Cisco’s Strong Q1 Earnings Reflect Robust AI-Driven Networking Demand and Margin Expansion
Q1 Results Surpass Expectations with Strong Product Orders and Profitability
Cisco kicked off fiscal 2026 with results that highlight not only revenue growth but meaningful progress across margins, product orders, and operating leverage. For the quarter ended October 25, 2025, Cisco reported $14.9 billion in revenue (up 8% year over year) and net income of $2.86 billion on a GAAP basis, translating to earnings per share (EPS) of $0.72 (6% higher than last year). Non-GAAP net income was $4.01 billion, or $1.00 per share—beating even the upper end of guidance ranges.
Networking Segment and AI Infrastructure Orders Lead Growth Momentum
The most eye-catching element in the results is a 15% surge in networking product revenue and a 13% overall jump in product orders year over year, continuing a five-quarter streak of double-digit networking growth. AI infrastructure stood out: orders from hyperscaler customers totaled $1.3 billion—clear evidence of accelerated adoption and a catalyst for future demand.
All geographies contributed, with the Americas leading at 9% revenue growth, while EMEA and APJC regions both grew by 5% each. Next-generation campus networking products—such as smart switches, secure routers, and WiFi 7—are ramping up faster than previous cycles, further underpinning Cisco’s bullish forward outlook.
Margin Performance: Operating Leverage at Multi-Year Highs
Cisco posted significant margin expansion this quarter. On a GAAP basis, the gross margin was 65.5% and operating margin climbed to 22.6% (up from 17.0% a year ago). On a non-GAAP basis, the gross margin reached 68.1% and operating margin 34.4%. These gains stemmed from the revenue mix tilt toward higher-value networking products and operating discipline on expenses.
| Metric | Q1 FY 2026 | Q1 FY 2025 | Change (%) |
|---|---|---|---|
| Revenue ($B) | 14.9 | 13.8 | 8 |
| GAAP Net Income ($B) | 2.86 | 2.71 | 5 |
| Non-GAAP Net Income ($B) | 4.01 | 3.67 | 9 |
| GAAP EPS ($) | 0.72 | 0.68 | 6 |
| Non-GAAP EPS ($) | 1.00 | 0.91 | 10 |
| GAAP Operating Margin (%) | 22.6 | 17.0 | +5.6 |
| Non-GAAP Operating Margin (%) | 34.4 | 34.1 | +0.3 |
Balance Sheet: Capital Returns and Solid Cash Flow Despite Decline
Cisco’s operating cash flow came in at $3.2 billion, a 12% decline from last year, which reflects strategic working capital investments amid rising demand. The company returned $3.62 billion to shareholders through $1.62 billion in dividends (at $0.41 per share) and $2.0 billion in stock buybacks, with ample authorization ($12.2 billion) remaining for further repurchases.
| Shareholder Returns (Q1 FY26) | Amount ($B) | Details |
|---|---|---|
| Dividends Paid | 1.62 | $0.41 per share |
| Stock Buybacks | 2.00 | 29M shares, avg. price $68.28 |
| Total Returned | 3.62 | |
| Buyback Authorization Remaining | 12.20 | No expiration date |
Guidance Points to Continued Growth, AI Tailwinds and Strong Profitability
Looking ahead, Cisco’s guidance for Q2 FY26 calls for revenue of $15.0 to $15.2 billion and non-GAAP EPS of $1.01 to $1.03, with non-GAAP gross margins up to 68.5%. Full-year revenue is projected at $60.2 to $61.0 billion, and non-GAAP EPS is targeted at $4.08 to $4.14. Tariffs are expected to have a manageable impact.
What’s driving confidence? Orders in next-gen campus networking and hyperscale AI, alongside disciplined expense control. Notably, long-term remaining performance obligations (RPOs) for product rose 13% to $11.8 billion—suggesting visibility well into the future.
Product and Regional Breakdown Highlights Strength in Core Business
| Segment | Q1 FY26 Revenue ($M) | Y/Y Growth (%) |
|---|---|---|
| Networking | 7,768 | 15 |
| Security | 1,980 | -2 |
| Collaboration | 1,055 | -3 |
| Observability | 274 | 6 |
| Services | 3,806 | 2 |
Takeaway: Margin Expansion and AI Infrastructure Position Cisco for Resilient Growth
Cisco’s Q1 report underscores that it is not just riding technology tailwinds but driving them—especially in secure networking and AI infrastructure. The strong margin performance and multi-billion dollar capital return signal strategic flexibility as new AI and networking demand materialize.
While short-term volatility in global demand or spending could weigh on certain segments, the sustained strength in networking and AI-centric orders stands out as the critical engine. For investors and industry watchers, Cisco’s numbers present a picture of resilient growth, robust profitability, and disciplined capital allocation heading into the remainder of the year.
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