AI, campus, router and security refreshes led to a strong quarter for Cisco.
Cisco executives struck an upbeat tone as the vendor reported its first-quarter earnings, citing widespread demand for networking technologies as customers “move quickly to unlock the potential of AI.” The positivity stems from the $14.9 billion total revenue Cisco posted for the quarter, which is up 8% compared to a year ago. Product revenue climbed 10%, driven by demand for AI infrastructure and campus networking, and services revenue gained 2%.
CEO Chuck Robbins said core networking product orders grew at a double-digit rate, with AI infrastructure hyperscaler customers adding $1.3 billion. In terms of specific product performance, revenue from networking climbed 15% and observability gained 6%. Revenue from security and collaboration gear fell 2% and 3%, respectfully.
“Networking product orders accelerated to high-teens growth in Q1, marking the fifth consecutive quarter of double-digit growth, driven by hyperscale infrastructure, enterprise routing, campus switching, wireless, industrial IoT, and servers,” Robbins said on a call with financial analysts.
“Within our campus networking portfolio, we are seeing very strong demand for switching, routing, and wireless products, indicating that enterprise customers are investing in the connectivity needed for AI deployments. As early Catalyst switching generations like the 4K and 6K near end of support, we see growing demand for our Cat 9K series. Additionally, all of our next-generation solutions, including smart switches, secure routers, and Wi-Fi 7 wireless products, are ramping faster than in prior product launches.”
The numbers reflect the beginning of a multi-year, multi-billion dollar refresh opportunity, Robbins said. “We’re also seeing consistent progress across our industrial IoT portfolio, including new ruggedized equipment, with orders growing more than 25% year-over-year in Q1.”
“We expect this demand to increase, driven by onshoring of manufacturing to the United States, the increase of AI workloads at the network edge, and the emergence of physical AI. AI infrastructure orders taken from hyperscalers in Q1 total $1.3 billion, balanced between Silicon One systems and optics, marking a significant acceleration in growth and demonstrating our strength for advanced AI use cases. We expect to recognize roughly $3 billion in AI infrastructure revenue from hyperscalers in fiscal year 2026.”
Customers are very focused on modernizing their network infrastructure in the enterprise in preparation for inferencing and AI workloads, Robbins said. “These things are always multi-year efforts,” and this is only the beginning, Robbins said.
The AI opportunity
“As we look at the AI opportunity, we see customer use cases growing across training, inferencing, and connectivity, with secure networking increasingly critical as workloads move from the data center to end users, devices, and agents at the edge,” Robbins said. “Agents are transforming network traffic from predictable bursts to persistent high-intensity loads, with agentic AI queries generating up to 25 times more network traffic than chatbots.”
“Instead of pulling data to and from the data center, AI workloads require models and infrastructure to be closer to where data is created and decisions are made, particularly in industries such as retail, healthcare, and manufacturing.”
Robbins pointed to last week’s introduction of Cisco Unified Edge, a converged platform that integrates networking, compute and storage to help enterprise customers more efficiently handle data from AI and other workloads at the edge. “Unified Edge enables real-time inferencing for agentic and physical AI workloads, so enterprises can confidently deploy and manage AI at scale,” Robbins said.
On the hyperscaler front, “we see a lot of solid pipeline throughout the rest of the year. The use cases, we see it expanding,” Robbins said. “Obviously, we’ve been selling networking infrastructure under the training models. We’ve been selling scale-out. We launched the P200-based router that will begin to address some of the scale-across opportunities.”
Cisco has also seen great success with its pluggable optics, Robbins said. “All of the hyperscalers now are officially customers of our pluggable optics, so we feel like that’s a great opportunity. They not only plug into our products, but they can be used with other companies’ products, with our competitors or white boxes. That’s been good. We’ve also begun to see inferencing use cases.”
Silicon One future
When asked about incorporating Cisco’s Silicon One chips into its hyperscaler and enterprise networks, and how Silicon One is starting to gain some traction with hyperscalers, Robbins acknowledged its growth. Cisco now has 14 varieties of Silicon One ASICs that run the gamut from leaf/top-of-rack campus switching to high-throughput AI-backbone applications.
“By the end of fiscal 2029, we think in another two-and-a-half years, we’ll have that fully rolled. We’ll have Silicon One fully rolled across the entire portfolio. That’s the intent. It’s in some of our data center switching products going to the enterprise. It’s obviously in the hyperscaler products,” Robbins said.
Silicon One’s appeal comes from “a combination of performance, programmability, and low power consumption,” Robbins said, as well as the benefit of having multiple sources. “I think that’s really what’s changed the trajectory for us with these customers,” Robbins said.
Security gains, Splunk procurement shifts
Cisco refreshed its security line-up over the past year, in addition to bringing on Splunk. Growth in its security business is expected, but it’s been developing slowly.
“We continue to see order growth for our new and refreshed products, which comprise around one-third of our security portfolio and include Secure Access, XDR, Hypershield, AI Defense, and our refreshed firewalls,” Robbins said. “Nearly 3,000 customers have purchased a new product since launch, and we saw mid-teens growth in demand for our next-generation firewalls in Q1.”
Robbins noted a shift in in how customers consume Splunk offerings in Q1, with a shift to more cloud subscriptions and fewer on-premise deals. Until last quarter, revenues from Splunk sales were split about evenly, but this the first quarter where cloud took over, Robbins said.
“Revenue for cloud subscriptions is recognized ratably, whereas product revenue for on-prem deals is recognized on delivery. While this shift negatively impacted security revenue growth in Q1, it is purely a timing issue. We are actually pleased to see more cloud subscriptions for Splunk as they enable greater adoption and expansion and allow us to deliver innovation faster,” Robbins said.
