Cisco Q1 2026 Earnings Beat on AI-Driven Demand
Key Points
- Cisco reported fiscal Q1 2026 revenue of $14.9 billion, an 8% year-over-year increase, surpassing analyst estimates.
- Adjusted earnings per share were $1.00, beating consensus estimates of $0.98, driven by strong AI infrastructure and networking demand.
- The company raised its full-year fiscal 2026 revenue guidance to $60.2 billion–$61 billion and adjusted EPS guidance to $4.08–$4.14.
- Product orders grew 13% year-over-year, with significant growth in networking products and a strategic partnership expansion with NVIDIA.
Strong Q1 2026 Financial Performance Driven by AI Demand
Cisco Systems Inc. reported fiscal first-quarter 2026 revenue of $14.9 billion, representing an 8% increase compared to the same period last year and exceeding Wall Street estimates of $14.77 billion. Adjusted earnings per share (EPS) were $1.00, surpassing the consensus estimate of $0.98. The company’s GAAP net income was $2.9 billion, or $0.72 per share, up 5% and 6% respectively year-over-year. Product revenue increased 10% to $11.08 billion, led by a 15% rise in networking products, while services revenue grew 2% to $3.81 billion. The strong financial results were attributed primarily to robust demand for AI infrastructure and campus networking solutions, reflecting Cisco’s strategic positioning in the AI-driven market. The company’s gross margins remained solid, with GAAP gross margin at 65.5% and non-GAAP gross margin at 68.1%. Operating income on a GAAP basis rose 43% to $3.4 billion, with a GAAP operating margin of 22.6%, indicating improved operational efficiency.
AI Infrastructure and Strategic Partnerships Fuel Growth
Cisco’s growth momentum was significantly supported by its AI infrastructure business, which saw orders from large cloud providers reach $1.3 billion in the quarter, up from $800 million in the prior quarter. The company targets $3 billion in revenue from hyperscale AI infrastructure for fiscal 2026, expecting to double orders from fiscal 2025. CEO Chuck Robbins highlighted a strong pipeline exceeding $2 billion in the enterprise segment, with expanding AI use cases driving demand. Cisco’s partnership with NVIDIA was expanded to enhance its AI infrastructure offerings, providing a competitive edge in the market. The company is also advancing its Silicon One portfolio, which is gaining traction with hyperscalers due to its performance, programmability, and energy efficiency, with full integration across Cisco’s portfolio expected by fiscal 2029. These developments underscore Cisco’s strategic focus on capitalizing on the AI build-out, which Robbins compared favorably to the late 1990s internet expansion, noting a faster pace and stronger financial backing.
Product and Geographic Growth Amid Cloud Transition Challenges
Product orders grew 13% year-over-year, with double-digit growth in networking products for the fifth consecutive quarter. Growth was broad-based across all geographies, including the Americas (up 9%), EMEA (up 5%), and APJC (up 5%). The service provider and cloud sectors showed particularly strong demand. However, security product revenue declined by 2%, impacted by a transition to cloud subscriptions in the Splunk business and declines in prior generation products. This shift to cloud subscriptions, while causing short-term revenue timing issues, is expected to benefit long-term adoption and innovation. Splunk’s annual recurring revenue (ARR) and remaining performance obligations (RPO) grew double digits, indicating strong demand despite the revenue impact. Collaboration product revenue fell 3%, reflecting some softness in that segment. Overall, Cisco’s diversified portfolio showed resilience, with networking and observability products driving growth.
Raised Guidance and Capital Return Reflect Confidence
Following the strong quarter, Cisco raised its fiscal 2026 guidance, now expecting revenue between $60.2 billion and $61 billion, up from prior guidance of $59 billion to $60 billion. Adjusted EPS guidance was increased to a range of $4.08 to $4.14 per share, compared to the previous range of $4.00 to $4.06. For the fiscal second quarter ending in January 2026, Cisco forecasted revenue of $15 billion to $15.2 billion and adjusted EPS of $1.01 to $1.03, both exceeding analyst expectations. The company returned $3.6 billion to shareholders in the quarter through dividends and share repurchases, representing 125% of free cash flow. Approximately 29 million shares were repurchased at an average price of $68.28 per share, with $12.2 billion remaining authorized for repurchases. Cisco’s CFO Mark Patterson emphasized the company’s multi-year, multi-billion-dollar campus refresh opportunity driven by AI-related demand and the critical role of secure networking in customers’ AI strategies.
Key Takeaways
- Cisco’s fiscal Q1 2026 results exceeded expectations, driven by strong AI infrastructure demand and networking product growth.
- The company’s strategic partnership with NVIDIA and expansion of AI-focused product lines position it well for continued growth in AI markets.
- While security revenue faced short-term headwinds due to cloud subscription transitions, long-term demand indicators remain positive.
- Raised full-year guidance and robust capital returns reflect Cisco’s confidence in sustaining growth amid evolving technology trends.
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