Cisco's Q4 AI orders from hyperscalers hit $4B, lifting FY2026 total to $9.3B. Revenue and EPS beat estimates. Gross margin fell 210 bps on hardware mix. Stock falls 9% despite raised guidance.
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Cisco delivered a fiscal fourth-quarter earnings report that would normally power an AI-infrastructure rally: revenue and earnings above expectations, a first-quarter outlook ahead of consensus, and $4 billion in new hyperscaler AI orders in the quarter. Shares fell about 9% late Thursday, extending the roughly 4% decline that began after the results.
The reaction is hard to explain through demand. Cisco's order book is accelerating. The pressure point is profitability, and a stock that had risen more than 60% in 2026 entered earnings with a high bar already embedded in the price.
Cisco reported fiscal fourth-quarter revenue of $17.25 billion, up 18% year over year and above the roughly $16.82 billion expected by analysts. Adjusted earnings reached $1.22 per share, beating the $1.17 consensus.
Product revenue increased 24%, while services revenue was flat. Networking revenue rose 28%, driven by continued data-center and AI infrastructure spending. Cisco described demand as broad-based: total product orders increased 35% and networking product orders rose 40%. Enterprise product orders were up 21%.
The forward numbers were stronger still.
Cisco expects fiscal first-quarter 2027 revenue of $18.0 billion to $18.2 billion, compared with the roughly $16.8 billion consensus cited before the report. Adjusted EPS is expected between $1.32 and $1.34, well ahead of the approximately $1.16 Wall Street estimate.
For the full fiscal year, Cisco guided to $72.2 billion to $73.4 billion of revenue and adjusted EPS of $5.05 to $5.11. The revenue midpoint is more than $4 billion above the $68.69 billion consensus compiled by LSEG.
Those are not numbers consistent with an AI-spending slowdown.
The most important number in the report may be the one that does not appear in conventional earnings estimates.
Cisco booked $4 billion of AI infrastructure orders from hyperscalers in Q4 alone, lifting fiscal 2026 orders to $9.3 billion. That full-year total was roughly 4.5 times fiscal 2025 levels. About 60% of the orders were for Silicon One-based systems and 40% were for optics.
Cisco also won three additional hyperscaler designs during the quarter and said it has visibility into multiple potential AI design wins over the next six months.
The orders are now becoming revenue. Cisco generated approximately $4 billion from hyperscaler AI infrastructure during fiscal 2026 and expects that figure to reach $7.5 billion in fiscal 2027. AI infrastructure represented about 6% of Cisco's total revenue last year, up from less than 2% in fiscal 2025.
Demand is also spreading beyond the largest cloud companies. Cisco booked more than $400 million of AI infrastructure orders from neocloud and sovereign customers in Q4, with enterprise clients adding to the total. The full-year total from those customers exceeded $1 billion.
That makes the selloff difficult to characterize as a rejection of the AI demand story.
Cisco's adjusted gross margin fell to 66.3% from 68.4% a year earlier. Product gross margin dropped to 64.8% from 67.5%. For the first quarter, management expects adjusted gross margin of 65% to 66%, slightly below the approximately 66.1% analysts expected. The economics matter because much of Cisco's fastest growth is coming from hardware-intensive AI infrastructure. More routers, switches, optics and Silicon One systems can produce much faster revenue growth without carrying the same margin profile investors get from higher-margin software and services.
Portfolio manager Joe Tigay told Reuters that Cisco is dealing with a more hardware-heavy product mix and elevated component costs even as revenue and earnings rise. Goldman Sachs analysts similarly pointed to the networking hardware supercycle as a potential continuing pressure on gross margin. That is the trade-off investors are now trying to price. Cisco has found a faster growth engine. That engine is initially less profitable at the gross-margin level.
Cisco had risen more than 60% during 2026 before the earnings release. Direxion's Jake Behan told Reuters that AI-infrastructure winners are increasingly being judged on acceleration rather than merely delivering strong numbers. He described the report as confirmation of Cisco's AI story rather than a new catalyst.
That distinction explains how Cisco could beat revenue, beat EPS, guide revenue and EPS above consensus and still lose roughly 9% in the following session.
The order book did not weaken. It accelerated. Cisco booked almost as much hyperscaler AI business in the fourth quarter alone as it generated in AI infrastructure revenue during the entire fiscal year.
The market's objection is that those orders arrive with more hardware, higher component costs and a lower near-term gross-margin profile.
For the wider AI-infrastructure trade, that is the useful read-through. Demand can remain exceptional while the stocks fall because investors have moved on to the next question: how much margin is left after companies actually build the infrastructure customers are ordering?
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