Cisco Reports 7.6% Revenue Growth, AI Orders Surge 33%

Cisco Systems, a prominent technology company, has reported robust financial results for its fourth fiscal quarter, which ended on July 26. The company's revenue grew by 7.6%, reaching 14.7 billion dollars. Adjusted earnings per share stood at 99 cents, surpassing market expectations of 14.6 billion dollars in sales and 98 cents per share in earnings. The adjusted gross margin was 68.4%, slightly higher than the market's anticipated 68.2%.

Networking business accounted for the lion's share of the revenue, totaling 7.34 billion dollars, in line with expectations. Service revenue amounted to 3.79 billion dollars. The company saw double-digit growth in network product orders, driven by demand in areas such as network scale infrastructure, switching equipment, enterprise routing systems, industrial IoT, and servers.

For the new fiscal year, Cisco has provided a cautious outlook despite the growing sales of its AI projects. The company expects revenue to range between 59 billion dollars and 60 billion dollars, aligning with Wall Street's average estimate of 59.5 billion dollars. Some optimistic analysts had projected revenue to exceed 61 billion dollars. The company also anticipates its full-year adjusted earnings per share to be between 4 dollars and 4.06 dollars, matching the expected 4.03 dollars.

For the first quarter of the 2026 fiscal year, Cisco forecasts revenue between 14.65 billion dollars and 14.85 billion dollars, with a midpoint of 14.75 billion dollars, exceeding the expected 14.65 billion dollars. The adjusted earnings per share are projected to be between 97 cents and 99 cents, compared to the expected 97 cents.

Cisco's Chief Financial Officer noted that the guidance assumes current tariff policies will remain in effect until the end of 2026. The company will continue to leverage its global supply chain team to mitigate the impact of tariffs when appropriate. While there has been no indication of demand being pulled forward, tariffs have had a minimal impact on demand during the quarter and throughout the fiscal year.

Like many of its peers, Cisco is seeking to capitalize on the burgeoning AI spending. The company reported that its AI business generated approximately 1 billion dollars in revenue for the fiscal year 2025. However, this sector is becoming increasingly competitive, with companies like Broadcom and Hewlett Packard Enterprise also vying for the same market.

Cisco's CEO highlighted that federal enterprises are expected to see business growth in the new fiscal year. The company has been adapting to changes in government procurement due to spending cuts under the Trump administration. To diversify its risk, the company acquired Splunk in 2024 for 28 billion dollars to bolster its security and monitoring software business.

Cisco has not seen the same surge in investor interest due to AI technology as some of its peers. However, the company is seen as having a strong strategy for future growth and a favorable position in this area. Major tech companies like Microsoft, Amazon, and Alphabet are increasing their investments to address capacity constraints that have limited their ability to meet AI demand, despite spending tens of billions of dollars over several quarters.

Cisco reported that orders for AI infrastructure from large cloud service providers reached over 800 million dollars this quarter, up from 600 million dollars in the previous quarter. This brings the total order value for the fiscal year 2025 to over 2 billion dollars, more than double the initial target. The favorable investment environment for large-scale cloud services is driving IT infrastructure financing, creating a beneficial environment for Cisco.

Cisco has partnered with Humain, a Saudi Arabian AI company, and is set to play a role in the UAE's "Star Gate" project. The CEO mentioned that these collaborations in the Middle East will be further strengthened in the second half of the 2026 fiscal year. As the largest manufacturer of production and operation computer networks and internet-related equipment, Cisco aims to be a core system supplier providing AI software training services and large-scale operation of the software.

The CEO explained, "We expect sovereign AI opportunities to gradually heat up in the second half of the 2026 fiscal year. Cisco will be the core system supplier for these large-scale AI training and inference clusters, playing a crucial role in their development and ultimate large-scale deployment."