Cisco Reports Record Revenue Last Quarter, AI Orders Surge with $4 Billion Intake, Current Quarter Guidance Exceeds Expectations | Earnings Report News

Cisco reported financial results for the last fiscal quarter and guidance for the current quarter that surpassed Wall Street's expectations with impressive growth.

After the U.S. stock market closed on Wednesday the 12th, Cisco announced that for the fourth fiscal quarter ending July 25, 2026, revenue grew by 18% year-on-year to a record $17.3 billion, nearly 3% above market expectations. Non-GAAP adjusted earnings per share (EPS) increased by 23% to $1.22, more than 4% above market expectations. Adjusted operating profit grew by 23% to $6.2 billion, nearly 6% above market estimates, with an adjusted operating margin of 35.9%.

AI was the biggest highlight of the quarter. In the fourth fiscal quarter, Cisco’s AI infrastructure orders from hyperscalers reached $4 billion, accounting for 43% of the $9.3 billion total such orders for fiscal 2026. Meanwhile, product orders grew by 35% year-on-year. Even excluding hyperscalers, product orders grew by 25%, indicating demand is not entirely reliant on large AI customers.

Cisco attributed the strong performance in the last quarter to the “broad-based and record demand for Cisco technology,” suggesting that AI data center networking equipment is becoming a new growth driver for the company.

More notably, Cisco’s guidance for the current fiscal year was well above analyst expectations. The company expects fiscal 2027 revenue to be between $72.2 billion and $73.4 billion, with the midpoint about 6% above market forecasts. Adjusted EPS is projected at $5.05 to $5.11, with the midpoint nearly 6% above market estimates. For the current quarter, Cisco anticipates revenue of $18.0 billion to $18.2 billion and adjusted EPS of $1.32 to $1.34, both also exceeding expectations.

However, after the earnings report was released, Cisco's stock did not sustain its initial optimistic reaction. Shares, which closed up nearly 2.9% on Wednesday, first jumped post-market and gained almost 8%, but then reversed course, falling over 6% post-market. This shows that, amid crowded AI trades, high price expectations, and stricter investor scrutiny on order sustainability, short-term capital opted to reprice the stock.

Analysts believe the share price movement mainly reflects that, after Cisco released a fundamentally strong earnings report and guidance that beat expectations, the market turned to examining the sustainability of AI orders, dependence on traditional networking business, and whether previous price expectations were already priced in.

In the fourth fiscal quarter, Cisco’s revenue was about $17.25 billion to $17.3 billion, above FactSet’s estimate of around $16.84 billion, and also higher than the market’s general expectation of $16.8 billion to $16.9 billion; representing an 18% year-on-year increase.

Profitability was likewise robust. The company reported net income of $3.86 billion, or $0.97 per share, compared with $2.55 billion, or $0.64 per share, a year earlier. Excluding some one-time items, adjusted EPS was $1.22, higher than analysts’ expectations of $1.17.

From a revenue composition perspective, product revenue rose 24% year-on-year and was the main source of growth this quarter, while services revenue remained flat. This combination shows that Cisco’s growth is currently driven more by a resurgence in hardware and infrastructure demand, especially in areas tied to AI data centers and network upgrades.

Operational efficiency also remained high. Adjusted operating profit was $6.2 billion, exceeding market expectations of about $5.85 billion; adjusted operating margin was 35.9%. Cisco also stated that in fiscal 2026, in terms of revenue and non-GAAP operating margin per employee, as well as profit per employee, the company achieved its highest productivity metrics in 30 years.

By business segment, networking remains Cisco's most important growth engine. In the fourth quarter, networking revenue was $9.79 billion, up 28% year-on-year, making it the largest and fastest-growing segment.

Other divisions also saw growth, though at a more modest pace:

• Security revenue was $2.23 billion, up 14% year-on-year;
• Collaboration revenue was $1.17 billion, up 12% year-on-year;
• Observability revenue was $275 million, up 6% year-on-year.

Order data further reinforces the recovery in demand. In the fourth quarter, Cisco's product orders grew by 35% year-on-year, and even after excluding hyperscaler customers, product orders still grew 25%. Networking orders grew 40% year-on-year, marking the eighth consecutive quarter of double-digit growth.

This set of data is critical for the market, as it shows that while AI hyperscaler orders are the most eye-catching, they are not the sole source of growth. Enterprise networking, traditional customers, and broader IT infrastructure demand are also improving, so the company’s use of “broad-based demand” to describe the situation is not an exaggeration.

The most market-imaginative figure this quarter was AI infrastructure orders from hyperscalers: $4 billion in the fourth quarter and $9.3 billion for the full fiscal 2026.

For Cisco, this means its role in AI data center construction is rising. In the past, Cisco was long regarded as a traditional networking equipment giant, focusing on enterprise networks, campus networks, switches, routers, and other areas. As AI training and inference clusters demand faster networks, low-latency connectivity, and increased data center interconnectivity, the importance of networking equipment has clearly grown, and Cisco is trying to capture a larger share of this wave of AI infrastructure capital expenditure.

Bloomberg Industry Research analyst Woo Jin Ho expects AI momentum to remain strong. Raymond James analyst Simon Leopold pointed out that Cisco’s Silicon One network chip line is benefiting from competitor supply shortages, especially opportunities created by Broadcom-related product deficits.

Meanwhile, Cisco has announced restructuring this year, allocating more resources to the AI market and planning to cut under 5% of its workforce. The company previously said that this restructuring could result in up to $1 billion in severance and other one-time costs. In other words, AI is not just a one-quarter theme but is now the direction for Cisco’s resource realignment.

If the fourth quarter results were “better than expected,” the guidance more closely represents a “significant upward revision” to market forecasts.

Cisco expects the following for the first quarter of fiscal 2027:

• Revenue of $18.0 billion to $18.2 billion, vs. market expectations of about $16.8 billion;
• Adjusted EPS of $1.32 to $1.34, vs. market estimates of about $1.16 to $1.17;
• Adjusted gross margin of 65% to 66%;
• Adjusted operating margin of 35.5% to 36.5%.

For full-year guidance, Cisco projects for fiscal 2027:

• Revenue of $72.2 billion to $73.4 billion, vs. market expectations around $68.69 billion to $69.12 billion;
• Adjusted EPS of $5.05 to $5.11, vs. the market’s $4.80 to $4.84.

Whether for the quarter or the full year, the company’s outlook for revenue and profit is well above market expectations, reflecting management’s strong confidence in order conversion, AI infrastructure demand, and improvements in the traditional networking business.

From the margin guidance, Cisco did not offer a notably squeezed profit margin outlook due to growth in AI infrastructure orders. The first quarter’s adjusted gross margin and operating margin are expected to remain in line with the fourth quarter level of a 35.9% operating margin.

Besides revenue, profits, and orders, Cisco’s remaining performance obligations (RPO) and cash flow also improved.

In the fourth quarter, the company’s RPO stood at $46.7 billion, up 7% year-on-year. RPO is typically viewed as an important indicator of future revenue visibility—growth means the value of contracted but not yet recognized revenue has increased.

Operating cash flow was $5.4 billion, up 27% year-on-year, indicating that profit growth is well-supported by cash generation. In the fourth quarter, the company also returned $3.2 billion to shareholders, including a dividend of $0.42 per share and other capital returns.

For a mature technology hardware company, strong cash flows and ongoing dividends remain key supports for investor valuation. Although Cisco’s growth story is being reinvigorated by AI, its shareholder return profile has not disappeared.