Cisco (CSCO.US) debuted AI business “report card”: Q4 performance exceeded expectations, but AI business guidelines were “very conservative”, and traditional business is still the main revenue driver

The Zhitong Finance App learned that AI network leader Cisco (CSCO.US) released its fourth fiscal quarter results report after the market on Wednesday. Sales increased 18% year over year to US$17.3 billion, with analysts' average expectations of US$16.8 billion; earnings per share after excluding some projects were US$1.22, higher than the average forecast of US$1.17. Cisco expects sales related to AI data center construction to reach 7.5 billion US dollars this fiscal year. Investors are disappointed. Over the past year, the world's largest network equipment supplier has received a total of 9.3 billion US dollars in artificial intelligence-related orders, and the market originally expected higher performance to be achieved.

As of press time, Cisco fell 4.04% after the market.

According to a statement issued by Cisco on Wednesday, AI business sales will account for about 10% of total revenue for the 2027 fiscal year (estimated at $72.2 billion to $73.4 billion). This is the first time that Cisco has given an AI revenue forecast for the full year, and analysts question how this figure matches AI-related orders of up to $4 billion in a single quarter for the quarter ending July 25.

UBS (UBS) analyst David Vogt (David Vogt) told management during the Cisco quarterly results call: “This seems very, very conservative in my opinion.” The stock fell about 4% in after-hours trading after closing at $123.88 during the regular trading session in the New York market. Over the past three months, the stock has accumulated a cumulative increase of nearly 25% as investors expect its AI strategy to drive sales growth.

Cisco is facing high expectations from the market, which believes it will benefit from the global wave of AI system data center construction. The company has been restructuring its business to seek more contracts in the AI boom, but it is also facing more intense competition from rivals such as Broadcom (AVGO.US) and HPE.US (HPE.US).

Cisco CEO Chuck Robbins (Chuck Robbins) said in a conference call that the company achieved AI revenue of about 4 billion US dollars in fiscal year 2026, even though total orders over the same period exceeded 9 billion US dollars. “These are non-linear orders, which are huge, and are usually placed long in advance,” he described the AI sales guide as “a good and careful forecast for the whole year.”

The conservative tone of AI business guidelines overshadowed Cisco's higher-than-expected sales and profit expectations for the first quarter. Revenue for the quarter ending October is estimated at US$18 billion to US$18.2 billion, while market compilation data shows that analysts' average expectations are US$16.8 billion; earnings per share after excluding some projects are estimated to be US$1.32 to US$1.34, which also far exceeds expectations.

Although Cisco is focused on AI data center supply, its sales are still highly dependent on traditional businesses. Earlier this year, the company announced a restructuring to focus more on the AI market, and estimated that related layoffs would incur up to $1 billion in severance costs and other one-time expenses.

Cisco's security business sales for the fourth fiscal quarter were $2.23 billion, up 14% year over year.

Cisco Chief Financial Officer Mark Patterson (Mark Patterson) said that AI models are increasingly capable of identifying and exploiting network vulnerabilities, which will drive further growth in the security business. “Seen from this perspective, it will encourage companies to shift their budgets from other areas within the organization to IT to actually carry out this work,” he said.