Cisco Systems delivered a clean double beat in its Q4 earnings report, with revenue of $17.3 billion surpassing the $16.83 billion consensus estimate by 3%. As reported by multiple sources, the networking giant also exceeded EPS expectations with adjusted earnings of $1.22 versus the $1.17 expected, representing a 23% year-over-year increase. The company's growth accelerated sharply, with revenue rising 18% year-over-year and EPS climbing 23% year-over-year, marking the strongest quarterly performance in recent years. Shares initially surged 3% following the report, reflecting investor confidence in the company's continued AI infrastructure momentum. However, shares fell about 4% in extended trading after closing at $123.88, as investors were disappointed by the company's AI revenue guidance for fiscal 2027.
Cisco's AI revenue guidance of $7.5 billion for fiscal 2027 disappointed investors who've seen the world's largest networking gear supplier amass $9.3 billion in artificial intelligence-related orders over the past year. According to UBS analyst David Vogt, "That just strikes me as very, very conservative" during a conference call with Cisco executives. AI sales will make up about 10% of Cisco's projected total revenue of $72.2 billion to $73.4 billion in fiscal 2027, marking the first time Cisco has given a full-year AI revenue forecast. CFO Mark Patterson described the AI sales guidance as "a good, prudent guide for the year", noting that AI orders are "non-linear orders that are massive in scale and are usually placed well ahead of time." The conservative guidance overshadowed Cisco's strong Q4 performance and raised questions about how the company will capitalize on its substantial AI order backlog.
Cisco reported record Q4 revenue of $17.3 billion, net income of $3.9 billion ($0.97 per share) on a GAAP basis, and non-GAAP net income of $4.9 billion ($1.22 per share). As reported by Cisco, Q4 total product orders surged 35% year-over-year, with orders excluding hyperscale customers rising 25%, demonstrating broad-based demand across the portfolio. Networking product orders grew 40% year-over-year in Q4, marking the eighth consecutive quarter of double-digit growth and validating the company's strategic pivot toward AI infrastructure. The company achieved record high demand for Cisco technology with a networking supercycle underway, with revenue by geographic segment showing Americas up 18%, EMEA up 19%, and APJC up 14%. Product revenue performance reflected strong growth across Networking up 28%, Security up 14%, Collaboration up 12%, and Observability up 6%. Total gross margins by geographic segment were 64.5% for the Americas, 70.1% for EMEA, and 67.3% for APJC, while on a non-GAAP basis, total gross margin was 66.3%.
Cisco issued a robust Q1 2027 outlook with revenue projected at $18 billion to $18.2 billion, significantly exceeding analysts' average projection of $16.8 billion according to Bloomberg data. Profit, excluding some items, will be $1.32 to $1.34 a share, also well above estimates. Sales from Cisco's security business totaled $2.23 billion in the fourth quarter, up 14% from a year earlier, demonstrating the company's continued strength in traditional networking segments. Cisco Chief Executive Officer Chuck Robbins said the company generated about $4 billion in AI revenue in fiscal 2026, even while orders totaled more than $9 billion, highlighting the massive scale of AI infrastructure projects. CFO Mark Patterson expects AI models to drive further growth as they become increasingly capable of identifying cyber vulnerabilities, creating a shift of dollars from other areas to IT security work.
While Cisco delivered strong top-line growth, investors will closely monitor margin commentary given the hardware-heavy revenue mix reshaping product economics. As reported, CFO Mark Patterson said non-GAAP gross margin has "stabilized" near 66%, though product margin fell 330 basis points in Q3. The company faces pressure from its increasingly hardware-heavy revenue mix, with faster hardware growth potentially weighing on profitability. Despite its focus on supplying AI data centers, Cisco still depends on its traditional businesses for much of its sales, with the company announcing a reorganization earlier this year to focus more closely on the AI market and estimating related job cuts would result in as much as $1 billion in severance costs and other one-time expenses. Polymarket traders now assign Cisco a 96.1% probability of beating earnings expectations, with the company's ability to demonstrate accelerating momentum in its next-generation infrastructure business critical for sustained valuation support.
