Cisco Systems Q4 Earnings Call Highlights

Key Points

• Record results: Cisco’s fourth-quarter revenue rose 18% year over year to $17.3 billion, while non-GAAP EPS increased 23% to $1.22. Full-year revenue reached $63.3 billion, up 12%.
• AI is accelerating demand: Fiscal 2026 hyperscale AI infrastructure orders reached $9.3 billion, about 4.5 times the prior year, and Cisco expects $7.5 billion in related revenue in fiscal 2027.
• Positive outlook and shareholder returns: Cisco forecast fiscal 2027 revenue of $72.2 billion to $73.4 billion and non-GAAP EPS of $5.05 to $5.11, while returning $12.7 billion to shareholders through dividends and buybacks in fiscal 2026.

Cisco Systems NASDAQ: CSCO reported record fourth-quarter and fiscal 2026 results, citing broad demand for networking, AI infrastructure, security and collaboration products. The company also issued fiscal 2027 guidance that calls for continued revenue and earnings growth as it pursues what Chief Executive Officer Chuck Robbins described as a multiyear networking “super cycle” tied to AI deployment.

Fourth-quarter revenue rose 18% year over year to a record $17.3 billion, while product revenue increased 24% to $13.5 billion. Services revenue was flat at $3.8 billion. Non-GAAP net income reached $4.9 billion and non-GAAP earnings per share increased 23% to a record $1.22, according to CFO Mark Patterson.

For the full fiscal year, Cisco reported revenue of $63.3 billion, up 12%, with non-GAAP net income rising 13% to $17.2 billion and non-GAAP EPS increasing 14% to $4.33. Patterson said the company increased its non-GAAP operating margin by 40 basis points to 34.8% for the year.

Orders Rise Across Customer Markets

Cisco said total product orders increased 35% in the fourth quarter, led by a 95% increase from service provider and cloud customers. Enterprise product orders rose 21%, public-sector orders increased 30%, and all geographic regions posted double-digit growth. Orders in the Americas increased 44%, followed by 25% growth in Europe, the Middle East and Africa and 19% growth in Asia-Pacific, Japan and China.

Networking product orders climbed 40% during the quarter, extending the portfolio’s streak of double-digit order growth to eight consecutive quarters. Cisco cited triple-digit growth in service-provider routing and Acacia optics, along with double-digit increases in data-center switching, compute, campus switching, wireless, enterprise routing and industrial Internet of Things products.

Campus networking product orders grew 20%, while data-center networking orders increased more than 35%. Robbins said Wi-Fi 7 orders represented more than half of Cisco’s wireless orders in the quarter. He also said more than half of Cisco customers purchase both campus and data-center networking solutions.

AI Infrastructure Orders Reach $9.3 Billion for the Year

Hyperscale AI infrastructure was a central contributor to Cisco’s quarterly demand. The company took $4 billion in hyperscale AI infrastructure orders during the fourth quarter, bringing fiscal-year orders to $9.3 billion, roughly 4.5 times the fiscal 2025 total. About 60% of those orders were Silicon One-based systems and 40% were optics, according to Robbins.

Cisco’s Acacia optics business generated more than $1 billion in fourth-quarter orders. The company said it won three new hyperscaler design wins during the quarter, including a scale-across deployment using its Silicon One P200-powered system. Cisco said it has now secured three P200 scale-across wins with separate hyperscalers and received orders from all three in the fourth quarter.

Robbins said AI workloads are increasingly being distributed across data centers because of physical and power limits at individual facilities. He said Cisco expects AI infrastructure revenue from hyperscalers to reach $7.5 billion in fiscal 2027. AI infrastructure for hyperscalers accounted for approximately 6% of fiscal 2026 revenue, compared with less than 2% in fiscal 2025.

Beyond hyperscalers, Cisco took more than $400 million in AI infrastructure orders from neocloud, sovereign-cloud and enterprise customers in the fourth quarter, bringing the annual total above $1 billion. The company also reported that enterprise Nexus switch orders tagged for AI deployments increased more than 85% sequentially.

Security Growth Improves, While Margins Reflect Hardware Mix

Security revenue increased 14% in the fourth quarter, supported by Splunk, network security and secure access service edge, or SASE, offerings. Cisco said more than 1,500 customers purchased its newer security products, including Secure Access, XDR, Hypershield and AI Defense, during the quarter. Firewall orders rose more than 30%.

Cisco added more than 280 new Splunk customers in the quarter and exceeded its annual target of 1,000 new Splunk customer accounts. Patterson said some sizable, longer-duration on-premises Splunk transactions contributed to the fourth-quarter security revenue result. He said Cisco expects security and observability growth to improve from low-single-digit growth in fiscal 2026 to high-single-digit growth in fiscal 2027.

Non-GAAP gross margin was 66.3%, down 210 basis points from a year earlier, reflecting a higher hardware mix and increased memory costs. Non-GAAP operating margin was 35.9% in the quarter. Patterson said the company expects a modest gross-margin headwind in fiscal 2027 because it is shipping higher volumes of hardware, but expects full-year operating margin of about 35%.

Cisco said it has not encountered significant lead-time issues and believes it has adequate supply to meet its fiscal 2027 outlook. Patterson said the company has direct relationships with Taiwan Semiconductor Manufacturing Co. for silicon supply and has entered strategic supply agreements, including measures related to memory availability.

Outlook and Capital Returns

For the first quarter of fiscal 2027, Cisco forecast revenue of $18 billion to $18.2 billion and non-GAAP EPS of $1.32 to $1.34. The company expects first-quarter non-GAAP gross margin of 65% to 66% and non-GAAP operating margin of 35.5% to 36.5%.

For fiscal 2027, Cisco projected revenue of $72.2 billion to $73.4 billion and non-GAAP EPS of $5.05 to $5.11. Patterson said the midpoint of the revenue outlook implies about 15% growth, including $7.5 billion in hyperscale AI infrastructure revenue. Excluding that AI revenue, he said Cisco expects its core business to grow about 10%.

The company generated $5.4 billion in operating cash flow during the fourth quarter, up 27% year over year, and ended the quarter with $15.9 billion in cash equivalents and investments. Cisco returned $3.2 billion to shareholders in the quarter through $1.7 billion in dividends and $1.5 billion in share repurchases. For fiscal 2026, capital returns totaled $12.7 billion, including $6.6 billion in dividends and $6.1 billion in repurchases.

About Cisco Systems (NASDAQ:CSCO)

Cisco Systems, Inc is a global technology company that designs, manufactures and sells networking hardware, software and telecommunications equipment. Its core business focuses on enabling enterprise and service-provider networks through products such as routers, switches, network security appliances and wireless systems. Over time Cisco has broadened its portfolio to emphasize software-defined networking, cybersecurity, cloud infrastructure and edge computing solutions that help organizations build and manage modern IT environments.

In addition to hardware, Cisco offers a growing range of software platforms and subscription services for network management, security, analytics and collaboration.

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