Cisco Q1 FY26 earnings beat guidance as AI orders cross $1.5bn and campus refresh gains steam

Cisco Systems, Inc. reported stronger-than-expected financial results for the first quarter of fiscal year 2026, with robust gains in AI infrastructure, campus networking, and recurring revenues positioning the company for one of its strongest years on record. For the quarter ending October 25, 2025, Cisco Systems, Inc. recorded revenue of 14.9 billion dollars, reflecting an eight percent increase from the same period last year. On a non-GAAP basis, net income grew nine percent to 4.01 billion dollars, with earnings per share rising ten percent to 1.00 dollar. GAAP net income was 2.86 billion dollars, or 0.72 dollars per share, representing a six percent increase year over year.

The company’s earnings performance exceeded the high end of its guidance range, driven by a strong product refresh cycle, hyperscaler momentum, and a growing AI order pipeline. Cisco Systems, Inc. saw total product orders increase 13 percent year over year, marking the fifth consecutive quarter of double-digit order growth in networking. A key highlight was the 1.3 billion dollars in AI infrastructure orders from hyperscaler customers during the quarter, complemented by another 200 million dollars in AI-related orders from neocloud, sovereign, and enterprise customers.

How did Cisco’s business units and geographies perform in the first quarter of fiscal 2026?

Cisco Systems, Inc. delivered balanced performance across product segments and geographic regions. Product revenue grew ten percent to 11.1 billion dollars, while services revenue rose two percent to 3.8 billion dollars. Networking remained the largest and fastest-growing category, generating 7.77 billion dollars in revenue, up 15 percent from the year-ago period. Observability grew six percent to 274 million dollars, while the security segment declined two percent and collaboration dipped three percent.

From a regional standpoint, the Americas continued to be the dominant contributor, delivering 8.99 billion dollars in revenue, a nine percent increase year over year. Revenue from the EMEA region rose five percent to 3.78 billion dollars, while revenue from APJC also grew five percent to 2.11 billion dollars. Cisco Systems, Inc. reported strong gross margins across these regions, with EMEA achieving the highest non-GAAP gross margin at 71.9 percent, followed by APJC at 66.9 percent and the Americas at 66.8 percent.

What is driving Cisco’s AI-related growth and how does Silicon One fit into its platform strategy?

Cisco Systems, Inc. is accelerating its AI infrastructure growth through its Silicon One chip architecture, Acacia optics portfolio, and high-efficiency 8K routing systems. In the first quarter of fiscal 2026, the company secured four new design wins with hyperscaler clients, contributing to 1.3 billion dollars in AI infrastructure orders. These orders were evenly spread across clients and product lines, with a balanced mix of Silicon One-based networking systems and advanced optical components. The Acacia optics business delivered particularly strong results, benefiting from the ongoing transition to coherent pluggables that offer significant cost and energy savings.

The company anticipates over 3 billion dollars in AI infrastructure revenue for the full fiscal year, reflecting continued demand from hyperscalers investing in both front-end and back-end networking. Cisco Systems, Inc. is also expanding its reach to sovereign cloud, enterprise, and next-generation cloud (neocloud) clients, who collectively contributed over 200 million dollars in AI orders during the quarter. With a growing pipeline valued at more than 2 billion dollars across these segments, Cisco’s AI growth outlook remains one of its strongest strategic drivers.

How is the multibillion-dollar campus refresh cycle reshaping Cisco’s hardware growth outlook?

A major contributor to Cisco’s performance in the first quarter was the accelerating refresh cycle across campus networking environments. All core technologies within this segment, including switching, routing, wireless, and industrial IoT, experienced notable order growth. Cisco Systems, Inc. reported that its new generation of smart switches, secure routers, and Wi-Fi 7 access points are ramping faster than any prior platform. The legacy install base of pre-Catalyst 9000 systems, valued in the tens of billions of dollars, is nearing end-of-life support, which is driving substantial upgrade activity.

Chuck Robbins, Chair and Chief Executive Officer of Cisco Systems, Inc., highlighted that this is not merely a hardware replacement cycle. It is a strategic infrastructure realignment designed to enable real-time inferencing at the edge, AI agent enablement, and embedded cybersecurity across enterprise networks. The combination of demand for AI-readiness, security modernization, and the need for operational efficiency is making this campus refresh a high-velocity, multi-year opportunity.

