Cisco Q4 FY2026: revenue up 18%, full-year subscription revenue up 1%

Cisco beat on revenue. Beat on earnings. Reported record quarterly revenue. Then guided fiscal 2027 revenue to $72.2–73.4 billion — growth of about 14–16% (our arithmetic), for a company that grew 12% in fiscal 2026.

	Q4 FY2026	Consensus
Revenue	$17.3B (+18%)	~$16.82B	beat
Non-GAAP EPS	$1.22 (+23%)	$1.17	beat
Q1 FY2027 revenue guide	$18.0–18.2B	~$16.8B	above

Consensus figures are the LSEG estimates cited by CNBC. Guiding the next quarter more than a billion dollars past the average estimate (our arithmetic) is not a rounding error. It is a statement.

The line that needs reading is not sentiment. It is a single line item that sat well below the headline, and it says something structural about what kind of company Cisco is becoming again.

Did Cisco beat its own guidance in Q4 FY2026?

Yes. Revenue of $17.3 billion ($17,252 million) came in above the top of the $16.7–16.9 billion range Cisco guided to in its May 13, 2026 8-K, and non-GAAP EPS of $1.22 was above the $1.16–1.18 range; GAAP EPS of $0.97 was above the guided $0.80–0.85. The non-GAAP operating margin of 35.9% was above the guided 34–35%, while the non-GAAP gross margin of 66.3% landed within its 65.5–66.5% range. Year over year, revenue rose 18%, non-GAAP EPS 23% and GAAP EPS 52%, as reported in the August 12 release; full-year revenue of $63.3 billion and non-GAAP EPS of $4.33 were also above the fiscal 2026 ranges of $62.8–63.0 billion and $4.27–4.29.

The 1% subscription revenue line

Measure (fiscal 2026)	Growth
Total revenue	+12%
Product revenue	+16%
Networking product revenue	+22%
Total software revenue ($23.2B)	+4%
Total remaining performance obligations ($46.7B)	+7%
Total subscription revenue ($32.0B)	+1%

Subscription revenue — term software licenses, security software licenses, SaaS and associated service arrangements, as the 10-K defines it — was $31,977 million in fiscal 2026 against $31,526 million a year earlier, up 1%. Total software revenue was $23.2 billion, up 4%. Total RPO — the contracted backlog — reached $46.7 billion, up 7%. In the fourth quarter alone, networking product revenue grew 28%.

For roughly a decade, Cisco’s strategic story has run in exactly the opposite direction. The whole strategic project — the subscription transition, the software push, the Splunk acquisition — was about converting a cyclical box business into a recurring-revenue software business. Recurring revenue was the number management pointed to.

This year, subscription revenue grew 1% while networking grew 22%.

Subscription revenue is about half of Cisco’s revenue base — $32.0 billion of $63.3 billion. Everything outside it — $31.3 billion against $25.1 billion a year earlier — grew about 25% (our arithmetic). So half the company grew 1% and the other half grew about a quarter. Both are recognised revenue for the same fiscal year, so the comparison is like for like; the non-subscription half is a mix of hardware, non-subscription software and services.

That is a materially lower-quality growth mix than the recurring-software mix of the past decade. Hardware revenue is cyclical, order-driven, and does not recur by construction. Subscription revenue does. A company whose growth flips from the second kind to the first has a different earnings profile.

The AI number is orders, and it is concentrated

Cisco’s AI disclosure is genuinely impressive and worth stating clearly before qualifying it:

• $4 billion of AI infrastructure orders from hyperscalers in Q4 alone.
• $9.3 billion for fiscal 2026.
• Approximately $4 billion of AI infrastructure revenue delivered in fiscal 2026, and $7.5 billion expected in fiscal 2027. Per the 10-K, AI infrastructure from hyperscalers was about 6% of fiscal 2026 revenue, against less than 2% in fiscal 2025.
• Product orders grew 35%; networking orders grew 40%, the eighth consecutive double-digit quarter.

