 cents a share on revenue of $720.4 million, up 21% from a year ago. Non-GAAP earnings for 2024 were 43 cents a share.

As for the outlook, Freshworks projected first quarter non-GAAP earnings of 12 cents a share to 14 cents a share on revenue of $190 million to $193 million, up 15% to 17%. For fiscal 2025, Freshworks is projecting revenue of $809 million to $821 million, up 12% to 14%, with non-GAAP earnings of 52 cents a share to 54 cents a share.

Supermicro's accounting woes curtail fiscal 2025 revenue outlook

Larry Dignan

Editor in Chief of Constellation Insights
Constellation Research

Larry Dignan is Editor in Chief of Constellation Insights at Constellation Research, where he leads editorial coverage focused on enterprise technology, digital transformation, and emerging trends shaping the future of business. He oversees research-driven news, analysis, interviews, and event coverage designed to help technology buyers and vendors navigate complex markets with clarity and context. ...

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Supermicro cut its revenue outlook for fiscal 2025 as the company still hasn't filed its audited annual report. The company said that it intends to make filings by Feb. 25 and raised $700 million in convertible bonds.

For fiscal 2025, Supermicro is projecting revenue of $23.5 billion to $25 billion. The company previously projected fiscal 2025 revenue of $26 billion to $30 billion.

The company, one of Nvidia's biggest customers, has seen sales surge due to demand for AI workloads. Supermicro has also seen its accounting headaches surge too along with subpoenas from the Department of Justice and Securities and Exchange Commission.

The company issued preliminary second quarter results.

However, CEO Charles Liang acknowledged that uncertainty around Supermicro's financials have hampered demand and cash flow. Nevertheless, Liang said the company "is well positioned to grow AI infrastructure design wins based on Nvidia Blackwell" and can deliver $40 billion in revenue in fiscal 2026. Supermicro competes with HPE and Dell Technologies among others.

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As for the unaudited second quarter results, Supermicro said earnings will be between 50 cents a share to 52 cents a share. Revenue for the second quarter will be between $5.6 billion to $5.7 billion. Non-GAAP earnings will be between 58 cents a share to 60 cents a share.

For the third quarter, Supermicro said sales will be between $5 billion to $6 billion in the third quarter with non-GAAP earnings of 46 cents to 62 cents a share.

On a conference call, Liang said Supermicro has swapped auditors, after the previously one quit, and added a new CFO and chief commercial officer.

What remains to be seen is how fast Supermicro can regain credibility. Liang said the company is focused on technology wins. He said:

"Our NVIDIA Blackwell products are shipping now. We have begun volume shipments of both air cooled 10U and liquid-cooled 4U NVIDIA B200 HGX systems. Meanwhile our NVIDIA GB200 NVL72 racks are fully ready as well. Utilizing our system building blocks, we are going to soon offer more brand-new platforms for customers seeking further optimized, higher-density and even greener AI solutions. While most key components are ramping at full speed, it will take some time to fulfill our current AI solution backlogs. Some customers also need more time to finish their DLC data centers build out. At the same time, we see strong new demands keep coming in from enterprises, CSPs, sovereign entities, and hyperscalers. "

Liang touted Supermicro liquid cooled infrastructure wins for xAI's Colossus AI supercomputer. Indeed, Supermicro still operates amid an AI infrastructure boom.

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• AMD data center business continues to shine in Q4

On the cash front, it's worth noting that Supermicro began the second quarter with $2.1 billion in cash but ended with $1.4 billion in cash. Here's the explanation from CFO David Weigand.

"Super Micro began the quarter with approximately $2.1 billion in cash and recorded approximately $320 million in GAAP net income for the second quarter. Cash was provided from lower inventory and other sources totaling $1.5 billion. The company used cash to pay down accounts payable by $1.2 billion, realized higher other receivables from purchase rebates and prepaid inventory of $484 million, increased accounts receivable by $335 million, reduced bank loans by $346 million net, incurred capital expenditures of $28 million and had other uses of cash totaling $87 million. This resulted in a reduction in cash of $660 million, thereby ending the Company’s 2QFY25 quarter with $1.4 billion in cash in December. We have continued to prudently manage our working capital and ended January 2025 with approximately $2 billion in cash."

