Networking giant Cisco announced its fourth-quarter and fiscal-year 2025 earnings this week. It put up a solid “beat and raise,” with the company posting quarterly revenue of $14.67 billion, which is $50 million above consensus estimates. Non-GAAP EPS came in at $0.99, a penny above Street expectations. Looking ahead, Cisco guided to $14.65 billion to $14.85 billion, which is above the consensus of $14.62 billion for the first quarter of fiscal year 2026. In after-hours trading the stock was flat, but it has seen good growth this year, gaining almost 20% year to date.
This was one of the more important quarters for Cisco in recent years, as the company was coming off a Cisco Live in which it delivered the largest payload of new products in its history. While the numbers are the numbers, looking a level deeper hints at what to expect from Cisco in fiscal year 2026 and beyond.
One of my key takeaways for the quarter? Security growth of 9% is misleadingly low.
The security business unit finished at $1.952 billion for the quarter, representing 9% year-over-year growth, which is behind many of its peers. In the investor Q&A, Nina Marshall of Morgan Stanley asked about this. CEO Chuck Robbins explained that security consists of two sets of products: There are the older, legacy products, which aren’t a big focus for investment, and then there are the new products, such as XDR, SSE, Hypershield and the refreshed firewall.
If one looks only at the new products, growth jumps to 20%, which puts Cisco in line or ahead of many of its pure-play competitors. Another interesting metric is that if one simply removes US Federal, which had a tough year, the rest the business grew double digits. Robbins gave some customer numbers to back up the new claim. He cited 80 new Hypershield customers, which are tied to the new Smart Switch, and more than 480 new SSE customers in the quarter.
Cisco security is going through a major transition, and as the older products become a smaller percentage of the business, Cisco will see consistent double-digit growth. Read on for more of my observations about the quarter.
AI infrastructure ahead of plan and growing
Cisco reported more than $800 million in AI infrastructure orders from webscale customers in the fourth quarter, bringing the total for 2025 to more than $2 billion, which is over 2x what the company originally projected. This is a mix of its own Nexus switches, optics, AI PODs, UCS servers and Silicon One.
Success here is critical for Cisco, as at one time, the company had next to no business with the hyperscalers. The development of Silicon One was pivotal in Cisco’s success with this audience, as it’s given them market leading price performance. Cisco has also cultivated a partnership with Nvidia and is the only company to have its silicon integrated into the GPU maker’s Spectrum-X product.
There is another wave of business coming for Cisco in this area selling AI infrastructure to non-hyperscalers. Robbins talked about this: “The Cisco Secure AI Factory with Nvidia provides a blueprint for building AI-ready data centers for enterprises, sovereign cloud providers and newly emerging neocloud providers. We expect the sovereign AI opportunity to build momentum in the second half of fiscal year ’26.”
AI will drive campus upgrades
Most of the focus of network growth in AI has been in the data center, as that’s where the growth has been. However, the traffic agentic AI creates will drive campus upgrades as well. On the call, Cisco showed a chart of traffic generated by chatbots pre and post agentic, and it shows Cisco is expecting agentic to drive a consistent level of traffic that most networks are not able to handle. Robbin explained: “Network traffic will not only increase beyond the peaks of current chatbot interaction but will remain consistently high with agents in constant interaction.”
The impact of this is twofold. The bump in traffic will drive the need for a higher performing wired and wireless network. Also, and maybe more importantly, as the AI agents gain autonomous decision-making and action-taking capabilities, pervasive security will be critical to ensure they operate reliably and safely. Cisco recently introduced its Smart Switches, which have integrated security and should see a multi-year refresh cycle coming. Given campus is Cisco’s largest business unit, a major refresh here can lead the company into sustainable, accelerated growth.
The platform effect is taking hold
One of the underappreciated aspects of Cisco’s turnaround has been the company returning to its roots and becoming product led. This has been and continues to be the mission for the company’s newly appointed Chief Product Officer, Jeetu Patel.
Prior to Patel running product, each business unit did its own thing, and that created conflicting priorities. One of the things customers have always liked about Cisco is that it is very customer friendly and would often derail product roadmaps in favor of sticking to a committed roadmap. The goal of Patel has been to turn Cisco into a product company where, as Robbins described, “Cisco’s platform advantage is where every technology doesn’t just add value by itself but compounds the value of our customers’ existing investments.”
There were many examples of this. The June product launch at Cisco Live included the previously mentioned Smart Switches; XDR security, which uses network telemetry; ThousandEyes integration into Cisco Collaboration Endpoints for greater experiences measurement; AI Canvas management tool; and a common AI agent for all Cisco products.
Splunk was more than a revenue buy
When Cisco acquired Splunk, investors looked at it like the company shelled out $24 billion to gain about $4 billion a year in revenue with accretive gross margins, which is a good financial deal. Since the deal closed, Cisco management has been emphatic that adding revenue was not the endgame. In the past two quarters, the company closed over 300 new logos for Splunk into the Cisco install base.
However, there is a bigger initiative at play here that hasn’t been surfaced, and that’s using Splunk data across Cisco’s products. As an example, Splunk data bolsters Cisco’s security information, and the integration with ThousandEyes and AppDynamics creates end-to-end observability. Also, at the NRF show this year, I was given a demo of Splunk data being combined with network data to help retailers make better decisions.
While these are great examples of what’s possible with Cisco + Splunk, this should be considered a starting point. Customers and partners should expect a continuous stream of innovation from the combined companies.
Tariffs create uncertainty
While the points above point to continued growth, there is a looming monkey wrench, and that’s the ever-changing tariffs issue.
Newly appointed CFO Mark Patterson talked about this with respect to forward-looking guidance: “While we have some clarity on tariffs, we are still operating in a complex environment. Our Q1 and fiscal year 2026 guide assumes current tariffs and exemptions remain in place through the end of fiscal.” Given how the current administration has handled tariffs to date, that’s a big assumption, although it’s the only one Cisco can operate under.
The one factor that can shield Cisco from much of the ping-ponging on tariff decision-making is the world-class supply chain Cisco has. In fact, the company has won awards for its supply chain and has contingency upon contingency to handle situations that come up. However, while Cisco can deal with known unknowns, there are always unknown issues that need to be dealt with.
Overall, although there was no “big bang,” it was a solid quarter showing steady progress as Cisco continue to transition. I find with AI, many investors expect a “Chat GPT” moment, and while many AI companies have seen that, Cisco makes the infrastructure that powers AI, and these are long deployment cycles. Given its size, consistent and steady growth is what should be expected.
Source:: Network World