Three qualifications belong next to those numbers.

First, orders are not revenue. Cisco booked $9.3 billion of hyperscaler AI orders in fiscal 2026, delivered about $4 billion of AI revenue, and expects $7.5 billion of AI revenue for fiscal 2027 — roughly 80% of one year’s order book converting into the following year’s revenue (our arithmetic). That is a reasonable assumption and it is still an assumption. Orders convert on the customer’s schedule, not the vendor’s.

Second, it is concentrated. Product orders grew 35% overall but 25% excluding hyperscalers. Roughly ten points of that growth came from a small number of very large buyers, and Cisco’s 10-K says sales of AI infrastructure to cloud and hyperscaler customers “may be concentrated among a limited number of customers.” That is the same structural exposure AMD carries with its handful of anchor customers: superb while the buildout runs, and impossible to diversify around if one hyperscaler re-phases a deployment by two quarters.

Third, the margin is already moving. The non-GAAP product gross margin was 64.8% in Q4 against 67.5% a year earlier, down 2.7 points (our arithmetic), and the 10-K attributes the fiscal 2026 decline in product gross margin “primarily” to “negative impacts from product mix and higher memory costs.” Barclays, in a note quoted by Yahoo Finance, said the fiscal 2027 outlook “implies lower product gross margin, which we think may be due to AI dilution.” That is the pattern we track across this earnings season in AMD and Shopify: the fastest-growing part of the revenue carries a thinner markup than the business it is added to.

What is genuinely excellent, stated plainly

The bearish reading above should not obscure an unusually strong operating quarter.

• Record revenue of $17.3 billion, up 18% — up from 12% growth in Q3, per the May 13 8-K — with product revenue up 24%.
• Operating leverage: the non-GAAP operating margin rose to 35.9% from 34.3% a year earlier, even as gross margin fell.
• Operating cash flow of $5.4 billion, up 27% — faster than revenue.
• Full-year revenue $63.3 billion, up 12%; non-GAAP EPS $4.33, up 14%.
• $12.7 billion returned to shareholders across the year — $6.6 billion of dividends and $6.1 billion of buybacks under the repurchase program — against fiscal 2026 free cash flow of $12.8 billion ($12,767 million) reported in the 10-K: about 99% of free cash flow (our arithmetic), against a stated target of a minimum of 50%.

The gross margin needs its own line, because the two bases point in opposite directions. On a GAAP basis it expanded: total 64.1% against 63.2%, product 62.6% against 61.5%, services 69.4% against 68.3%. On the non-GAAP basis Cisco guides to, it contracted: total 66.3% against 68.4%, product 64.8% against 67.5%, with services up to 71.6% from 70.8%. For the full year, the 10-K reports total GAAP gross margin down 0.4 points.

The capital return is the figure long-term holders should weigh most heavily. Cisco is converting essentially all of its free cash flow into dividends and share count reduction while growing revenue 12% for the year. Very few companies of this size do both at once.

The guidance, read carefully

Fiscal 2027 revenue of $72.2–73.4 billion against fiscal 2026’s $63.3 billion is growth of 14% to 16%, a midpoint near 15% (our arithmetic), against 12% in fiscal 2026.

But note what is inside it. Cisco expects $7.5 billion of AI infrastructure revenue in fiscal 2027, up from about $4 billion, and Barclays (via Yahoo Finance) reads the outlook as implying core business growth of 10%. So roughly a third of the guided growth comes from the AI line — the newest, lumpiest and, per the same analysts, lowest-margin part of the business.

Piper Sandler, in a note quoted by CNBC, took the opposite view, calling the guidance “conservative given the current demand environment” while warning that some investors “may start to nitpick that we’re seeing peak growth.”

Both readings can be true. If the AI supercycle runs another two years, this guidance is conservative. If fiscal 2027 is the peak, then the 1% subscription line is the evidence that there is less recurring revenue underneath it than the last decade’s narrative implied.