Workday aims to be system of record for AI agents, digital labor

Larry Dignan

Editor in Chief of Constellation Insights
Constellation Research

Larry Dignan is Editor in Chief of Constellation Insights at Constellation Research, where he leads editorial coverage focused on enterprise technology, digital transformation, and emerging trends shaping the future of business. He oversees research-driven news, analysis, interviews, and event coverage designed to help technology buyers and vendors navigate complex markets with clarity and context. ...

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Workday is already a hub to manage human capital. Now it wants to manage fleets of digital labor--AI agents from Workday as well as third parties--via Workday Agent System of Record.

The company also outlined Workday Illuminate AI agents for payroll, contracts, financial auditing and policy. Workday's agents ride along with the AI agent management platform and marketplace for AI agents. Workday launched Illuminate at Workday Rising in September.

Workday argued that it is already the system of record for more than 10,500 organizations so managing the deployment and returns on investment from AI agents is a natural extension. CEO Carl Eschenbach said Workday's platform can "manage every part of the workforce – employees, contingent workers, and agents."

Constellation Research CEO Ray Wang said Workday's centralized system to manage AI agents makes sense. "The rise of AI agents in the enterprise has created an urgent need for a centralized system of record to manage and govern this increasingly complex landscape," said Wang.

Amazon, Accenture, Deloitte, Salesforce, PwC and KPMG were among the partners saying Workday's AI agent management platform fills a void. The system gives enterprises the ability to onboard AI agents, define roles and responsibilities, track impact, returns and budget and support compliance.

Research: Workday Extend Writes Its Next Chapter: AI | Constellation ShortList™ Global HCM Suites

Key points about Workday's Agent System of Record include:

• Centralized management.
• Agent onboarding, which provides secure access, defines roles and skills.
• Cost management and optimization of AI agents with budget forecasting and returns.
• Compliance tools to manage controls and policy enforcement.
• Real-time identity verification, agent orchestration and cost management.

To go along with that Agent System of Record, Workday also launched the following agents that will be available in Workday Marketplace:

• Contracts Agent analyzes contracts across the enterprise and surfaces key items buried in unstructured data. This use case was also recently highlighted by airline United.
• Payroll Agent, which identifies and updates invalid payroll data and automates audit workflows.
• Financial Auditing Agent to monitor transactions, reconcile balances and review internal controls.
• Policy Agent, which reads corporate policies and proactively delivers information to employees.

Workday Chief Product Officer David Somers said in a blog post that enterprises have a responsibility to manage its digital workforce alongside humans and control AI agent sprawl.

"We've still got some hurdles to overcome. Accuracy, consistency, bias, speed, and cost are all things we need to consider carefully when implementing agentic AI within organizations. That's why it's so important to set clear boundaries and rules for how they operate. Just like we wouldn't give a new employee free rein over sensitive systems, we need to control what our AI agents can access and do."

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For Shopify's Q4, customer wins, expansion does the talking

Larry Dignan

Editor in Chief of Constellation Insights
Constellation Research

Larry Dignan is Editor in Chief of Constellation Insights at Constellation Research, where he leads editorial coverage focused on enterprise technology, digital transformation, and emerging trends shaping the future of business. He oversees research-driven news, analysis, interviews, and event coverage designed to help technology buyers and vendors navigate complex markets with clarity and context. ...

Read more

Shopify's momentum as a commerce platform continues as the company reported strong fourth quarter results and has become more strategic for customers.

The company reported fourth quarter net income of $1.29 billion on revenue of $2.81 billion, up 31% from $2.14 billion a year ago. Shopify's net income was boosted by equity investments. Excluding those investments, Shopify delivered net income of $458 million.

For 2024, Shopify reported net income of $2.02 billion on revenue of $8.8 billion, up 26% from 2023.

