Cisco's AI orders surge over $2 billion, FY2026 guidance is "moderate" | Earnings Report Insights
Cisco announced its Q4 report for the fiscal year 2025, with a net profit of $2.82 billion, a year-on-year increase of 31%. At the same time, AI infrastructure orders for the fiscal year 2025 exceeded $2 billion, more than double the original target of $1 billion. Looking ahead to the fiscal year 2026, EPS is expected to be at least $4, with revenue of $59 billion, both in line with market expectations. Cisco's stock price has risen 19% this year, but the less-than-exciting performance led to a 2% drop in after-hours trading
Cisco released a seemingly "better-than-expected" financial report, with its fourth-quarter revenue and earnings slightly exceeding Wall Street's expectations.
On August 13, Cisco announced its fourth-quarter report for the fiscal year 2025, with performance slightly above analysts' expectations, including a net profit of $2.82 billion, a year-on-year increase of 31%. Here are the key points from the report:
Financial Performance: Q4 adjusted earnings per share of $0.99 (expected $0.98), revenue of $14.7 billion, a year-on-year increase of 8% (expected $14.62 billion), net profit of $2.82 billion, a year-on-year increase of 31%.
Core Business Progress: Network business revenue of $7.63 billion, a year-on-year increase of 12%, exceeding expectations; security business performance was poor, with quarterly revenue of $1.95 billion, failing to meet the market expectation of $2.11 billion, becoming a notable shortcoming in the report.
AI Strategy Results: AI infrastructure orders for fiscal year 2025 exceeded $2 billion, more than double the original target of $1 billion; Q4 single-quarter AI orders from network giants reached $800 million.
Fiscal Year 2026 Outlook: Adjusted earnings per share of $4.00-$4.06, revenue of $59-$60 billion, both in line with analysts' expectations.
The most noteworthy highlight in the report is undoubtedly the explosive growth of AI infrastructure orders. CEO Chuck Robbins revealed that AI infrastructure orders from network giants exceeded $2 billion for fiscal year 2025, with about $1 billion of orders specifically for connecting GPU back-end networks. Robbins firmly stated:
I do not believe AI is a fleeting trend.
Despite the overall positive financial data, Cisco's stock price fell by 2% in after-hours trading, which may reflect investors' disappointment with "good but not outstanding" performance. Considering that the stock price has risen 19% this year, far exceeding the S&P 500 index's approximately 10% increase, the pressure for profit-taking cannot be ignored.
Core Business Performance Divergence
Breaking down the business segments, Cisco's "joy" and "worry" are evident.
The highlight is its traditional stronghold—network business.
This department's quarterly revenue reached $7.63 billion, with a year-on-year increase of 12%, exceeding analysts' expectations of $7.34 billion. This is mainly due to the strong demand for switches and routers driven by AI workloads.
However, the underperformer is its highly anticipated security business.
This department's quarterly revenue was only $1.95 billion, achieving a 9% year-on-year increase, but still falling short of analysts' expectations of $2.11 billion.
However, what truly calmed investors was the company's outlook for the future. Cisco provided guidance for the full fiscal year 2026, with revenue expected to be between $59 billion and $60 billion, and adjusted EPS between $4.00 and $4.06, which is almost entirely in line with analysts' general expectations (revenue of $59.53 billion, EPS of $4.03).
This "moderate" guidance indicates that, despite the heated narrative around AI, management has not seen strong momentum sufficient to significantly raise its full-year expectations.
AI Narrative: A Lifeline or a Castle in the Air
Currently, Cisco's management is fully committed to selling its growth story around AI infrastructure to the market, which is indeed the most eye-catching part of the financial report.
CEO Chuck Robbins emphasized during the conference call that AI represents a huge opportunity, as Cisco is leading the architectural transformation necessary for the AI era. However, analysts pointed out potential risks for Cisco in the future:
High Customer Concentration: Current AI orders mainly come from a few "Webscale" giants. Although Robbins mentioned that the pipeline for enterprise AI sales has reached "hundreds of millions of dollars," it remains uncertain whether AI demand can smoothly transition from cloud giants to a broader base of enterprise customers.
Future Projects Yet to Materialize: Robbins acknowledged that the highly anticipated sovereign AI infrastructure projects are still in the "planning stage," and the company "has not received any orders." This potential huge revenue is still just on paper.
Sustainability of Growth: Although Robbins firmly believes that "AI is not a fleeting trend," the key question is whether this explosive order growth can be sustained. Once the capital expenditure cycle of cloud giants slows down, Cisco's AI narrative will face severe tests.
In summary, Cisco has delivered a report card with clear strengths and weaknesses. In the future, the market's focus will not only be on the growth of AI order numbers but also on whether these orders can be converted into broader, more sustainable revenue, ultimately reversing the decline in other business lines such as security
