Cisco Systems, Inc. (NASDAQ: CSCO) shares took a hit Thursday morning, even though the company just reported fiscal fourth-quarter 2026 results that beat expectations and issued guidance that blew past Wall Street's numbers. Sometimes the market just wants more.
Revenue came in at $17.25 billion, topping the $16.82 billion analysts were looking for. Adjusted earnings of $1.22 per share also beat the $1.17 consensus estimate. But the stock was down 5.72% at $116.80 in premarket trading, according to market data.
So why the disconnect? Maybe it's profit-taking after a big run, or maybe investors are worried about the pace of AI spending. But management is painting a picture of a massive, multiyear upgrade cycle that's just getting started.
CEO Chuck Robbins told analysts on the earnings call that companies are increasingly viewing AI readiness, cybersecurity, and infrastructure upgrades as must-have spending. Customers are shifting money from other budgets into IT because falling behind could put their businesses at a competitive disadvantage.
Robbins compared the trend to how companies now treat cybersecurity investments: "It's just not optional." That's the kind of language that gets investors excited, and it's fueling what Cisco calls a multiyear networking "super cycle."
Cisco Q4 Earnings Snapshot
Let's dig into the numbers. Product revenue jumped 24% year over year to $13.5 billion, while services revenue was flat at $3.8 billion. Total remaining performance obligations (RPO) increased 7% to $46.7 billion, with product RPO up 9%. Annual recurring revenue reached $32.1 billion, up 3%.
Subscription revenue made up 48% of quarterly revenue. Software revenue grew 11% to $6.2 billion. Adjusted gross margin was 66.3%, and adjusted operating margin was 35.9%.
Cash flow is looking healthy too. Operating cash flow climbed 27% to $5.4 billion, and Cisco ended the quarter with $15.9 billion in cash, cash equivalents, and investments. The company returned $3.2 billion to shareholders, including $1.7 billion in dividends and $1.5 billion in share repurchases. It still has $8.1 billion left under its buyback authorization.
AI And Networking Orders Surge
The real story here is the order book. Product orders jumped 35% year over year in the fourth quarter. Geographically, orders increased 44% in the Americas, 25% in EMEA, and 19% in APJC.
Hyperscaler orders grew at a triple-digit rate, while service provider and cloud orders surged 95%. Enterprise orders rose 21%, and public-sector orders increased 30%. Networking orders climbed 40%, marking the eighth consecutive quarter of double-digit growth. Networking revenue was up 28%.
Now, the AI numbers. Cisco secured $4 billion in hyperscaler AI infrastructure orders during the quarter. That brought fiscal 2026 orders to $9.3 billion, which is about 4.5 times the fiscal 2025 level. Acacia, Cisco's optical unit, generated more than $1 billion in orders. The company also shipped more than 850 400G and over 75 800G coherent pluggable optics.
Cisco added three hyperscaler design wins and expects several more AI design wins over the next six months across its Silicon One platforms and optics. AI infrastructure orders from neo-cloud, sovereign-cloud, and enterprise customers exceeded $400 million in the quarter and topped $1 billion for fiscal 2026.
Enterprise AI demand is also picking up. AI-tagged Nexus switch orders increased more than 85% sequentially, while data-center networking orders rose more than 35%. Wi-Fi 7 represented more than half of wireless orders.
Security And AI Adoption Gain Momentum
Security orders grew by double digits. More than 1,500 customers adopted Cisco's new security products during the quarter, bringing the cumulative net-new customer count to more than 6,400. Firewall orders increased more than 30%. Splunk added more than 280 new logos during the quarter and surpassed 1,000 for fiscal 2026.
Collaboration had its strongest quarter in seven years, with video-device revenue rising 40%. Cisco also resolved 145,000 customer support cases entirely through AI during fiscal 2026. Its Circuit AI assistant processed more than 75 million prompts in the fourth quarter.
Nearly 4,500 enterprises have signed up for Cisco Cloud Control since its June launch. Resilient Infrastructure Services powered by Cisco IQ now serve more than 8,600 customers.
Cisco Forecast Tops Wall Street Estimates
Looking ahead, Cisco expects fiscal first-quarter revenue of $18 billion to $18.2 billion, well above the $16.8 billion analyst estimate. The company forecast adjusted earnings of $1.32 to $1.34 per share, compared with the $1.16 consensus estimate.
For fiscal 2027, Cisco expects revenue of $72.2 billion to $73.4 billion, versus the $68.69 billion estimate. Adjusted earnings are expected to range from $5.05 to $5.11 per share, above the $4.80 estimate.
Cisco also expects hyperscaler AI infrastructure revenue to reach $7.5 billion in fiscal 2027, nearly doubling from $3.8 billion in fiscal 2026.
So, the market might be grumbling today, but Cisco's numbers tell a story of a company riding a massive wave of AI-driven demand. Whether that wave continues is the big question, but for now, the supercycle seems to be in full swing.