As for the outlook, Shopify projected first quarter revenue growth in the mid-twenty percentage rate. The first quarter is typically Shopify's slowest period.

Last quarter, Shopify broke through as an all-encompassing commerce platform that appealed to both smaller and large enterprises. Harvey Finkelstein, President of Shopify, said the company in 2025 will be committed to "further establishing Shopify as the go-to commerce platform for businesses of all sizes."

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While the term "platformization" is typically associated with cybersecurity, it's beginning to apply to commerce platforms. Shopify is consolidating wallet share. Speaking on Shopify’s earnings call, Finkelstein said:

“From top sports teams to major music labels and even one of the largest window covering businesses, Shopify powers them all. This diversity isn't just impressive, it proves that Shopify is the most compelling choice for any business looking to grow quickly, reliably and at scale. In addition to new brands consistently choosing Shopify for its comprehensive enterprise level offerings, the Shop Pay Commerce component has also become a compelling entry point into the Shopify ecosystem for enterprise brands.”

Shopify touted customers such as Everlane, Aldo, Sperry. Crocs, Warner Music and a host of others. “At the high level the enterprise is migrating to Shopify. I think one of the great things we did was we created a bunch of options for them,” said Finkelstein.

But it goes a long way when customers talk up Shopify on their own calls. Commerce customers are citing Shopify as part of their transformation plans.

For instance, Bark CEO Matt Meeker said Shopify replaced a series of legacy systems and boosted its quarterly results. Meeker said:

"In late October, we transitioned all paid media traffic to our new Shopify platform. This is a big deal. While transitions of this nature inherently carry some uncertainty, I'm pleased to report that the early results have been encouraging," said Meeker. "New subscriptions grew 11% year-over-year, and we achieved this at a lower customer acquisition cost."

Meeker added that 43% of checkouts on Bark.com were via Shop Pay. "The new platform modernizes the customer experience, which we expect to continue to drive increased conversion over time," said Meeker. "We plan to migrate our remaining active subscriber cohorts from our legacy sites to the Shopify platform this quarter."

Grove Collaborative Holdings also said Shopify has been a big part of its transformation efforts. "We announced the Shopify migration, but we don't expect to be fully on the platform until early Q1. We are really excited about what that will enable," said Grove Collaborative Holdings CEO Jeff Yurcisin.

Shopify is also gaining on integrations with other commerce players. Roblox cited a Shopify integration in its most recent quarter as did Affirm and Lightspeed Commerce.

For Shopify, those customer endorsements are just the beginning to expanding the company’s footprint. Finkelstein said:

“In 2025, we will continue to invest in our core platform and in key areas like enterprise, offline and international markets as these key growth drivers are helping to fuel our top line growth and laying the groundwork for ongoing success and innovation. We are entering an exciting era of commerce driven by transformative shifts in technology like AI. I think Shopify will very much be one of the major net beneficiaries in this new AI era.”

Monday.com rides large enterprise accounts, AI features to move upstream

Larry Dignan

Editor in Chief of Constellation Insights
Constellation Research

Larry Dignan is Editor in Chief of Constellation Insights at Constellation Research, where he leads editorial coverage focused on enterprise technology, digital transformation, and emerging trends shaping the future of business. He oversees research-driven news, analysis, interviews, and event coverage designed to help technology buyers and vendors navigate complex markets with clarity and context. ...

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Monday.com said it is landing more CRM customers and large enterprise accounts as it outlined plans to double-down on its strategy with a consumption model for AI.

The company, which offers work management software and has expanded with MondayDB and CRM, reported strong fourth quarter earnings and said it will continue to invest in AI.

Monday.com's results highlight how work management has become a popular category as the company dukes it out with Smartsheet and Asana. Monday.com's annual recurring revenue surpassed the $1 billion mark. Atlassian is also making a work management play and highlighted gains on its most recent quarter.

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Co-CEO Roy Mann said on an earnings conference call:

"We continue to make considerable progress in our multi-product strategy. Monday CRM has exceeded expectations, and we added a record number of net new accounts for both CRM and dev during the year."

