Key Highlights

● Cisco unveiled new silicon, systems and optics for AI data center networks on October 12.

● Cisco and Nvidia plan an open specification for next-generation pluggable optics.

● Fiscal fourth-quarter revenue was about $17.3 billion, up 18%; fiscal 2026 revenue was $63.3 billion.

● Hyperscale AI infrastructure orders were about $9.3 billion for fiscal 2026.

Cisco Systems (NASDAQ:CSCO) used the Open Compute Project Global Summit on October 12 to present a new set of chips, systems and optical products aimed at the networks that link AI data centers. According to a summary of the company's release, Cisco and Nvidia (NASDAQ:NVDA) also plan to develop an open specification for a next-generation pluggable optics format, a move that would affect how optical modules are designed across the industry.

The announcement sits on top of a strong fiscal year. In August, Cisco reported record fourth-quarter revenue and said its orders from hyperscale customers for AI infrastructure had far exceeded the level it projected earlier in the year. Management described the trend as a multiyear networking super cycle, a characterization that remains a company view rather than an established fact.

What did Cisco announce at the OCP Global Summit on October 12?

A news summary based on Cisco's PR Newswire release said the company introduced new silicon, systems and optical networking products intended for scaling distributed AI data center networks. The Open Compute Project summit is a gathering where cloud operators and equipment makers share designs, which makes it a natural venue for hardware news aimed at large customers.

Three elements stood out. First, Cisco and Nvidia plan to develop an open specification for a pluggable optics format that would support 400 gigabits per lane. Second, systems built on Cisco's newest Silicon One chip are already shipping, and a follow-on chip capable of 1.6 terabits is expected to begin shipping before the end of this year. Third, Cisco said its routing systems based on a separate Silicon One chip are deployed in production by hyperscalers including Microsoft (NASDAQ:MSFT) and Alibaba (NYSE:BABA).

The summary noted that the performance and deployment claims are Cisco's own. That attribution is standard for vendor announcements: the company controls the framing, and customers typically publish few details on their own networks.

Pluggable optics are the small modules that convert electrical signals to light and back at the edge of a switch. As data rates climb, the design of those modules affects power use, cost and the density of connections in a rack.

Why does an open optics specification with Nvidia matter to Cisco?

Optical connections are a growing share of the cost and power budget inside AI clusters. Each additional speed generation requires new module designs and, often, new standards so that equipment from different makers can work together. By working with Nvidia on an open specification, Cisco is helping shape a format that could be used across suppliers.

The pairing is notable because the two companies compete in some parts of data center networking, with Nvidia offering its own switches and interconnects. A joint specification indicates that, at least for optics, both see value in a common format. The reported announcement did not say who else will participate or when a draft specification will be released.

Cisco has an optics business with significant exposure to this trend through its Acacia unit. In an August preview article, one report noted that Acacia took more than $1 billion of orders in the third quarter and was on track to grow more than 200% in fiscal 2026, figures it attributed to the company.

Open specifications can accelerate adoption, but they can also lower barriers for competitors. How the benefits are divided will depend on the final terms, which have not been published.

What were Cisco's fourth-quarter and fiscal year results?

According to Cisco's results exhibit filed with the Securities and Exchange Commission, reported on August 12 for the period ended July 25, fourth-quarter revenue was about $17.3 billion, up 18% from a year earlier. Fiscal year revenue was about $63.3 billion, up 12%.

Non-GAAP earnings per share were $1.22 for the quarter, up 23%, and $4.33 for the year, up 14%. GAAP earnings per share were 97 cents for the quarter and $3.33 for the year.

Total product orders rose 35% in the quarter, or 25% excluding hyperscalers. Networking product orders rose 40%, the eighth straight quarter of double-digit growth. Operating cash flow was about $5.4 billion for the quarter and about $14.2 billion for the year, which was flat from the prior year.

Remaining performance obligations were about $46.7 billion, up 7%. Chief executive Chuck Robbins said Cisco is well positioned to support customers however or wherever they decide to deploy AI, and chief financial officer Mark Patterson called out record revenue, non-GAAP operating earnings and earnings per share, all above the high end of guidance.

How big are Cisco's AI infrastructure orders from hyperscale customers?

