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Cisco's Q4 Earnings Beat Estimates, Strong Networking Aids Revenues
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Key Takeaways
Cisco's Q4 revenues rose 18% to $17.252B, while non-GAAP EPS increased 23% to $1.22.
Networking revenues surged 28%, as AI infrastructure posted triple-digit growth and orders jumped 40%.
Cisco projects fiscal 2027 revenues of $72.2-$73.4B, with hyperscaler AI revenue expected at $7.5B.
Cisco Systems (CSCO - Free Report) reported fourth-quarter fiscal 2026 non-GAAP earnings of $1.22 per share, up 23% year over year and beating the Zacks Consensus Estimate by 4.27%. Broad networking demand and operating leverage supported the year-over-year growth.
Revenues increased 18% year over year to $17.252 billion, topping the consensus mark by 2.36%. Product revenues increased 24% year over year.
Product orders increased 35% year over year (up 25% excluding hyperscalers), while annualized recurring revenue (ARR) reached $32.1 billion, up 3% year over year, highlighting broad demand.
Cisco Systems, Inc. Price, Consensus and EPS Surprise
Remaining performance obligations (RPO) totaled $46.7 billion, up 7% year over year, with product RPO rising 9%, while services RPO increased 6% year over year. Total software revenues increased 11% year over year to $6.183 billion, while subscription revenues represented 48% of total revenues.
CSCO’s Networking Growth Accelerates
Networking revenues surged 28% year over year to $9.791 billion. The increase reflected triple-digit growth in AI infrastructure, double-digit growth in data center switching and continued growth in campus networking.
Networking product orders jumped 40%, marking the eighth consecutive quarter of double-digit growth. Campus networking orders advanced 20%, while data center networking orders increased more than 35%. Wi-Fi 7 accounted for more than half of total wireless orders in the quarter.
Hyperscaler AI infrastructure orders totaled $4 billion in the fourth quarter, taking fiscal 2026 orders to $9.3 billion, roughly 4.5 times the fiscal 2025 level. The fiscal-year mix was approximately 60% Silicon One-based systems and 40% optics.
Cisco also secured three new hyperscaler design wins, covering P200-powered scale-across systems, G200-powered scale-out systems and an optical line system. AI infrastructure orders from neocloud, sovereign and enterprise customers exceeded $400 million in the quarter and totaled $1.3 billion for fiscal 2026.
CSCO Security and Software Trends Improve
Security revenues increased 14% year over year to $2.226 billion. The entire security portfolio, including Splunk, recorded double-digit order growth. Firewall orders increased more than 30%, while more than 1,500 customers purchased newer offerings such as Secure Access, XDR, Hypershield and AI Defense during the quarter.
Collaboration revenues advanced 12% to $1.167 billion, while Observability revenues rose 6% to $275 million. Services revenues were essentially flat at $3.793 billion.
Cisco Balances Margin Pressure With Leverage
Non-GAAP gross margin was 66.3%, down 210 basis points (bps) year over year. Product gross margin fell 270 bps to 64.8%, primarily due to a higher hardware mix and memory costs, partly offset by productivity improvements and price increases. Services gross margin improved 80 bps to 71.6%.
Non-GAAP operating expenses were $5.243 billion, up 5%, but declined to 30.4% of revenues from 34.1% a year earlier.
Consequently, non-GAAP operating margin expanded to 35.9% from 34.3%, demonstrating operating leverage despite gross-margin pressure.
CSCO Cash Flow and Recurring Metrics
Cash, cash equivalents and investments totaled $15.918 billion at the end of the fiscal fourth quarter compared with $16.6 billion at the end of the third quarter of fiscal 2026.
Operating cash flow increased 27% year over year to $5.386 billion.
CSCO returned $3.161 billion to shareholders through $1.502 billion of share repurchases and $1.659 billion of dividends. The current program has $8.1 billion under remaining authorization.
Cisco Sets Strong Fiscal 2027 Outlook
For the first quarter of fiscal 2027, Cisco expects revenues between $18 billion and $18.2 billion. Non-GAAP earnings are projected at $1.32-$1.34 per share, with non-GAAP gross margin of 65-66% and operating margin of 35.5-36.5%.
For fiscal 2027, Cisco projects revenues of $72.2-$73.4 billion and non-GAAP earnings of $5.05-$5.11 per share.
Hyperscaler AI infrastructure revenues are expected to reach $7.5 billion, up from approximately $4 billion in fiscal 2026.
Sandisk, Teradyne and Microchip shares have jumped 474.7%, 111.2% and 24.9% year to date, respectively. Long-term earnings growth rate for Sandisk, Teradyne and Microchip is currently pegged at 48.16%, 54.38% and 45.48%, respectively.