The targets on the record

Target	What management said
Q1 FY2027 revenue	$18.0–18.2 billion; non-GAAP gross margin 65–66%
FY2027 revenue	$72.2–73.4 billion, roughly +15% at the midpoint
FY2027 non-GAAP EPS	$5.05–5.11, roughly +17% on $4.33
FY2027 AI infrastructure revenue	$7.5 billion expected, up from about $4 billion
FY2026 AI infrastructure orders	$9.3 billion from hyperscalers
Capital return policy	Minimum 50% of free cash flow annually; $12.7 billion returned in FY2026

The bear case, stated fairly

1. Subscription revenue grew 1%. The recurring base — the thing a decade of strategy was built to grow — is close to flat while hardware compounds.
2. RPO grew 7% against revenue growth of 12% for the year and 18% in the quarter. Contracted backlog is growing more slowly than the revenue being recognised.
3. The growth is hardware and it is cyclical. Networking +28% in the quarter is excellent and it is not the kind of revenue that shows up again next year without a new order.
4. Hyperscaler concentration. Product orders +35%, but +25% ex-hyperscalers.
5. Product gross margin is already lower on the non-GAAP basis (64.8% against 67.5%), which the 10-K attributes to product mix and memory costs, and Barclays reads the fiscal 2027 outlook as lower again.
6. Orders are not revenue. $9.3 billion booked; about $4 billion delivered; $7.5 billion expected next year.

The bull case is equally concrete: record quarterly revenue, revenue growth accelerating from 12% in Q3 to 18%, GAAP gross margin up in the quarter, a non-GAAP operating margin up 1.6 points, operating cash flow up 27%, a Q1 revenue guide above the LSEG estimate, hyperscaler AI revenue rising from under 2% of revenue to about 6%, and virtually all free cash flow returned to shareholders.

What to check at the Q1 FY2027 report

• Software and subscription growth against fiscal 2026’s 4% and 1%. This is the number. If it reaccelerates, the software thesis is intact and the hardware surge is a bonus. If it stays near flat, Cisco reads as a networking company having a very good cycle.
• RPO growth relative to revenue growth. Backlog growing slower than revenue can continue for a while; it cannot continue indefinitely.
• Non-GAAP product gross margin against Q4’s 64.8%, and the total against the guided 65–66%. Whether the decline continues — and how fast — determines whether the $7.5 billion of AI revenue is worth what the top line suggests.
• AI infrastructure revenue against the $7.5 billion path, quarter by quarter, and whether new AI orders keep pace with the $9.3 billion just booked.
• Product orders excluding hyperscalers. The 25% figure is the honest read on broad enterprise demand; the 35% headline is the read on a few procurement departments.
• Networking’s sequential growth, not the year-over-year figure. Cyclical businesses turn on the sequential line first.
• Whether the FY2027 guide is raised. Piper Sandler thinks it is conservative. Management will settle that within two quarters.

The read

Cisco delivered the best quarter in its history, and the mix underneath it is more mixed than the headline.

Revenue accelerated to 18%, the operating margin widened, cash generation improved faster than sales, and management guided the coming year to 14–16% growth. On the operating record alone this is a record year.

The problem is what kind of growth it is. A business long associated with recurring software revenue reported 1% subscription growth for the year and 22% networking growth (28% in the fourth quarter), a non-GAAP gross margin two points lower than a year ago — and expects a third of next year’s growth to come from AI infrastructure sold to a handful of hyperscalers, at a product gross margin the analysts covering it expect to be lower again.

The tracking job narrows to one pairing. Read subscription and software growth against networking growth side by side. While the gap looks like this one — 1% against 22% — Cisco is a networking company in an exceptionally good cycle. If subscription revenue starts closing the gap, the decade-long software transition is finally showing in the numbers.

