Cisco reported fiscal fourth-quarter results for the period ending July 25, 2026, that surpassed Wall Street expectations, alongside a stronger-than-anticipated outlook for the current fiscal year.

The company's revenue rose 18% year-over-year to a record $17.3 billion, beating analyst estimates by nearly 3%. On an adjusted non-GAAP basis, earnings per share (EPS) grew 23% to $1.22, exceeding forecasts by more than 4%. Adjusted operating profit climbed 23% to $6.2 billion, surpassing expectations by approximately 6%, with an adjusted operating margin of 35.9%.

Artificial intelligence was the standout driver this quarter. Cisco (CSCO) secured $4 billion in AI infrastructure orders from hyperscale cloud providers during the fourth quarter, representing 43% of the full fiscal year 2026 total of $9.3 billion. Product orders increased 35% year-over-year, and even excluding hyperscalers, they still grew by 25%, indicating demand is not solely reliant on major AI clients.

Cisco attributed its strong performance to "broad and record demand for Cisco technology," suggesting that AI data center networking equipment is becoming a key growth engine. The company's guidance for fiscal 2027 was notably higher than analysts' projections. It expects revenue of $72.2 billion to $73.4 billion, with the midpoint approximately 6% above consensus, and adjusted EPS of $5.05 to $5.11, also roughly 6% above market estimates. For the current quarter, Cisco forecasts revenue of $18.0 billion to $18.2 billion and adjusted EPS of $1.32 to $1.34, both exceeding expectations.

However, the stock's initial positive reaction faded after the earnings release. Shares, which closed nearly 2.9% higher on Wednesday, initially jumped nearly 8% in after-hours trading before reversing course to decline by over 6%. This suggests that amid a crowded AI trade with high expectations and increased scrutiny on order sustainability, short-term traders opted to reprice the stock.

Analysts view the price movement as a reflection of the market shifting focus to the durability of AI orders, dependence on traditional networking businesses, and whether the stock's prior valuation had already priced in the strong results.


Revenue and Profit Exceed Forecasts, Led by Product Segment

Fourth-quarter revenue came in at approximately $17.25 billion to $17.3 billion, above the FactSet consensus of around $16.84 billion and the broader market estimate of $16.8 billion to $16.9 billion, reflecting 18% growth. Net income was $3.86 billion, or $0.97 per share, compared to $2.55 billion, or $0.64 per share, in the same period last year. Adjusted EPS of $1.22 exceeded the analyst consensus of $1.17.

Product revenue increased 24% year-over-year, serving as the primary growth driver, while services revenue remained largely flat. This mix indicates that Cisco's current growth is fueled by a rebound in hardware and infrastructure spending, particularly in AI data centers and network upgrades. Operating efficiency remained strong, with adjusted operating profit of $6.2 billion beating the market estimate of $5.85 billion and an adjusted operating margin of 35.9%.

Cisco also noted that in fiscal 2026, it achieved its highest productivity metrics in 30 years, measured by revenue per employee, non-GAAP operating margin, and earnings per employee.


Networking Business Drives Growth, Orders Show Broad-Based Demand

Networking remained Cisco's most significant growth engine, with revenue of $9.79 billion, up 28% year-over-year, making it the largest and fastest-growing segment. Other segments grew more modestly: Security revenue rose 14% to $2.23 billion, Collaboration revenue increased 12% to $1.17 billion, and Observability revenue grew 6% to $275 million.

Order data reinforced the demand recovery. Product orders grew 35% year-over-year, and even excluding hyperscalers, they still rose 25%. Networking orders increased 40% year-over-year, marking the eighth consecutive quarter of double-digit growth. This data is crucial for the market, as it shows that while AI hyperscaler orders are the most notable component, they are not the sole source of growth. Enterprise networks, traditional customers, and broader IT infrastructure demand are also improving, supporting Cisco's characterization of "broad-based demand."


AI Infrastructure Orders Highlight the Quarter, Reaching $9.3 Billion for the Year

The most attention-grabbing figure was the $4 billion in AI infrastructure orders from hyperscale cloud providers in the fourth quarter, bringing the full-year fiscal 2026 total to $9.3 billion. This underscores Cisco's growing role in AI data center construction. Historically viewed as a traditional networking equipment giant focused on enterprise networks, campus networks, switches, and routers, Cisco is now capitalizing on the increased demand for high-speed networking, low-latency connections, and data center interconnects driven by AI training and inference clusters.

Bloomberg Intelligence analyst Woo Jin Ho expects AI momentum to remain robust. Raymond James analyst Simon Leopold noted that Cisco's Silicon One networking chip line is benefiting from supply constraints at competitors, particularly shortages of Broadcom's related products. Cisco has also announced a restructuring plan to allocate more resources to the AI market and plans to cut less than 5% of its workforce, with potential severance and other one-time costs of up to $1 billion.


First Quarter and Full-Year Fiscal 2027 Guidance Significantly Exceeds Expectations

While the fourth-quarter results were impressive, the guidance represents a more significant upward revision of market expectations. For the first quarter of fiscal 2027, Cisco expects revenue of $18.0 billion to $18.2 billion, well above the market estimate of around $16.8 billion. Adjusted EPS is forecast at $1.32 to $1.34, compared to the market consensus of about $1.16 to $1.17. Adjusted gross margin is projected at 65% to 66%, and adjusted operating margin at 35.5% to 36.5%.

For the full fiscal year 2027, Cisco anticipates revenue of $72.2 billion to $73.4 billion, significantly above the market estimate of approximately $68.69 billion to $69.12 billion. Adjusted EPS is expected to be $5.05 to $5.11, compared to the market estimate of about $4.80 to $4.84. Both quarterly and annual outlooks reflect management's confidence in order conversion, AI infrastructure demand, and improvements in the traditional networking business. The margin guidance suggests that the company does not expect significant pressure from AI infrastructure orders, with adjusted operating margins remaining in the 35.5% to 36.5% range.


Remaining Performance Obligations and Cash Flow Improve, Shareholder Returns Steady

Beyond revenue and profit, Cisco's remaining performance obligations (RPO) and cash flow also showed improvement. RPO reached $46.7 billion in the fourth quarter, up 7% year-over-year, serving as a key indicator of future revenue visibility. Operating cash flow was $5.4 billion, up 27% year-over-year, reflecting strong cash generation from profit growth. The company also returned $3.2 billion to shareholders during the quarter, including a dividend of $0.42 per share.

For a mature tech hardware company, strong cash flow and consistent dividends remain important supports for investor valuation. While Cisco's growth narrative is being reopened by AI, its shareholder return characteristics have not diminished.