Cisco Systems, Inc. Q1 FY2026 earnings call

Cisco had a strong start to fiscal 2026 with Q1 revenue and earnings per share above guidance. Total revenue increased 8% year over year, with product revenue up 10% driven by AI infrastructure and campus networking. Non-GAAP EPS grew 10%. $3 billion was returned to shareholders. Product orders grew 13% year over year across geographies and customer markets. Networking orders accelerated to high teens growth. AI infrastructure orders in Q1 totaled $1.3 billion, with expectations of $3 billion in revenue from hyperscalers in FY 2026. Innovations included the introduction of Cisco Unified Edge for edge AI and Cisco Data Fabric. Partnerships were expanded with G42, NVIDIA, etc. Security saw order growth for new/refreshed products, with mid-teens growth in next-gen firewalls, and Splunk ARR and RPO grew double digits with a shift to cloud subscriptions.

Total revenue for the quarter was $14.9 billion, up 8% year over year. Product revenue was $11.1 billion, up 10%, and service revenue was $3.8 billion, up 2%. Networking had 15% growth, led by service provider routing (driven by AI infrastructure), data center switching, enterprise routing, and campus switching. Security was down 2% due to prior generation products and a shift to cloud subscriptions in Splunk, but offset by growth in secure firewall, Duo, and SASE. Collaboration was down 3% due to declines in devices and WebEx. Observability was up 6%, primarily driven by ThousandEyes. Recurring metrics: Total RPO was $42.9 billion, up 7%; product RPO grew 10%, total ARR was $31.4 billion, up 5%; total subscription revenue was $8 billion, 54% of total revenue; total software revenue was up 3% to $5.7 billion. Product orders were up 13% year over year, with service provider and cloud up 45%, public sector up 12%, enterprise up 4%. Geographic segments: The Americas up 16%, EMEA up 8%, APJC up 13%.

Fiscal Q2 2026 guidance: Revenue expected to be in the range of $15 billion to $15.2 billion, non-GAAP gross margin 67.5% to 68.5%, non-GAAP operating margin 33.5% to 34.5%, non-GAAP EPS $1.10 to $1.13. Fiscal Year 2026 guidance: Revenue expected to be in the range of $60.2 billion to $61 billion, non-GAAP EPS $4.08 to $4.14.

Supply chain issues such as DRAM pricing and supply tightening. Uncertainties in government spending and regulatory environments, including end-of-life product upgrades and export license requirements for sovereign cloud initiatives.

Q: Dive deeper into AI orders, evolution of web scale opportunity, and enterprise pipeline progress A: Chuck Robbins stated they expect at least 2x orders from hyperscalers in FY 2026 and the enterprise pipeline for Neo Cloud Sovereign Cloud exceeds $2 billion Q: Commentary on DRAM pricing and gross margin A: Mark Patterson mentioned DRAM supply tightening and pricing included in guidance Q: Growth of rest of business excluding AI A: Mark Patterson noted tougher comps in later quarters but positive order growth Q: Multiyear cycle confidence in campus refresh A: Chuck Robbins discussed end-of-life products, faster adoption, and security integration as drivers of the multiyear cycle Q: Penetration of Silicon One and Splunk cloud shift A: Chuck Robbins talked about Silicon One rollout and Splunk shift to cloud as positive long-term but timing issue in Q1 Q: Campus market dynamics and government impact A: Chuck Robbins discussed end-of-life products, competition, and government spending impact Q: Optical demand and sovereign cloud orders A: Chuck Robbins talked about optical growth and sovereign cloud orders not material to guide yet Q: G42 partnership and partner program changes A: Chuck Robbins discussed G42 partnership and partner program simplification and alignment Q: AI sales margin and security growth A: Mark Patterson and Chuck Robbins discussed AI margin mix and security growth expectations Q: Campus refresh and AI growth contribution A: Chuck Robbins and Mark Patterson discussed contribution from campus refresh and AI growth Q: Cisco Unified Edge opportunity and deployment A: Chuck Robbins discussed Unified Edge opportunity and deployment strategies Q: Campus refresh motivation and international government impact A: Chuck Robbins discussed campus refresh motivation and international government spending Q: AI build-out comparison to 90s Internet A: Chuck Robbins compared current AI build-out to 90s Internet, noting faster pace and strong balance sheets of investors