What do the latest RPO and ARR metrics reveal about Cisco’s transition toward recurring revenue?

Cisco Systems, Inc. is steadily building momentum in its subscription and recurring revenue base. The company ended the quarter with 42.9 billion dollars in remaining performance obligations, up seven percent year over year. Of this, product RPO rose ten percent, while long-term product RPO increased by 13 percent to reach 11.8 billion dollars. Services RPO grew four percent. Annualized recurring revenue stood at 31.4 billion dollars, reflecting a five percent increase, with product ARR rising seven percent and services ARR up two percent.

These trends underscore Cisco’s continuing shift toward software-defined, subscription-based business models, including recurring revenues from security, observability, software licensing, and support contracts. Notably, product subscription revenue rose to 4.5 billion dollars, while software revenue overall reached 5.7 billion dollars in the quarter.

How is Cisco managing profitability, cash flow, and shareholder returns amid its AI pivot?

Cisco Systems, Inc. maintained solid profitability metrics even as it scaled investments in AI hardware and networking. Non-GAAP gross margin for the quarter was 68.1 percent, while operating income grew eight percent year over year to 5.1 billion dollars. The non-GAAP operating margin stood at 34.4 percent, ahead of the high end of guidance. However, operating cash flow declined 12 percent to 3.2 billion dollars, impacted by higher inventory levels and changes in working capital.

Inventories rose to 3.4 billion dollars, and inventory purchase commitments increased sharply to 8.3 billion dollars, indicating Cisco is preparing for higher delivery volumes in the coming quarters. The company returned 3.6 billion dollars to shareholders during the quarter, comprising 1.6 billion dollars in dividends and 2.0 billion dollars in share repurchases. Cisco Systems, Inc. still has 12.2 billion dollars in remaining authorization under its buyback program.

What is Cisco guiding for in Q2 and full-year FY26—and what risks are analysts tracking?

For the second quarter of fiscal 2026, Cisco Systems, Inc. is projecting revenue between 15.0 billion dollars and 15.2 billion dollars, with non-GAAP earnings per share between 1.01 dollars and 1.03 dollars. The company expects non-GAAP gross margins to range from 67.5 percent to 68.5 percent, and non-GAAP operating margin to fall between 33.5 percent and 34.5 percent. Full-year fiscal 2026 revenue is now guided between 60.2 billion dollars and 61.0 billion dollars, while non-GAAP EPS is projected in the range of 4.08 dollars to 4.14 dollars.

Risks cited by analysts include ongoing softness in the security and collaboration segments, elevated inventory levels, and uncertainty around trade tariffs. Cisco’s margin forecasts also reflect the estimated impact of tariffs on electronics components from China, Mexico, and Canada. While AI infrastructure momentum remains a bright spot, its long-cycle nature means deal timing and fulfillment rates will be closely scrutinized in coming quarters.

What are the most important takeaways from Cisco’s Q1 FY26 performance and guidance outlook?

• Cisco Systems, Inc. reported Q1 FY26 revenue of 14.9 billion dollars, up 8 percent year over year, with non-GAAP EPS of 1.00 dollar, exceeding guidance.
• AI infrastructure orders surged to 1.3 billion dollars from hyperscaler customers, with an additional 200 million dollars from sovereign, neocloud, and enterprise clients.
• Networking product orders rose in the high teens, marking the fifth consecutive quarter of double-digit growth in the category.
• Product revenue grew 10 percent, while services revenue increased 2 percent; networking was the standout performer, up 15 percent.
• Security and collaboration segments saw slight declines of 2 percent and 3 percent respectively, while observability rose 6 percent.
• Campus networking refresh demand accelerated, driven by end-of-support for pre-Catalyst 9000 systems and rapid adoption of Wi-Fi 7, smart switches, and secure routers.
• Non-GAAP gross margin stood at 68.1 percent, and operating margin reached 34.4 percent, reflecting strong profitability.
• Operating cash flow declined 12 percent to 3.2 billion dollars due to inventory build-up and working capital shifts.
• Remaining performance obligations grew to 42.9 billion dollars, up 7 percent; annualized recurring revenue reached 31.4 billion dollars, led by product ARR.
• Cisco returned 3.6 billion dollars to shareholders through dividends and buybacks and guided FY26 revenue to 60.2 to 61.0 billion dollars with EPS forecasted between 4.08 and 4.14 dollars.