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Sources and method. Company figures are from Exhibit 99.1 to Cisco’s Form 8-K filed 2026-08-12 (accession 0000858877-26-000106; the Q4 and fiscal 2026 results release, for the quarter ended 2026-07-25, reported after the close), Cisco’s Form 10-K for fiscal 2026 filed 2026-09-02 (accession 0000858877-26-000132) and Exhibit 99.1 to the Form 8-K filed 2026-05-13 (accession 0000858877-26-000075), read directly from SEC EDGAR. From the August 12 release: revenue of $17,252 million (+18%), product revenue +24%, Networking $9,791 million (+28%), Security $2,226 million (+14%), Collaboration $1,167 million (+12%) and Observability $275 million (+6%); GAAP and non-GAAP total, product and services gross margins against the prior-year quarter; non-GAAP operating margin of 35.9% against 34.3%; GAAP EPS of $0.97 and non-GAAP EPS of $1.22; product orders +35% and +25% excluding hyperscalers; networking orders +40%; hyperscaler AI infrastructure orders of $4 billion in Q4 and $9.3 billion for the year, about $4 billion of AI revenue in fiscal 2026 and $7.5 billion expected in fiscal 2027; RPO of $46.7 billion (+7%); operating cash flow of $5,386 million (+27%); fiscal 2026 revenue of $63.3 billion and non-GAAP EPS of $4.33; fiscal 2026 dividends of $6,553 million and program repurchases of $6,106 million ($12,659 million in total, per the release’s dividends-and-repurchases table); and all Q1 and fiscal 2027 guidance. From the 10-K: subscription revenue of $31,977 million against $31,526 million, software revenue of $23.2 billion (+4%), free cash flow of $12,767 million, the minimum-50% capital-return target, AI infrastructure from hyperscalers at about 6% of fiscal 2026 revenue against less than 2%, the full-year 0.4-point decline in GAAP gross margin and its stated drivers, and the customer-concentration risk factor quoted above. From the May 13 filing: Q3 revenue growth of 12% and the Q4 and fiscal 2026 guidance (revenue of $16.7–16.9 billion, non-GAAP gross margin of 65.5–66.5%, non-GAAP operating margin of 34–35%, non-GAAP EPS of $1.16–1.18 and GAAP EPS of $0.80–0.85 for the quarter; revenue of $62.8–63.0 billion and non-GAAP EPS of $4.27–4.29 for the year). Whether the quarter beat or missed is judged here only against that previously issued guidance and against the year-ago quarter.

One correction worth recording, because it was wrong in early coverage we checked: several summaries attributed revenue of $14.7 billion and non-GAAP EPS of $0.99 to this quarter. Those are the prior-year fiscal Q4 figures. The quarter reported on 2026-08-12 was $17.3 billion and $1.22.

Not company figures, and attributed accordingly: the consensus estimates (Q4 revenue near $16.82 billion, non-GAAP EPS of $1.17, and Q1 fiscal 2027 revenue near $16.8 billion) are LSEG figures as reported by CNBC; the Barclays commentary on ~10% implied core growth and lower implied product gross margin is as quoted by Yahoo Finance; and the Piper Sandler commentary on conservative guidance and peak growth is as quoted by CNBC. All three are linked above.

Our arithmetic, labelled as such: the fiscal 2027 guided growth range of 14–16% against fiscal 2026 revenue; the roughly 80% implied conversion of fiscal 2026 AI orders into fiscal 2027 AI revenue; the ~25% growth of revenue outside subscription; the 2.7-point decline in non-GAAP product gross margin; the $1.2–1.4 billion gap between the Q1 guide range and the LSEG estimate; and capital returned as about 99% of free cash flow. The interpretation — that the growth mix has shifted from recurring software back to cyclical hardware — is our analysis, not a company statement, and is not a forecast. This piece makes no claim about the share-price reaction.

Related: AMD Q2 2026 and Shopify Q2 2026, where the same AI-mix gross-margin pressure appears; Cerebras Q2 2026, which reported the same night; and Nebius and CoreWeave, the customers on the other side of Cisco’s hyperscaler order book.

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