Cisco Grows 24% for Its Fastest Pace in 15 Years and Lifts Its Hyperscaler AI Target to $9 Billion, but Thinner Margins Show the Price of the Boom

Cisco just delivered the kind of quarter it has not posted in more than a decade. The networking giant reported record fiscal first-quarter revenue of $18.5 billion on November 12, up 24% from a year earlier, and said that was its strongest revenue and non-GAAP earnings-per-share growth in over 15 years. It also raised its full-year outlook and lifted its forecast for AI infrastructure revenue from hyperscalers to $9 billion, more than double what it booked in fiscal 2026, according to the company’s earnings release.

The results land in a nervous week for the AI trade, after Jensen Huang’s resignation from Nvidia rattled investors. Cisco’s message was that the money behind AI is still flowing, and that more of it is now going into the networks that connect the chips, not only the chips themselves.

The Numbers Beat Wall Street

Adjusted earnings came in at $1.40 per share against the $1.33 analysts expected, and revenue of $18.5 billion topped the $18.1 billion consensus, CNBC reported, citing LSEG estimates. Revenue was up from $14.88 billion a year ago, and net income rose to $4.6 billion, or $1.14 per share, from $2.9 billion.

The growth was concentrated in hardware. Product revenue rose 32% while services revenue rose just 1%. Inside products, networking jumped 43%, while security grew 7%, collaboration 8% and observability 2%. Every region grew by double digits: the Americas were up 28%, EMEA 18% and Asia-Pacific, Japan and China 21%.

Cisco raised its fiscal 2027 guidance to revenue of $74.8 billion to $75.8 billion and non-GAAP EPS of $5.47 to $5.53. For the current quarter it expects $18.0 billion to $18.2 billion in revenue and non-GAAP EPS of $1.34 to $1.36.

Orders Point to a Longer Cycle

Revenue shows what shipped. Orders show what customers plan to buy, and they were strong too. On the earnings call, Cisco said total product orders grew 21% year over year, and 14% even after stripping out hyperscalers. Enterprise orders rose 15%, public sector orders 13%, telecom orders roughly 20%, and orders from service provider and cloud customers 47%.

Networking product orders grew 28%, Cisco’s ninth straight quarter of double-digit growth, with gains across every product family from campus switching and wireless to data center switching and routing. Management described this as the early stage of a “multi-year, multi-billion dollar networking super cycle.” CEO Chuck Robbins told analysts the $9 billion hyperscaler AI figure would be about 12% of total company revenue, CRN reported.

The AI demand is also spreading beyond the biggest cloud companies. Cisco said orders for Nexus data center switches tagged for AI deployments rose 47% as neocloud, sovereign and enterprise buyers accelerated their spending. It also landed three new AI design wins in the quarter, two for its Silicon One P200-based systems and one for 1.6-terabit optics.

The Catch: Margins Are Slipping

Under the headline beat, the quarter shows what this growth costs. Cisco’s non-GAAP gross margin fell to 65.6% from 68.1% a year earlier, and product gross margin dropped to 63.7% from 67.2%. That fits a business selling more high-volume AI hardware to a handful of very large, very demanding buyers. Its guidance calls for non-GAAP gross margin of 65% to 66% next quarter, so the pressure isn’t going away yet.

Cisco made up for it by keeping spending tight. Non-GAAP operating expenses rose only 2% while revenue rose 24%, which pushed non-GAAP operating margin to a record 37.8%. That kind of operating leverage is what turned double-digit revenue growth into a 40% jump in adjusted EPS.

Cisco’s shares closed at $102.01 on Thursday ahead of the report, SquawkNews noted, well below their 52-week high of $130.37, a sign that investors had been demanding proof the AI networking story would hold up.

Why It Matters for Business Leaders

AI is becoming an infrastructure bill, not just a software bill. Cisco’s results show that companies deploying AI are paying for the plumbing as well as the models. When enterprise orders rise 15% and AI-tagged switch orders rise 47%, that tells you mainstream businesses, not only tech giants, are rebuilding networks to carry AI workloads. Budget plans that cover AI subscriptions but leave out the network, power and security upgrades underneath them are likely to fall short.

Supply could get tighter. Cisco isn’t the only supplier seeing this. On the same day, AI chipmaker Cerebras raised its 2026 revenue forecast to $940 million to $960 million and said delivery delays on its OpenAI contract came from industry-wide shortages of land and power, CNA reported. If hyperscalers keep absorbing networking gear and power capacity, smaller buyers may face longer lead times. Companies planning data center or campus network refreshes in 2027 should lock in timelines early.

Concentration risk cuts both ways. Growing reliance on hyperscalers helps Cisco’s top line but weighs on margins and leaves results tied to the capital plans of a few customers. Investors and suppliers in the AI supply chain should watch whether the 14% order growth outside hyperscalers holds up. That is the healthier, more diversified part of the demand.

Sovereignty is turning into a sales category. Cisco said it is expanding its sovereign critical infrastructure portfolio, which can run in on-premise and air-gapped environments, from Europe to Canada, with more countries to follow. For multinationals, where data and AI workloads physically live is quickly becoming a procurement requirement and not just a compliance footnote.

The Bottom Line

Cisco’s quarter is a strong counterweight to this week’s worries about AI spending. Record revenue, broad-based orders and a raised $9 billion hyperscaler target suggest the AI build-out is moving into the network layer and into mainstream enterprises. The trade-off is thinner gross margins and heavier dependence on a few giant buyers. For now, Cisco is managing that with tight cost control, and the next few quarters of orders will show whether this “super cycle” has the staying power management promises.

Edited by Coron @QUE.COM
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