Cisco Systems Inc Earnings - Q4 2026 Analysis & Highlights
Cisco Systems delivered record fiscal 2026 results driven by a networking supercycle fueled by agentic AI adoption, with strong hyperscaler momentum, enterprise infrastructure modernization, and significant operating leverage, while guiding for continued acceleration in fiscal 2027 with $7.5 billion in AI infrastructure revenue.
Key Financial Results
Total revenue of $17.3 billion in Q4, up 18% year-over-year, with product revenue up 24% year-over-year.
Full fiscal year 2026 revenue of $63.3 billion, up 12% year-over-year, representing a record year for the company.
Non-GAAP earnings per share of $1.22 in Q4, up 23% year-over-year, and $4.33 for full fiscal year 2026, up 14% year-over-year, both records.
Non-GAAP net income of $4.9 billion in Q4, up 23%, and $17.2 billion for full fiscal year 2026, up 13%.
Total product orders up 35% year-over-year in Q4, with hyperscale orders up triple digits and excluding hyperscale, product orders up 25%.
Non-GAAP gross margin of 66.3% in Q4, down 210 basis points year-over-year but up 30 basis points quarter-over-quarter.
Non-GAAP operating margin of 35.9% in Q4, and 34.8% for full fiscal year 2026, up 40 basis points year-over-year.
Operating cash flow of $5.4 billion in Q4, up 27%, driven by strong revenue growth and operating leverage.
Business Segment Results
Networking product revenue grew 28% year-over-year in Q4, driven by triple-digit growth in AI infrastructure, double-digit growth in data center switching, and continued growth in campus networking.
Networking product orders grew 40% in Q4, driven by triple-digit growth in service provider routing and Acacia optics, and double-digit growth in data center switching, compute, campus switching, wireless, enterprise routing, and industrial IoT products.
Security revenue up 14% in Q4, reflecting strength in Splunk, Network Security, and SASE.
Collaboration revenue up 12% in Q4 with solid growth in Webex, devices, and contact center.
Services revenue of $3.8 billion in Q4, flat year-over-year.
Total software revenue of $6.2 billion, up 11%.
Enterprise product order growth accelerated to 21% year-over-year in Q4 with double-digit growth in every product category and geography.
Public Sector order growth accelerated to 30% year-over-year with continued momentum in EMEA and APJC and accelerated growth in the Americas driven by US Federal.
Service Provider & Cloud customer product orders grew 95% year-over-year, with four of the top hyperscalers each growing AI infrastructure orders in the triple digits.
Telco orders grew over 30% year-over-year in Q4.
Campus networking product orders grew 20% year-over-year in Q4.
Industrial IoT portfolio orders grew in double digits for nine consecutive quarters and continued to accelerate in Q4.
Firewall orders grew over 30% in Q4.
Collaboration business saw the best quarterly performance in seven years, with double-digit order growth in Q4 and video devices growing 40% year-over-year.
Total RPO of $46.7 billion, up 7%, with product RPO up 9%.
Total ARR of $32.1 billion, up 3%, with product ARR growth of 5%.
Total subscription revenue represented 48% of Cisco's total revenue.
Capital Allocation
$3.2 billion returned to shareholders in Q4 through share repurchases and dividends, comprised of $1.7 billion in quarterly cash dividend and $1.5 billion in share repurchases.
$12.7 billion returned to shareholders in fiscal 2026 through cash dividends and share repurchases, representing 99% of free cash flow.
$6.6 billion in quarterly cash dividends and $6.1 billion in share repurchases for full fiscal year 2026.
Dividend increased for the 15th consecutive year in fiscal 2026.
$8.1 billion remaining under share-repurchase program.
Total cash, equivalents, and investments of $15.9 billion at end of Q4.
Industry Trends and Dynamics
Accelerating adoption of agentic AI is fueling a networking supercycle, with customers investing in Cisco's networking stack for inferencing across cloud, on-premise, and edge environments.
