Cisco (NASDAQ: CSCO) reported $18.5 billion in revenue for its fiscal first quarter of 2027, up 24% from a year earlier, while non-GAAP earnings per share rose 40% to $1.40. The networking company also raised its full-year outlook and lifted its expected fiscal 2027 AI infrastructure revenue from hyperscalers to $9 billion, putting profit margins and cash conversion at the center of the investment case. Cisco’s November 12 earnings release covers the quarter ended October 24, 2026.
Cisco Q1 FY2027 earnings: revenue and profit accelerate
Cisco’s latest quarter combined faster sales growth, higher operating profitability and stronger cash generation. The company said this was its fastest revenue and non-GAAP EPS growth in more than 15 years. Its GAAP results also improved substantially, so the earnings acceleration was not limited to adjusted accounting measures.
| Metric | Fiscal Q1 2027 | Fiscal Q1 2026 | Change |
|---|---|---|---|
| Revenue | $18.5 billion | $14.9 billion | +24% YoY |
| GAAP net income | $4.6 billion | $2.9 billion | +59% YoY |
| GAAP diluted EPS | $1.14 | $0.72 | +58% YoY |
| Non-GAAP diluted EPS | $1.40 | $1.00 | +40% YoY |
| Non-GAAP operating income | $7.0 billion | About $5.1 billion | +37% YoY |
| Non-GAAP gross margin | 65.6% | 68.1% | -2.5 percentage points |
| Operating cash flow | $4.4 billion | $3.2 billion | +36% YoY, based on unrounded figures |
The quarter also exceeded Cisco’s own previous guidance. The company had projected $18.0 billion to $18.2 billion in revenue and non-GAAP EPS of $1.32 to $1.34. Actual revenue cleared the top of that range by approximately $300 million, and adjusted EPS exceeded the high end by $0.06. Those comparisons matter because they measure the outcome against management’s most recent commitments rather than an assumed market reaction.
Networking drives most of Cisco’s growth
Networking revenue reached $11.132 billion, up 43% year over year. That accounted for approximately 60% of Cisco’s total sales and about 76% of product revenue. The company is benefiting from spending on data-center connectivity as well as upgrades to enterprise networking equipment, two sources of demand with different spending cycles.
| Business category | Fiscal Q1 2027 revenue | Year-over-year change |
|---|---|---|
| Networking | $11.132 billion | +43% |
| Security | $2.120 billion | +7% |
| Collaboration | $1.136 billion | +8% |
| Observability | $279 million | +2% |
| Total product revenue | $14.667 billion | +32% |
| Services | $3.850 billion | +1% |
The growth split is striking. Networking is expanding much faster than Security, Collaboration or Observability, and services revenue increased only 1%. Product orders rose 32% year over year, suggesting that demand is not restricted to revenue from equipment already shipped. Still, the durability of those orders will depend on when customers deploy their systems and how Cisco prices subsequent generations of hardware.
There is also a useful comparison with AI optical networking stocks. Cisco’s scale and software relationships differ from those of component suppliers, but both groups face the same question: will accelerating AI traffic deliver sustainable gross profit, or mainly higher equipment volumes?
The $9 billion AI forecast is revenue, not orders
Cisco now expects $9 billion of fiscal 2027 revenue from AI infrastructure sold to hyperscaler customers, an increase of 20% from its previous $7.5 billion forecast. The company generated approximately $4 billion of this revenue in fiscal 2026. If achieved, the new target would represent more than twice last year’s result and roughly 12% of the midpoint of Cisco’s full-year revenue outlook.
It is important to separate that revenue forecast from customer orders. Cisco reported $9.3 billion of AI infrastructure orders in fiscal 2026, according to its August earnings announcement. Orders reflect commercial demand, whereas revenue is recognized as obligations are fulfilled. Treating the two figures as interchangeable would overstate the amount of business already delivered.
CEO Chuck Robbins described the company as being in the early stages of a multi-year networking supercycle. The shareholder opportunity is that faster AI cluster buildouts require switches, routing, optics and network management alongside accelerators. The risk is that spending by a small number of very large cloud customers can produce uneven quarterly comparisons and tougher hardware pricing.