View the Zacks #1 Rank List
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Cisco's Q4 Earnings Beat Estimates, Strong Networking Aids Revenues
Key Takeaways
Cisco Systems (CSCO - Free Report) reported fourth-quarter fiscal 2026 non-GAAP earnings of $1.22 per share, up 23% year over year and beating the Zacks Consensus Estimate by 4.27%. Broad networking demand and operating leverage supported the year-over-year growth.
Revenues increased 18% year over year to $17.252 billion, topping the consensus mark by 2.36%. Product revenues increased 24% year over year.
Product orders increased 35% year over year (up 25% excluding hyperscalers), while annualized recurring revenue (ARR) reached $32.1 billion, up 3% year over year, highlighting broad demand.
Cisco Systems, Inc. Price, Consensus and EPS Surprise
Cisco Systems, Inc. price-consensus-eps-surprise-chart | Cisco Systems, Inc. Quote
Remaining performance obligations (RPO) totaled $46.7 billion, up 7% year over year, with product RPO rising 9%, while services RPO increased 6% year over year. Total software revenues increased 11% year over year to $6.183 billion, while subscription revenues represented 48% of total revenues.
CSCO’s Networking Growth Accelerates
Networking revenues surged 28% year over year to $9.791 billion. The increase reflected triple-digit growth in AI infrastructure, double-digit growth in data center switching and continued growth in campus networking.
Networking product orders jumped 40%, marking the eighth consecutive quarter of double-digit growth. Campus networking orders advanced 20%, while data center networking orders increased more than 35%. Wi-Fi 7 accounted for more than half of total wireless orders in the quarter.
Hyperscaler AI infrastructure orders totaled $4 billion in the fourth quarter, taking fiscal 2026 orders to $9.3 billion, roughly 4.5 times the fiscal 2025 level. The fiscal-year mix was approximately 60% Silicon One-based systems and 40% optics.
Cisco also secured three new hyperscaler design wins, covering P200-powered scale-across systems, G200-powered scale-out systems and an optical line system. AI infrastructure orders from neocloud, sovereign and enterprise customers exceeded $400 million in the quarter and totaled $1.3 billion for fiscal 2026.
CSCO Security and Software Trends Improve
Security revenues increased 14% year over year to $2.226 billion. The entire security portfolio, including Splunk, recorded double-digit order growth. Firewall orders increased more than 30%, while more than 1,500 customers purchased newer offerings such as Secure Access, XDR, Hypershield and AI Defense during the quarter.
Collaboration revenues advanced 12% to $1.167 billion, while Observability revenues rose 6% to $275 million. Services revenues were essentially flat at $3.793 billion.
Cisco Balances Margin Pressure With Leverage
Non-GAAP gross margin was 66.3%, down 210 basis points (bps) year over year. Product gross margin fell 270 bps to 64.8%, primarily due to a higher hardware mix and memory costs, partly offset by productivity improvements and price increases. Services gross margin improved 80 bps to 71.6%.
Non-GAAP operating expenses were $5.243 billion, up 5%, but declined to 30.4% of revenues from 34.1% a year earlier.
Consequently, non-GAAP operating margin expanded to 35.9% from 34.3%, demonstrating operating leverage despite gross-margin pressure.
CSCO Cash Flow and Recurring Metrics
Cash, cash equivalents and investments totaled $15.918 billion at the end of the fiscal fourth quarter compared with $16.6 billion at the end of the third quarter of fiscal 2026.
Operating cash flow increased 27% year over year to $5.386 billion.
CSCO returned $3.161 billion to shareholders through $1.502 billion of share repurchases and $1.659 billion of dividends. The current program has $8.1 billion under remaining authorization.
Cisco Sets Strong Fiscal 2027 Outlook
For the first quarter of fiscal 2027, Cisco expects revenues between $18 billion and $18.2 billion. Non-GAAP earnings are projected at $1.32-$1.34 per share, with non-GAAP gross margin of 65-66% and operating margin of 35.5-36.5%.
For fiscal 2027, Cisco projects revenues of $72.2-$73.4 billion and non-GAAP earnings of $5.05-$5.11 per share.
Hyperscaler AI infrastructure revenues are expected to reach $7.5 billion, up from approximately $4 billion in fiscal 2026.
Zacks Rank & Stocks to Consider
Cisco currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Computer and Technology sector include Sandisk (SNDK - Free Report) , Teradyne (TER - Free Report) , and Microchip (MCHP - Free Report) . Each of the three stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Sandisk, Teradyne and Microchip shares have jumped 474.7%, 111.2% and 24.9% year to date, respectively. Long-term earnings growth rate for Sandisk, Teradyne and Microchip is currently pegged at 48.16%, 54.38% and 45.48%, respectively.