Cisco Grew 24 Percent to $18.5 Billion, Its Fastest in 15 Years, and Raised Its AI Infrastructure Target to $9 Billion

Cisco reported $18.5 billion of revenue for its fiscal first quarter, ended October 24, up 24 percent year over year and the company's fastest growth in more than 15 years. GAAP net income rose 59 percent to $4.6 billion, non-GAAP earnings per share came in at $1.40 against analyst expectations near $1.33, and non-GAAP operating margin reached a record 37.8 percent. Chief executive Chuck Robbins called it the strongest revenue and earnings growth the company has posted in over a decade and a half.

The mix explains the acceleration. Product revenue grew 32 percent while services grew 1 percent, and networking alone jumped 43 percent to $11.13 billion. Security rose 7 percent to $2.12 billion, collaboration 8 percent to $1.14 billion, and observability 2 percent to $279 million. Every region grew, with the Americas up 28 percent, EMEA up 18 percent and Asia-Pacific, Japan and China up 21 percent, where product orders climbed 57 percent.

The AI number is the one investors came for. Cisco raised its expectation for AI infrastructure revenue from hyperscalers to $9 billion in fiscal 2027, from $7.5 billion previously and more than double the roughly $4 billion booked in fiscal 2026. Management expects hyperscale AI to be about 12 percent of total revenue this fiscal year, double last year's 6 percent. Fiscal 2026 AI orders from those customers reached $9.3 billion, including $4 billion in the fourth quarter alone. Over the past five quarters Cisco has booked 18 AI design wins, three of them last quarter, and landed its first 1.6-terabit optics socket at a hyperscaler. The G300 platform has begun shipping to labs.

Demand is lumpy, though. Total product orders rose 21 percent, down from 35 percent the previous quarter, and UBS pressed management on a sequential decline in hyperscaler AI orders. Robbins argued the annual trend remains strong and that the business has no linear relationship to quarters, which is why the company switched to disclosing AI revenue rather than orders. "Some quarters will be big, some will be smaller," he said, reiterating that Cisco is in the very early stages of a multiyear, multibillion-dollar network supercycle.

Hardware-heavy growth costs margin. Non-GAAP gross margin fell to 65.6 percent from 68.1 percent, and GAAP gross margin to 63.7 percent from 65.5 percent, as switches and optics displaced higher-margin software and services, with the global memory shortage raising component costs. Analysts called the decline modest given those pressures. Operating leverage absorbed it: non-GAAP net income rose 39 percent to $5.6 billion, outpacing revenue growth, and operating cash flow climbed 36 percent to $4.4 billion.

Guidance went up with the quarter. Cisco now expects fiscal 2027 revenue of $74.8 billion to $75.8 billion, from $72.2 billion to $73.4 billion, and non-GAAP earnings of $5.47 to $5.53 per share. For the current quarter it guided to $18.0 billion to $18.2 billion of revenue, above consensus near $17.9 billion. Chief financial officer Mark Patterson said $1.5 billion of the $2.5 billion guidance raise comes from hyperscale and $1 billion from the core business.

The stock barely moved, closing up 1.24 percent at $102.01 before slipping about 1.4 percent after hours, despite the best print in 15 years. Shares are up roughly 35 percent this year against about 9 percent for the Nasdaq, which suggests the re-rating already happened.

What it means: Cisco spent the generative AI boom on the sidelines while Nvidia and Broadcom absorbed the attention, and this quarter shows the quieter second-order trade, the networking, optics and power distribution that has to exist before a cluster can run. The caveat is that this revenue is hardware at hardware margins, tied to a handful of hyperscaler build schedules that management itself describes as lumpy. If AI capex keeps compounding, Cisco's problem is capacity and margin, not demand. If it plateaus, the 43 percent networking growth line stops looking like a supercycle and starts looking like a spike.