Cisco Systems, Inc. (NASDAQ: CSCO) delivered record fiscal fourth-quarter results, but the first market reaction was negative as investors focused on pressure on profit margins.
For the quarter ended July 25, 2026, Cisco reported revenue of US$17.3 billion, up 18% from a year earlier. Non-GAAP earnings per share rose 23% to US$1.22. The most eye-catching number, however, came from artificial intelligence infrastructure.
Cisco said AI infrastructure orders from hyperscale customers reached US$4 billion in Q4, taking the total for FY26 to US$9.3 billion.
Cisco’s US$9.3 Billion AI Order Number Stands Out
Cisco is benefiting from growing investment in AI data centres.
Total product orders increased 35% year over year in Q4, while networking product orders rose 40%. Importantly, the US$9.3 billion AI order figure covers the full 2026 financial year, not the fourth quarter alone.
CSCO also generated about US$4 billion of AI infrastructure revenue in FY26. Management expects that figure to rise to about US$7.5 billion in FY27, suggesting more of its AI demand could turn into reported revenue.
For investors, this provides clear evidence that AI is becoming an increasingly important growth driver for CSCO.
Why Did Cisco Stock Fall After Strong Earnings?
The problem was not Cisco’s headline revenue or earnings numbers. Instead, investors focused on margins.
Cisco reported a Q4 non-GAAP gross margin of 66.3%, down from 68.4% a year earlier. For the first quarter of FY27, the company expects a non-GAAP gross margin of 65% to 66%.
That outlook became a key concern after the results. CSCO shares fell in after-hours trading and remained under pressure in Thursday premarket trading as Wall Street focused on the weaker margin outlook.
The reason margins matter is simple. AI infrastructure can bring CSCO significant new revenue, but investors also want to know how much profit the company can earn from that growth. Analysts noted that a heavier mix of hardware sales to hyperscale customers can put pressure on gross margins.
What Does Cisco’s FY27 Guidance Show?
Cisco’s wider outlook remains strong.
For FY27, management expects revenue of US$72.2 billion to US$73.4 billion and non-GAAP earnings per share of US$5.05 to US$5.11.
For Q1 FY27, CSCO guided to revenue of US$18.0 billion to US$18.2 billion and adjusted earnings of US$1.32 to US$1.34 per share.
That means CSCO is still expecting growth. The debate for investors is less about whether AI demand exists and more about the quality and profitability of that growth.
What Should Cisco Investors Watch Next?
The biggest thing to watch is how quickly CSCO turns its AI orders into revenue.
The company has built a US$9.3 billion full-year AI infrastructure order total from hyperscale customers and expects AI infrastructure revenue to reach about US$7.5 billion in FY27.
Investors should also watch gross margins closely. If AI networking revenue keeps growing while margins stabilise, concerns could ease. If margins remain under pressure, strong AI demand may not translate into the level of profit growth investors want.
Cisco’s earnings therefore delivered two clear messages: AI demand is very strong, but investors are becoming more focused on what that demand means for profitability.
For Cisco, the next phase of the story will be about converting its AI order boom into sustainable earnings growth.
