Cisco beats expectations with 12% revenue growth driven by AI infrastructure demand
Cisco reported first-quarter revenue of $15.84 billion, exceeding Wall Street estimates by 1.9% and marking 12% year-over-year growth. The networking company also raised its full-year profit guidance and provided next-quarter revenue guidance 6.5% above analyst expectations, signaling confidence in sustained momentum.
The company's adjusted earnings per share came in at $1.06 versus the consensus estimate of $1.04. Operating margins expanded to 25% from 22.6% in the same quarter last year.
What drove the results
Hyperscaler customers placed $1.9 billion in AI infrastructure orders during the quarter. Cisco expects to recognize approximately $4 billion in AI infrastructure revenue for the full year, with management projecting at least $6 billion next year.
Enterprise data center switching orders rose over 40% year-over-year as organizations modernized networks to handle AI workloads. Campus networking and wireless products also grew double digits, with WiFi 7 adoption representing half of the wireless product mix.
The company's newer security offerings-Secure Access, XDR, and Hypershield-delivered double-digit order growth. More than 1,000 new customers purchased these products in the quarter.
Margin stability amid cost pressures
Cisco's vertical integration in silicon and optics provided insulation from supply chain constraints. Management credited tighter pricing policies and reduced exposure to volatile memory costs with stabilizing gross margins despite component inflation.
The company announced a restructuring plan to reallocate resources toward silicon, optics, security, and AI capabilities. Management described the move as proactive, building from a position of strength rather than necessity.
What management expects ahead
Cisco raised its full-year adjusted earnings per share guidance to $4.28 at the midpoint, a 3.1% increase from prior guidance. Next quarter's revenue guidance sits at $16.8 billion, compared to analyst estimates of $15.78 billion.
Management cautioned that AI infrastructure revenue can be nonlinear due to customer purchasing cycles. The transition of the Splunk business from on-premises to cloud subscriptions is expected to weigh on near-term growth but should stabilize as adoption matures.
Cisco's stock price moved to $117.84 following the earnings report, up from $102.40 before the announcement.
What to watch
- The pace and breadth of AI infrastructure orders, particularly among new hyperscaler and enterprise customers
- Gross margin stabilization as pricing strategies and supply chain investments take effect
- Customer adoption rates for next-generation security and networking products
- Progress on the Splunk cloud transition and resource reallocation from the restructuring plan
For management teams evaluating technology infrastructure investments, Cisco's results point to where enterprise spending is heading. AI for Management resources can help leaders understand the operational and strategic implications of these shifts. Those focused on longer-term business transformation may find AI for Executives & Strategy content relevant to evaluating similar technology modernization decisions.
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