Rise of agentic AI is expanding the threat landscape, driving demand for security and observability solutions to help monitor agent behavior and mitigate evolving threats.
AI infrastructure orders from hyperscalers reached $4 billion in Q4, bringing total for fiscal 2026 to $9.3 billion, approximately 4.5x fiscal year 2025 total.
Mix of AI infrastructure orders approximately 60% Silicon One-based systems and 40% Optics.
Acacia business had over $1 billion in orders in Q4, with over 850,400-gig and over 75,800-gig coherent pluggable optics shipped to date.
Networking portfolio achieved eighth consecutive quarter of double-digit growth, supporting view of multiyear, multibillion-dollar networking supercycle.
More than half of Cisco's customers purchase both campus and data center networking solutions, demonstrating differentiated platform approach.
AI infrastructure orders from neocloud, sovereign, and enterprise customers exceeded $400 million in Q4, bringing total for the year to over $1 billion.
Nexus switch orders tagged for AI deployments were up more than 85% sequentially.
Data center networking orders grew more than 35% year-over-year in Q4.
Wi-Fi 7 orders representing more than 50% of total wireless orders in Q4.
Entire security portfolio, including Splunk, saw double-digit order growth in Q4.
Over 1,500 customers purchased new security products including Secure Access, XDR, Hypershield, and AI Defense in Q4, bringing total net new customers to over 6,400 since launch.
Splunk added more than 280 new logos and secured highest number of competitive wins in any quarter in fiscal year 2026.
Cisco Cloud Control launched with nearly 4,500 enterprises signed up since launch.
Cisco IQ has over 8,600 customers.
145,000 support cases resolved entirely by AI in fiscal 2026 with zero human intervention.
Circuit proprietary AI assistant supported over 75 million prompts in Q4.
Competitive Landscape
Cisco won three new design wins with hyperscalers in Q4, including one for Silicon One P200-powered system for scale-across, bringing total to three scale-across design wins for the P200 since launch.
Additional hyperscale design wins in Q4 for scale-out use case with G200-powered system and one for managed optical fiber network leveraging line system technology.
Optical win is strategic as it positions Cisco as alternative supplier to incumbent competitor and has potential to disrupt traditional delivery of managed optical fiber networks.
Line of sight to multiple AI design wins expected over next six months across G300, G200, and P200 Silicon One chip designs as well as for Optics.
Silicon One is industry's most scalable and programmable architecture for wide range of use cases and infrastructure designs.
Plan to roll out Silicon One comprehensively across high-performance networking systems by fiscal year 2029, giving greater control over supply chain and innovation pipeline.
Control of silicon, systems, and software will enable development of more performance secure networking, reinforcing competitive differentiation and positioning for market share gains.
Leading US global bank placed order for 1,000 Cisco data center smart switches, replacing major networking competitor and major firewall competitor, transitioning to secure networking architecture only Cisco can provide.
Leading frontier AI company chose Cisco's campus networking solution including Wi-Fi 7 access points, smart switches, and end-to-end segmentation.
Cisco is uniquely positioned to help customers assess potential exposure and implement quantum safe protection across devices, networks, and data using post-quantum cryptography.
Some of Cisco's newest systems including Secure routers, smart switches, wireless controllers, and secure firewall platforms are PQC-compliant.
Cisco has rebuilt relationships with hyperscaler customers through combination of key investments and acquisitions in silicon, optics, and security over past six years.
Macroeconomic Environment
Enterprise customers are reprioritizing within existing budgets to fund AI readiness, Mythos readiness, and quantum readiness initiatives.
Customers are beginning to view AI readiness, Mythos readiness, and quantum readiness in similar vein to how they've looked at cybersecurity spend over last three to four to five years.
Shift of dollars from other areas in organizations to IT to fund infrastructure modernization and security initiatives.
Customers recognize they are in midst of probably fastest moving technology transition ever seen, requiring balance between moving with caution and not moving too slow to avoid competitive disadvantage.