Fiscal 2027 guidance moves higher
The latest full-year forecast implies a larger business and faster earnings growth than Cisco anticipated in August. Reuters also reported the upward revenue revision on November 12.
| Metric | New FY2027 forecast | Previous FY2027 forecast | Change at midpoint |
|---|---|---|---|
| Revenue | $74.8B–$75.8B | $72.2B–$73.4B | +$2.5B, or 3.4% |
| Non-GAAP EPS | $5.47–$5.53 | $5.05–$5.11 | +$0.42, or 8.3% |
| GAAP EPS | $4.38–$4.44 | $4.00–$4.06 | +$0.38, or 9.4% |
At the new midpoint of $75.3 billion, expected fiscal 2027 sales would be approximately 19% above the $63.3 billion Cisco reported for fiscal 2026. That is a meaningful acceleration for a mature infrastructure vendor. The higher EPS target also suggests management expects operating expenses to grow substantially more slowly than revenue.
For fiscal Q2 2027, Cisco forecasts $18.0 billion to $18.2 billion in sales, non-GAAP EPS of $1.34 to $1.36, non-GAAP gross margin of 65% to 66% and non-GAAP operating margin of 36% to 37%. The $18.1 billion revenue midpoint is about 2.2% below Q1’s rounded total, so investors should not extrapolate the latest quarterly sales growth mechanically into each remaining quarter.
Strong operating leverage, but gross margins remain the key risk
Cisco’s non-GAAP operating margin rose to 37.8% from 34.4% a year earlier, even though non-GAAP gross margin declined from 68.1% to 65.6%. That 2.5-percentage-point gross-margin contraction is the clearest counterweight to the strong revenue headline. Hardware mix and pricing can reduce the gross profit earned on each dollar of revenue even while total profit grows.
The operating-income increase was supported by expense discipline. Cisco said its non-GAAP operating expenses rose just 2% year over year as revenue grew 24%. GAAP operating margin climbed to 30.2%, and GAAP diluted EPS reached $1.14, making the improvement visible on both accounting bases.
For shareholders, the next test is whether Cisco can maintain that expense leverage as AI infrastructure becomes a larger share of sales. If the company needs additional investment to support larger deployments, or if lower-margin hardware grows faster than software, operating margins may eventually come under pressure.
Operating cash flow reached $4.357 billion, versus $3.212 billion in the year-earlier quarter. Cash purchases of property and equipment totaled $502 million, producing approximately $3.855 billion in quarterly free cash flow on an operating-cash-flow-minus-capital-expenditures basis. The equivalent calculation for the prior-year quarter is $2.889 billion, an increase of roughly 33.4%.
Cisco returned $3.656 billion through dividends and repurchases during the quarter, equivalent to about 95% of that calculated free cash flow. The company ended October with approximately $15.8 billion in cash and investments and about $29.8 billion in combined short- and long-term debt. That leaves roughly $14.0 billion in net debt using those broad balance-sheet categories.
Remaining performance obligations increased 8% to $46.2 billion, while deferred revenue reached $30.1 billion, up 7%. These amounts support revenue visibility, but they have different recognition schedules from new hyperscaler equipment orders. This contrast also explains why analysts looking at CoreWeave’s debt and cash flow or Nebius’s infrastructure investment should not apply the same financing assumptions to Cisco.
The decisive variables are networking orders, the mix between hyperscaler hardware and recurring software and services, non-GAAP gross margin, and the conversion of demand into cash. Investors should also track whether fiscal 2027 AI revenue stays on course for $9 billion and whether the new full-year EPS range can survive competitive pricing and customer-spending fluctuations.
Cisco declared another $0.42 quarterly dividend, payable January 20, 2027, to shareholders of record on January 4, 2027. The next financial checkpoint is fiscal Q2 2027 earnings, when investors can compare the 65%–66% gross-margin forecast with the actual product mix and judge whether the stronger annual guidance remains intact.
Bottom line: Cisco’s quarter shows that AI networking demand is translating into both GAAP profit and cash generation, while the raised $9 billion AI revenue outlook makes the growth opportunity more concrete. The biggest unresolved issue for shareholders is whether Cisco can preserve operating leverage as lower-gross-margin hardware becomes a larger part of the business.
Published November 12, 2026, 4:20 p.m. ET. For informational purposes only; not investment advice.