Cisco shares fall 7% despite earnings beat

Cisco reported quarterly earnings that exceeded analyst expectations, with revenue reaching US$15.4 billion, compared to estimates of US$15.1 billion.

Despite the strong results, the stock fell about 7% after hours as guidance met expectations.

Revenue increased 10% from a year earlier, driven by a 21% rise in core networking sales to US$8.3 billion.

Net income rose to US$3.2 billion from US$2.4 billion a year ago.

For the current quarter, Cisco projects revenue between US$15.4 billion and US$15.6 billion.

The company highlighted AI infrastructure orders totaling US$2.1 billion and announced a new switch containing an Nvidia chip, as well as plans to join an AI infrastructure project in Saudi Arabia with AMD.

For FY26, Cisco expects revenue of US$61.2 billion to US$61.7 billion.

🔗 Source: CNBC

🧠 Food for thought

Implications, context, and why it matters.

Hyperscaler demand is driving Cisco’s growth while other segments lag

Total revenue rose 10%, yet some business lines still look soft.
Security division revenue fell 4% year over year. Management tied the drop to older products losing steam and the Splunk shift from on-premise deals to cloud subscriptions 1.
Services revenue slipped 1%. Annualized Recurring Revenue (ARR) rose 3%, which suggests recurring growth stayed modest 1.
Much of the momentum came from hyperscale cloud providers, the largest cloud companies that run massive data centers. Product orders in the “service provider and cloud” group jumped 65% year over year, while enterprise customer product orders rose 8% 1.

Cisco’s Saudi Arabia venture is a long-term bet on sovereign AI

The Saudi Arabia plan focuses on the next wave of infrastructure spending tied to sovereign AI, government-led national AI computing capacity, rather than near-term revenue.
CEO Chuck Robbins said there is “no real need nor expectation for meaningful impact in FY26” from sovereign deals. He added that Cisco’s FY26 guidance does not rely on that contribution and called it “purely upside” 2.
The project aims to deliver up to 1 gigawatt of AI infrastructure by 2030, starting with a planned 100 MW deployment in Saudi Arabia. That scale suggests countries want AI capacity outside traditional US-based hyperscalers 3.
The move fits a wider shift where geopolitical strategy matters more as tech giants compete to become anchor partners for national AI efforts. Cisco also describes an infrastructure/readiness gap in the region 3.