Cisco Q4 Earnings Call Centers on AI Networking Supercycle

CSCO Frames a Networking Supercycle

CEO Robbins said total product orders rose 35% year over year in the fourth quarter and 25% excluding hyperscalers. Networking orders increased 40%, marking an eighth straight quarter of double-digit growth.

Robbins tied the cycle to AI traffic, campus modernization, data-center investment and security requirements. Enterprise product orders rose 21%, public-sector orders climbed 30%, and service-provider and cloud orders advanced 95%.

Robbins stressed breadth, with double-digit order growth across data-center switching, campus switching, wireless, enterprise routing and industrial IoT.

Cisco Lifts AI Infrastructure Ambition

CEO Robbins said Cisco took $4 billion of hyperscaler AI infrastructure orders in the fourth quarter, bringing fiscal 2026 orders to $9.3 billion. About 60% were Silicon One-based systems, and 40% were optics.

Cisco expects hyperscaler AI infrastructure revenues of $7.5 billion in fiscal 2027, up from about $4 billion in fiscal 2026. Robbins also cited three P200 scale-across design wins with separate hyperscalers.

Executive vice president and CFO Mark Patterson said AI revenues should rise gradually from the first quarter through the fourth quarter. He added that fiscal 2027 AI orders should be meaningfully higher as Cisco shifts its annual focus from orders to revenues.

CSCO Sees Core Growth Beyond AI

CFO Patterson said excluding the $7.5 billion hyperscaler AI target leaves the core business growing about 10% in fiscal 2027. He expects security and observability to move from low-single-digit to high-single-digit growth.

Patterson also expects services to return to low-single-digit growth in fiscal 2027.

CSCO’s fourth-quarter non-GAAP EPS of $1.22 topped the Zacks Consensus Estimate of $1.17, while revenues of $17.25 billion exceeded the $16.85 billion consensus mark. Patterson credited operating leverage and disciplined expense management.

Cisco Trades Gross Margin for Scale

CFO Patterson guided first-quarter fiscal 2027 non-GAAP gross margin to 65% to 66% and operating margin to 35.5% to 36.5%. He said higher hardware mix and memory costs will weigh modestly on gross margin.

Patterson said operating margin better reflects hyperscaler economics because the business requires limited incremental operating expense. The fiscal 2027 outlook implies an operating margin of about 35%.

CEO Robbins reinforced that lower gross-margin opportunities can still be highly profitable when revenues scale without comparable expense growth.

CSCO Q&A Tests Demand Durability

An Evercore ISI analyst asked whether stronger growth could represent a peak. Robbins said hyperscaler AI, telecom buildouts, enterprise modernization and campus refresh activity support a longer cycle.

A UBS analyst questioned the $7.5 billion AI revenue target relative to the order base. CFO Patterson called the target prudent because hyperscaler orders are large, nonlinear and often placed well ahead of delivery.

A JPMorgan analyst asked whether enterprise budgets could become stretched. CEO Robbins said customers are reprioritizing budgets and shifting spending toward IT as AI readiness, security and modernization become higher priorities.

Cisco Keeps Focus on Profitable Growth

Management's fiscal 2027 outlook calls for revenues of $72.2 billion to $73.4 billion and non-GAAP EPS of $5.05 to $5.11. CFO Patterson also said Cisco has adequate supply to support the guide and additional demand.

CEO Robbins closed by emphasizing Cisco's silicon, optics, systems, security and observability portfolio. The priority remains capturing the networking cycle while preserving expense discipline and capital returns.

CSCO’s Zacks Rank and Style Score Signals

CSCO carries a Zacks Rank #3 (Hold). Its Style Scores are mixed, with a Momentum Score of B, Growth Score of D, Value Score of F and VGM Score of F. Under the Zacks framework, higher Style Scores are more favorable, particularly when paired with top Zacks Ranks. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Rank reflects earnings estimate revisions and can change as analysts update forecasts after the just-reported results. The current combination is, therefore, a snapshot rather than a fixed assessment of future performance.

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