Mann also touted AI features including AI capabilities throughout the platform. In the fourth quarter, customers performed about 10 million AI actions. Mann noted that AI agents via Monday.com or third parties can also be a boon to drive consumption.

A move upstream also helped Monday.com. "One of the most significant milestones of 2024 was our strategic expansion into the enterprise market. We successfully grew our largest seat count to 80,000 seats, signaling strong adoption and deepening enterprise customer engagement," said Mann.

Monday.com's AI pricing model revolves around flexible consumption with a baseline level of free usage in all plans. As usage increases, Monday.com customers can buy more AI blocks of capacity.

This AI operating model is starting to gain traction across enterprises including ServiceNow and Salesforce. ServiceNow aims for 'Goldilocks' software model, SaaS industry likely to follow

Eran Zinman, Co-CEO, said Monday.com, said the company will focus on providing AI blocks that can automate tasks and focus on use cases.

Zinman said:

"In 2025, our AI strategy will be focused on three main areas. AI Blocks; Product Power-ups; and Digital Workforce. AI Blocks will be expanded to provide more advanced ways to automate tasks. Through Product Power-ups, AI will be deeply integrated into each product to address specific user needs. And finally, the digital workforce will include AI agents like Monday expert, Deal Facilitator, and Service Analyzer, which will offer actionable insights and streamlined processes for users."

These plans highlight how Monday.com focuses on the art of consumption. The company wants to give you enough of a free tier to gain usage and then leverage workflow automation to drive more consumption.

Monday.com will include 500 free AI Credits per month with the option to purchase more capacity from 2,500 credits to 250,000 credits.

Results and outlook

Monday.com reported fourth quarter earnings of 43 cents a share on revenue of $268 million, up 32% from a year ago. Non-GAAP earnings in the quarter were $1.08 a share.

For 2024, Monday.com reported earnings of 62 cents a share on revenue of $972 million, up 33% from a year ago. As for the outlook, Monday.com projected first quarter revenue between $274 million and $276 million, up 26% to 27%. For 2025, Monday.com expects revenue of $1.208 billion to $1.221 billion.

Zinman noted that demand has been solid across all regions, but 2025 is likely to be unpredictable. He said:

"This year is more unpredictable when you compare it to prior years. The geopolitical situation across the world is to a certain extent, there are something that you can't really predict. So this is also something that we took into account as part of our guidance."

Another wild-card for Monday.com is that its expanding product lineup each has a different go-to-market strategy and sales motion.

Monday.com ended the quarter with 245,000 customers and can do well expanding within its customer base by cross-selling. To that end, Monday.com is ramping its sales capacity and adding people.

Anthropic's Economic Index highlights AI augmenting mid-to-high salary jobs

Larry Dignan

Editor in Chief of Constellation Insights
Constellation Research

Larry Dignan is Editor in Chief of Constellation Insights at Constellation Research, where he leads editorial coverage focused on enterprise technology, digital transformation, and emerging trends shaping the future of business. He oversees research-driven news, analysis, interviews, and event coverage designed to help technology buyers and vendors navigate complex markets with clarity and context. ...

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Usage of generative AI revolves around software development and technical writing tasks and users typically see the technology as way to augment and enhance humans, according to Anthropic's inaugural Economic Index report.

Anthropic anonymized conversations on its Claude large language model (LLM) to highlight trends. High level findings of Anthropic's Economic Index include:

• About 36% of occupations use AI in at least a quarter of their tasks. About 4% of occupations use it for three quarters of tasks.
• 57% of AI use is augmentation relative to 43% focused on automation.
• Mid-to-high wage occupations such as computer programmers and data scientists are using AI for tasks. Lowest and highest paid roles use AI the least.

Perhaps the biggest takeaway from Anthropic's Economic Index is that the middle class of professions is facing the most augmentation. Computer and mathematics, art, design and media, life and physical social science, and education take up the most of Claude conversations.

The dataset on Hugging Face, which Anthropic open sourced, is worth a look.