Cisco Delivers Strong Q1 FY2026 as AI Infrastructure Demand Accelerates

/ AI, Cloud, Infrastructure, Networking
Cisco Delivers Strong Q1 FY2026 as AI Infrastructure Demand Accelerates

The News

Cisco reported Q1 FY2026 revenue of $14.9 billion, an 8% year-over-year increase, with GAAP EPS of $0.72 and non-GAAP EPS of $1.00. Networking product orders grew double digits for the fifth consecutive quarter, and AI infrastructure orders from hyperscalers reached $1.3 billion. Cisco also raised full-year guidance and highlighted a multiyear, multibillion-dollar campus networking refresh now underway.

Analysis

Enterprise Networking Demand Rebounds

Cisco’s first-quarter results show enterprise spending on networking and AI infrastructure is recovering, driven by new architectural demands created by AI adoption, multi-cloud expansion, and intensified security requirements.

The company’s double-digit growth in networking for the fifth straight quarter underscores the growing need for high-bandwidth, low-latency, secure infrastructure. This aligns with our observations across the enterprise stack where we see AI use cases are forcing organizations to revisit core network designs, improve east-west traffic flows, modernize campus networks, and re-architect connectivity between cloud, campus, and data center environments.

Cisco’s scale in switching, routing, Wi-Fi 7, and IoT helped drive demand across every major region, with the Americas up 9% and EMEA and APJC up 5% each. The multiyear refresh cycle already underway suggests that organizations are prioritizing foundational network upgrades to support AI workloads, hybrid work, and zero-trust security models.

Cisco’s Expanding Role in AI Compute Fabrics

The headline inside the headline is AI. Cisco reported $1.3 billion in AI infrastructure orders from hyperscalers, a figure that validates its rising relevance in the broader AI hardware and interconnect landscape.

While Cisco is not a GPU vendor, AI infrastructure depends heavily on high-performance networking, optical connectivity, and low-latency fabrics, all areas where Cisco has deep historical strength. The uptick in hyperscaler orders signals that Cisco is increasingly positioned as a critical provider of the networking “spine” powering large-scale AI clusters and inference environments.

AI infrastructure is entering a phase of horizontal expansion, where vendors capable of delivering high-throughput interconnects and operational reliability become essential, even if they’re not providing the compute silicon itself.

Margin Strength and Operational Discipline Reinforce Cisco’s Strategic Position

Cisco not only exceeded revenue expectations but delivered strong margins:

  • GAAP gross margin of 65.5% (non-GAAP 68.1%)
  • GAAP operating margin of 22.6%, up sharply from last year
  • Non-GAAP operating margin of 34.4%

These results show operational leverage at scale, especially notable given the supply chain volatility of previous years. Product revenue grew 10% year-over-year, with particular strength in networking and modest growth in observability, while security and collaboration declined slightly.

Cisco returned $3.6 billion to shareholders through dividends and buybacks which show its confidence in future cash generation and its strategic plan for FY2026.

What the Results Reveal

Cisco’s Q1 performance reflects broader enterprise patterns:

  • Organizations are entering major refresh cycles for campus and data center networks.
  • AI infrastructure is reshaping budget priorities, driving new investment in bandwidth, optics, switching, and secure connectivity.
  • Multicloud and hybrid architectures continue to increase complexity, raising the bar for observability, automation, and end-to-end policy control.
  • Security concerns remain elevated, and despite Cisco’s slight year-over-year decline in security revenue, demand for integrated secure routing, zero-trust initiatives, and encrypted network visibility remains strong.

These trends indicate that enterprises are not simply adding AI capabilities; they are restructuring foundational infrastructure to support them.

Looking Ahead

Cisco raised its full-year revenue and EPS guidance, noting that FY2026 could be its strongest year yet. The multiyear campus refresh and accelerating AI infrastructure demand provide meaningful tailwinds for the next several quarters. As AI continues moving from pilot projects to large-scale operational systems, the network becomes a central performance determinant across training, inference, and distributed application architectures.

If Cisco continues to execute on revamped product lines (including smart switches, secure routers, Wi-Fi 7, and observability improvements) it is positioned to capture a sizable share of AI-driven infrastructure modernization. At the same time, improving margins and consistent order growth indicate that Cisco is balancing innovation with operational efficiency, which is a necessary combination as customers move rapidly to unlock the value of AI-driven transformation.

Author

  • Paul Nashawaty

    Paul Nashawaty, Practice Leader and Lead Principal Analyst, specializes in application modernization across build, release and operations. With a wealth of expertise in digital transformation initiatives spanning front-end and back-end systems, he also possesses comprehensive knowledge of the underlying infrastructure ecosystem crucial for supporting modernization endeavors. With over 25 years of experience, Paul has a proven track record in implementing effective go-to-market strategies, including the identification of new market channels, the growth and cultivation of partner ecosystems, and the successful execution of strategic plans resulting in positive business outcomes for his clients.

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