Cisco closed its fiscal year on Wednesday with the best quarter in its history. Revenue of $17.3 billion, up 18% from $14.7 billion. Non-GAAP earnings of $1.22 a share against a consensus near $1.17, on revenue that beat an expectation near $16.8 billion. Full-year revenue of $63.3 billion, up 12%; full-year non-GAAP EPS of $4.33, up 14%.
The AI number was the headline management wanted. Hyperscaler AI infrastructure orders reached $9.3 billion across fiscal 2026, roughly 4.5 times the prior year, with about $4 billion of that booked in the fourth quarter alone. Cisco delivered around $4 billion of AI revenue in fiscal 2026 and expects about $7.5 billion in fiscal 2027.
Shares closed Thursday at $113.47, down 8.4%, on roughly 61.1 million shares against a three-month average near 25.7 million. The stock had entered the day up about 60% year to date.
Our take: The market did not reject the AI orders. It repriced what they cost to fill. Non-GAAP gross margin was 66.3% in the quarter, down 210 basis points from 68.4% a year ago, and management attributed the compression to a heavier hardware mix and to component costs — memory in particular. That is the DRAM squeeze arriving on a networking P&L. Cisco is now a company whose fastest-growing revenue line carries its lowest margin, and whose input costs are set in a market it does not control. An 8.4% de-rate on a record print is not irrational. It is investors deciding that $7.5 billion of fiscal 2027 AI revenue is worth less per dollar than the revenue it displaces.
The guide says gross profit still grows
Cisco guided fiscal Q1 2027 to revenue of $18.0 billion to $18.2 billion, non-GAAP EPS of $1.32 to $1.34, non-GAAP gross margin of 65% to 66% and non-GAAP operating margin of 35.5% to 36.5%. Every one of those revenue and EPS figures is above the quarter just delivered. The gross margin figure is below it.
Run the midpoints. Revenue of $18.1 billion at 65.5% gross margin implies roughly $11.9 billion of gross profit, against about $11.4 billion in the quarter just reported at 66.3% on $17.25 billion. Gross profit dollars go up by around $400 million even as the percentage goes down. Operating margin guidance of 35.5% to 36.5% says Cisco intends to hold the bottom line by controlling opex.
The market sold the ratio anyway. That is the whole story of this earnings season: a percentage that moves the wrong way now outweighs dollars that move the right way. We watched Datadog beat and raise into its worst day ever, and a full week of beats get punished. Cisco is the largest name yet to take that treatment.
The part that is genuinely new
Cisco has spent a decade being valued as a low-growth annuity that sells switches to enterprises. Fiscal 2026 broke that frame: 12% full-year revenue growth, 18% in the final quarter, and an order book concentrated in a handful of hyperscale buyers. Concentration is the trade-off nobody priced in during the run-up. Enterprise networking revenue is diffuse and sticky. Hyperscaler orders are lumpy, negotiated hard, and can be paused by four or five people.
The $9.3 billion is real. So is the fact that Cisco has swapped a boring revenue mix for a volatile one, and is absorbing memory inflation to do it.
What to watch
- Whether Q1 lands inside 65% to 66%. A print below the low end turns a mix story into a cost story.
- Memory pricing. Cisco is now a downstream taker in the DRAM cycle. That is new exposure for this name.
- AI order concentration. $4 billion in a single quarter from a small buyer set. The disclosure to want is how much comes from the top customer.
- Operating margin versus gross margin. Guidance implies opex discipline offsets the gross line. If both slip, the multiple has further to fall.