Cisco's AI 'Super Cycle' Drives Strong Earnings and Outlook, Yet Stock Falls

Cisco (CSCO-US) shares fell more than 4% after hours on Wednesday (12th), despite the company reporting better-than-expected fourth-quarter fiscal 2026 earnings and significantly surpassing revenue forecasts, which still failed to meet Wall Street's heightened expectations.

Prior to the Q4 earnings release, Wall Street had turned bullish on Cisco, driving the stock up over 60% this quarter and approximately 8% this month. Markets were optimistic that the networking equipment giant would play a more critical role amid the artificial intelligence (AI) boom.

Cisco's financial data confirms this trend is indeed unfolding, even as the stock declined following the report.

Cisco's Q4 revenue rose 18% year-over-year, increasing from $14.7 billion a year ago to $17.25 billion, exceeding market expectations. The company attributed the surge in demand to a 'network supercycle'.

Net profit for Q4 grew 51%, rising from $2.6 billion, or $0.64 per share, a year earlier, to $3.9 billion, or $0.97 per share.

However, gross margin performance declined compared to the prior year. On an adjusted basis, Cisco's Q4 gross margin was 66.3%, down from 68.4% a year earlier.

Q4 Earnings Key Metrics vs. LSEG Estimate

Revenue: $17.25 billion vs. $16.82 billion

Adjusted EPS: $1.22 vs. $1.17

Cisco's switches, routers, and other networking solutions have become essential components within data center server racks. The company reported that data center switch orders increased by over 25% in 2026. Cisco believes agent-based AI workloads could increase network traffic by more than 450% compared to current chatbot levels.

As the AI infrastructure boom continues, Cisco forecasts first-quarter fiscal 2027 revenue between $18.0 billion and $18.2 billion, well above FactSet's estimate of $16.83 billion.

For the full year, Cisco expects revenue between $72.2 billion and $73.4 billion, also significantly exceeding Wall Street's forecast of $69.1 billion.

Cisco stated that hyperscalers—the cloud computing giants driving massive AI spending—placed $4 billion in infrastructure orders during Q4, bringing the total order volume for the fiscal year to $9.3 billion.

Hyperscalers contributed approximately $4 billion in revenue during the previous fiscal year, and Cisco expects this figure to nearly double in fiscal 2027, reaching $7.5 billion.