Cisco (CSCO) is betting on the AI boom as it faces potential pressures in its networking and security units.
“AI is really the biggest driver in terms of the overall umbrella,” CFO Mark Patterson said on Yahoo Finance’s Opening Bid.
Cisco reported stronger-than-expected earnings and guidance. Q4 revenue rose 8% year over year to $14.7 billion, surpassing the $14.63 billion estimate. Adjusted EPS increased 14% year to $0.99, beating the $0.98 consensus, according to Bloomberg data.
For fiscal year 2026, Cisco is expecting revenue between $59 billion and $60 billion, with adjusted EPS of $4.00 to $4.06.
However, Cisco’s stock is facing some headwinds as concerns mount about its slowing momentum in its core networking business and lower growth in its security division.
Shares have slipped about 1% since the report. They are up 17% year to date, ahead of the S&P 500’s (^GSPC) 10% gain.
Cisco’s core networking business grew 12% in the most recent quarter, signaling healthy demand despite broader concerns.
“That’s frankly … where a lot of the tailwinds are today that we’re seeing,” Patterson said.
For security, Patterson said demand hasn’t slowed since Cisco’s $28 billion acquisition of Splunk closed in 2024. Its revenue increased 9% in the quarter, and Patterson noted it added over 300 customers in both Q3 and Q4.
“I think that we’ve got a better, more complete offering for our customers,” he said.
But AI is the name of the game. Patterson said fourth quarter revenue growth got a major lift from soaring demand for AI infrastructure, particularly large-scale AI training systems. Orders from webscale customers for these projects more than doubled the company’s original target.
“We took over $800 million in orders in the quarter,” he said, adding the bigger prize lies in the years ahead as everyday customers start adopting AI.
“For us, the enterprise space is still very nascent, but we think [it] will ultimately be a larger opportunity than what we’re seeing in the training build-outs with hyperscale.”
Patterson, a 25-year Cisco veteran, emphasized there’s a need for companies to upgrade both their networking and security systems to meet the demands of AI. He said Cisco is undergoing a “campus refresh,” or replacement of outdated equipment at customer sites.
On the macro front, tariffs were a “slight headwind in Q4 and also for FY 25,” Patterson said. While he didn’t specify the financial impact, he noted Cisco was able to offset much of the effect thanks to its global supply chain.