Cisco said hyperscale AI infrastructure orders were about $4 billion in the fourth quarter and about $9.3 billion for fiscal 2026, about 4.5 times the prior year, per a call highlights article. Roughly 60% of the orders were systems based on Silicon One and about 40% were optics. Non-hyperscale AI orders topped $1 billion for the year.

The company recognized about $4 billion of AI infrastructure revenue from hyperscalers in fiscal 2026 and said it expects about $7.5 billion in fiscal 2027. In an earlier article, one report had noted that Cisco raised its order expectation from $5 billion to about $9 billion during the year, so the actual result slightly exceeded that increased level.

Orders are not revenue, and the gap between the two reflects delivery schedules and customer acceptance. The fourth-quarter order figure was roughly equal to the full-year revenue recognized, which points to a growing backlog. How quickly that backlog converts into revenue will depend on supply, installation and customer build plans.

Management also noted that AI workloads are spreading across multiple data centers because of power and space limits at single sites, a trend that benefits networking equipment that connects facilities over longer distances. That is the logic behind the emphasis on distributed networks in the summit announcement.

What guidance did Cisco give for the first quarter and fiscal 2027?

For the first quarter of fiscal 2027, Cisco guided to revenue of about $18 billion to $18.2 billion and non-GAAP earnings per share of $1.32 to $1.34. GAAP earnings per share are expected between about $1.08 and $1.10.

For the full fiscal year, the company guided to revenue of about $72.2 billion to $73.4 billion and non-GAAP earnings per share of about $5.05 to $5.11. According to a call highlights article, the midpoint implies growth of about 15%, or about 10% excluding the hyperscale AI revenue.

That second figure is a useful reminder that the rest of the business is growing more slowly. Management expects security and observability growth to rise from low single digits in fiscal 2026 to high single digits in fiscal 2027, according to the same article. Security revenue grew 14% in the fourth quarter, helped by Splunk, network security and secure access products.

The first-quarter report is the next scheduled results event.

How are margins and memory costs affecting Cisco?

The call highlights article reported that non-GAAP gross margin fell by 210 basis points to about 66.3% in the fourth quarter. Management attributed the decline mainly to a heavier mix of hardware and to higher memory costs. Non-GAAP operating margin was about 36%.

For fiscal 2027, management expects a modest gross margin headwind from higher hardware volumes while projecting full-year operating margin of about 35%. For the first quarter, gross margin guidance is 65% to 66%.

Cisco said it sees no significant lead-time problems and believes supply is adequate for the next fiscal year. It cited direct silicon relationships with TSMC (NYSE:TSM) and supply agreements that include measures for memory availability. Those statements are the company's own, and memory markets have been volatile across the industry.

The trade-off is straightforward. Systems built for hyperscalers tend to carry lower gross margins than software and services, so a faster-growing AI business can dilute the average even as it adds revenue and operating earnings in dollar terms. Whether that dilution is manageable is one of the main questions for the coming quarters.

How is Cisco distributing cash to stock owners?

Cisco declared a quarterly dividend of 42 cents per share, payable on October 21 to owners of record on October 2, according to the results exhibit. During the fourth quarter it retired about 13 million shares for a total of about $1.5 billion, and about $8.1 billion remains authorized.

The call highlights article said Cisco distributed about $3.2 billion to stock owners in the fourth quarter and about $12.7 billion over the full year. Operating cash flow of about $14.2 billion for the year covered that amount.

A steady dividend and share retirement program is a long-standing part of Cisco's profile. At the same time, the company has acquisitions to digest, including Splunk, and large capital needs tied to hardware supply.

What are the open questions for Cisco, and what comes next?

Several uncertainties remain. The first is conversion: orders of about $9.3 billion must be turned into shipments and revenue on schedule, while the company has guided to about $7.5 billion of AI infrastructure revenue for the coming year. The second is competition from other networking and chip suppliers, including those that build their own switching silicon.

The third is margin mix. The fourth is the growth of the non-AI business, where management expects improvement in security and observability but where growth has been modest.

Upcoming events include shipment of the faster chip before year end, any follow-up on the open optics specification and the first-quarter earnings report. Cisco also pays its dividend on October 21, as scheduled.