Cisco reported record quarterly revenue of $17.3 billion as demand for networking products and artificial intelligence infrastructure accelerated at the end of its 2026 fiscal year.
Revenue increased 18% year over year during the quarter ended July 25, according to Cisco’s fourth-quarter results.
GAAP net income rose 51% to $3.9 billion, while diluted earnings increased from $0.64 to $0.97 per share. On a non-GAAP basis, earnings were $1.22 per share, up 23%.
For the full fiscal year, Cisco generated $63.3 billion in revenue, an increase of 12%. GAAP net income grew 30% to $13.3 billion.
Cisco Chair and CEO Chuck Robbins said: “We delivered a very strong close to fiscal 2026, marking another record year for Cisco.”
AI infrastructure orders accelerate
Cisco received $4 billion of AI infrastructure orders from hyperscaler customers during the fourth quarter, taking the fiscal-year total to $9.3 billion.
Hyperscalers are large cloud and data-center operators that build computing systems on an enormous scale. Cisco supplies the networking silicon, switches and optical equipment used to connect their servers and computing clusters.
Approximately 43% of Cisco’s annual hyperscaler AI orders arrived during the final quarter, based on the figures released by the company. This indicates that demand accelerated late in the year.
The $9.3 billion total also compares with more than $2 billion of hyperscaler AI orders in fiscal 2025.
Cisco recognized approximately $4 billion of hyperscaler AI infrastructure revenue in fiscal 2026. It expects that figure to reach $7.5 billion in fiscal 2027, which would represent an increase of close to 88%.
Those figures show AI becoming a larger part of Cisco’s business. Hyperscaler AI infrastructure accounted for approximately 6.3% of fiscal 2026 revenue. If Cisco reaches both its $7.5 billion AI target and the midpoint of its overall revenue guidance, the proportion would rise to roughly 10.3% in fiscal 2027.
However, the $9.3 billion of orders should not be treated as revenue or as an AI backlog. Cisco does not directly reconcile orders with recognized revenue, and it has not described the difference between the two figures as revenue that will necessarily be recorded next year.
Networking growth extends beyond AI hyperscalers
Although AI accounted for much of the attention, Cisco’s order growth was not confined to its largest cloud customers.
Total product orders rose 35% during the quarter. Excluding hyperscalers, orders still increased 25%. Cisco also reported double-digit order growth across every geographic region and customer market.
Networking product orders increased 40%, marking the eighth consecutive quarter of double-digit growth.
Quarterly product revenue rose 24% to $13.5 billion, while services revenue remained virtually unchanged at $3.8 billion. Products therefore accounted for almost the entire year-over-year increase in Cisco’s quarterly revenue.
Cisco reported the following product results:
- Networking: Revenue increased 28% to $9.8 billion.
- Security: Revenue rose 14% to $2.2 billion.
- Collaboration: Revenue increased 12% to $1.2 billion.
- Observability: Revenue rose 6% to $275 million.
Networking alone generated approximately 57% of Cisco’s total quarterly revenue. This makes the current expansion primarily a networking-product story, even though AI spending is becoming a much larger contributor.
Operating margin rises despite lower adjusted gross margin
Cisco’s non-GAAP gross margin declined from 68.4% to 66.3%. Product gross margin fell by 2.7 percentage points to 64.8%.
Despite that decline, non-GAAP operating margin increased from 34.3% to 35.9%. Adjusted operating expenses grew by 5%, considerably slower than the 18% increase in revenue.
This indicates that Cisco’s operating leverage came from keeping expense growth below revenue growth, rather than from earning a higher adjusted margin on the products it sold.
GAAP operating income increased 38% to $4.3 billion, giving the company a GAAP operating margin of 24.7%.
Full-year cash flow remains flat
Operating cash flow rose 27% to $5.4 billion during the fourth quarter. The full-year figure, however, remained flat at approximately $14.2 billion, despite the 30% increase in GAAP net income.
Cisco’s cash-flow statement shows that inventory absorbed $2.5 billion during the year. Financing receivables used another $1.8 billion. These working-capital movements help explain why the increase in accounting profit was not matched by annual cash-flow growth.
Operating cash flow represented approximately 22.4% of fiscal 2026 revenue, compared with 25.1% during the previous year.
Remaining performance obligations, which cover contracted revenue that has not yet been recognized, increased 7% to $46.7 billion. Product obligations rose 9%, while services obligations increased 6%.
Cisco returned $3.2 billion to shareholders during the quarter, comprising $1.7 billion in dividends and $1.5 billion in share repurchases.
Cisco forecasts approximately 15% revenue growth
Cisco expects fiscal 2027 revenue of between $72.2 billion and $73.4 billion. The midpoint of $72.8 billion would represent growth of approximately 15% from fiscal 2026.
Full-year non-GAAP earnings are forecast at between $5.05 and $5.11 per share, compared with $4.33 in fiscal 2026.
For the first quarter, Cisco expects:
- Revenue of between $18 billion and $18.2 billion.
- A non-GAAP gross margin of between 65% and 66%.
- A non-GAAP operating margin of between 35.5% and 36.5%.
- Non-GAAP earnings of between $1.32 and $1.34 per share.
Restructuring redirects spending toward AI
Cisco is also carrying out a restructuring intended to redirect investment toward silicon, optics, security and AI.
The company previously estimated that the plan would produce up to $1 billion in pre-tax charges. Cisco recorded $511 million in restructuring and related charges during the fourth quarter.
Cisco has said it expects to reinvest substantially all the resulting savings in its targeted growth areas. The plan is therefore primarily a reallocation of spending, rather than a promise of material net cost reductions.
Cisco enters fiscal 2027 with strong networking demand and a much larger AI infrastructure business. Its next test will be converting hyperscaler orders into revenue while protecting product margins and improving the conversion of earnings into cash.