Customers recognize that pausing would put companies at risk from competitive differentiation.
Growth Opportunities and Strategies
AI infrastructure for hyperscalers projected to grow to $7.5 billion in fiscal year 2027, supported by demand growth and market share gains.
Approximately 6% of total revenue was from AI infrastructure for hyperscalers in fiscal 2026, up from less than 2% in fiscal 2025.
Scale-across opportunity is massive, with network traffic generated from AI-based scale-across approximately 14x what it was historically.
Cisco is uniquely positioned for scale-across with P200, optics, open line systems, and coming soon multi-rail optical systems.
On-premise AI infrastructure will become important option for enterprise customers as they look to optimize both business value and cost of AI.
Enterprises need GPU clusters on premise and at edge with low latency high-bandwidth networking and built-in security, observability, and automation.
Cisco will benefit regardless of how or where customers choose to deploy AI because of unmatched depth and breadth of portfolio and expertise in each scenario.
Cisco Cloud Control incorporates key innovations such as AI Canvas and Cisco IQ, providing single management plane and unified data layer for all Cisco products.
Cisco launched Antares, a family of open-weight small language models designed to help cybersecurity professionals pinpoint known vulnerabilities within code base.
Resilient Infrastructure Services powered by Cisco IQ help customers identify vulnerabilities, prioritize actions, and implement continuous protection autonomously.
Generative AI and agentic systems being used across customer experience organization, dramatically expediting quote turnaround and case resolution times and driving higher renewal rates.
Circuit runs on secure AI factory infrastructure, which improves GPU utilization and automatically routes each task to appropriate large language model.
Customers are modernizing workplaces with strong demand for campus networking solutions.
Infrastructure modernization being driven by both scaling AI initiatives and strengthening defenses against rapidly evolving cyber landscape.
Quantum computing creates risk both today and in future, requiring customers to assess exposure of infrastructure to these risks.
Splunk solutions are being integrated into security offerings and contributing to several whole portfolio agreements in Q4.
Complementary M&A opportunities being pursued to capitalize on significant growth opportunities ahead.
Acquisitions of Galileo Technologies, Inc., and Astrix Securities Limited closed in Q4 to further expand observability and security offerings.
Financial Guidance and Outlook
Fiscal Q1 2027 revenue guidance of $18.0 billion to $18.2 billion.
Fiscal Q1 2027 non-GAAP gross margin guidance of 65% to 66%.
Fiscal Q1 2027 non-GAAP operating margin guidance of 35.5% to 36.5%.
Fiscal Q1 2027 non-GAAP earnings per share guidance of $1.32 to $1.34.
Fiscal Q1 2027 non-GAAP effective tax rate assumption of approximately 18.5%.
Fiscal year 2027 revenue guidance of $72.2 billion to $73.4 billion, implying 15% growth at midpoint.
Fiscal year 2027 non-GAAP earnings per share guidance of $5.05 to $5.11, implying 17% growth at midpoint.
Core business (excluding $7.5 billion AI revenue) expected to grow at approximately 10% in fiscal 2027.
Security and observability expected to grow from low-single-digit growth in fiscal 2026 to high single-digit growth in fiscal 2027.
Services expected to turn positive in fiscal 2027 and see gradual improvement through year, with full year low single-digit growth range.
Operating margin of approximately 35% expected for full year fiscal 2027, representing high watermark for company.
Slight gross margin headwind expected as company moves through fiscal 2027 due to high volumes of hardware and increased revenue mix to hardware.
Implied networking revenue growth of approximately 13% in Q2 through Q4 due to tougher comparisons from prior year.
AI infrastructure orders expected to be meaningfully higher in fiscal 2027 than fiscal 2026.
Gradual increases in AI hyperscale revenue expected from Q1 through Q4 of fiscal 2027.
Company expects to continue focus on driving durable growth with financial discipline, driving operating leverage and continued capital returns.
Strategic investments in organic innovation and complementary M&A opportunities to be pursued while maintaining disciplined spend management.
