AI demand continues to make strong efforts! Cisco Systems, Inc. (CSCO.US) Q4 revenue and profits exceed expectations, AI business achieves $1 billion in annual revenue.

Cisco Systems, Inc. (CSCO.US) announced its fourth-quarter performance. For the fiscal fourth quarter ending on July 26, revenue increased by 7.6% to reach $14.7 billion. Earnings per share were 99 cents after excluding certain items. Market expectations were for revenue of $14.6 billion and earnings per share of 98 cents. The adjusted gross margin was 68.4%, slightly higher than the market's expected 68.2%. Of this, the majority of revenue came from networking business, totaling $7.34 billion, matching expectations. Service revenue was $3.79 billion. This quarter, network product orders saw double-digit growth, mainly attributed to products in areas such as network scale infrastructure, switching devices, enterprise routing systems, industrial IoT, and servers. Cisco Systems, Inc. provided a cautious forecast for the new fiscal year, despite seeing growth in its artificial intelligence projects. The company stated in a release on Wednesday that revenue for the fiscal year ending in July 2026 will be between $59 billion and $60 billion. This aligns with the average Wall Street expectation of $59.5 billion, but some optimistic analysts forecast revenue surpassing $61 billion. The company also expects adjusted earnings per share for the year to be between $4 and $4.06, consistent with the $4.03 expected. However, for the first quarter of the 2026 fiscal year, Cisco Systems, Inc. anticipates revenue to be between $14.65 billion and $14.85 billion, with the mid-point at $14.75 billion, higher than the expected $14.65 billion. Adjusted earnings per share are forecasted to be between 97 cents and 99 cents, with the expected value at 97 cents. Cisco Systems, Inc. CFO Mark Patterson stated in a call with analysts that their guidance assumes the current tariff policy will continue through the end of 2026. He said, "We will continue leveraging our world-class supply chain team to help mitigate the impacts of tariffs where appropriate." The company has not seen a significant early release of product demand, but Patterson added that tariffs have had a minimal impact on demand during the quarter and the full fiscal year. Like many peers, Cisco Systems, Inc. is also striving to benefit from the booming AI spending. The company mentioned that their AI business revenue for the 2025 fiscal year was around $1 billion. However, the field is becoming increasingly competitive, with companies like Broadcom Inc. (AVGO.US) and Hewlett Packard Enterprise Co. (HPE.US) (which recently acquired Juniper Networks, Inc.) also serving the same market. CEO Chuck Robbins mentioned in a conference call that federal enterprises will see business growth in the new fiscal year. Tech companies have been adjusting to the government procurement changes due to the spending cuts by the Trump administration. In order to diversify risks, Robbins acquired Splunk Inc. for $28 billion in 2024 to strengthen the company's security and monitoring software business. At present, Cisco Systems, Inc. has not seen a significant surge in investor interest due to AI technology, unlike some of its peers. Chief Investment Officer David Bahnsen of Bahnsen Group stated in an interview that the company "has a strategy for future growth, and they are in a very good position for that." Large tech companies like Microsoft Corporation (MSFT.US), Amazon.com, Inc. (AMZN.US), and Alphabet Inc. Class C parent company (GOOGL.US) are increasing their investments to meet AI demands despite having spent billions in several quarters due to capacity constraints. The company mentioned that orders for AI infrastructure from large cloud providers reached over $800 million this quarter, an increase from the $600 million in the previous quarter, making the total orders for the 2025 fiscal year exceed $2 billion, more than twice their initial target. Investments in large-scale cloud services are driving IT infrastructure financing, creating a favorable environment for Cisco Systems, Inc. Analyst David Heger of Edward Jones stated, "Within the enterprise spending environment, there exists additional investment in infrastructure to accommodate AI, potentially serving as another growth driver, especially given Cisco Systems, Inc.'s significant influence in the traditional enterprise market." Cisco Systems, Inc. has partnered with Saudi Arabian AI company Humain and stated its involvement in the "Star Gate" project in the UAE. Robbins mentioned in the conference call that these collaborations in the Middle East will strengthen in the latter half of the 2026 fiscal year. As the largest manufacturer of computer networking and internet-related equipment, he mentioned that Cisco Systems, Inc. will become a "core systems supplier" providing AI software training services and running the software at a large scale. Robbins explained, "We expect sovereign AI opportunities to gradually heat up in the latter half of the 2026 fiscal year. Cisco Systems, Inc. will be the core systems supplier for these large-scale AI training and inference cluster constructions and will play a significant role in their development and ultimate large-scale deployment process." After the performance announcement, as of the time of writing, Cisco Systems, Inc. stock saw a slight post-market increase of 0.14%. The company's stock has risen nearly 20% year-to-date. Analyst Ian Bezek noted, "Long-term investors should be pleased with Cisco Systems, Inc.'s performance as the company has performed well on key metrics and raised revenue expectations for 2026 slightly above the market's general expectations. The stock had already risen significantly before the report, and given these decent but not particularly outstanding results, there could be profit-taking. However, any pullback would be a buying opportunity."