Cisco Q1 FY2027 Earnings: Revenue Rises 24% as Networking Grows 43%

Cisco (NASDAQ: CSCO) reported Q1 FY2027 revenue of $18.5 billion, up 24% year over year, while GAAP diluted EPS rose 58% to $1.14 from $0.72. Networking revenue grew 43% and product revenue increased 32%, while operating expense leverage lifted GAAP operating margin to 30.2% despite a lower gross margin. Operating cash flow rose 36% to $4.4 billion, and Cisco raised its FY2027 revenue and non-GAAP EPS guidance.

Core Earnings Data

For the quarter ended October 24, 2026, Cisco’s revenue growth was concentrated in products, particularly Networking. Earnings grew faster than revenue as GAAP operating expenses declined 3% and non-GAAP operating expenses increased only 2%.

The following figures are in billions of dollars except EPS and margin data.

Business and Segment Performance

Product revenue reached $14.667 billion and increased 32%, compared with only 1% growth in services revenue. Networking supplied most of the expansion, while Security, Collaboration, and Observability posted more moderate growth.

Growth was also positive across every reported geography. Americas revenue rose 28% to $11.506 billion, APJC increased 21% to $2.556 billion, and EMEA grew 18% to $4.456 billion. The Americas remained Cisco’s largest region and recorded the fastest regional growth rate.

Operating Leverage Offset Lower Gross Margins

Cisco’s total GAAP gross margin declined to 63.7% from 65.5%, while its non-GAAP gross margin fell to 65.6% from 68.1%. Product gross margin was the main source of pressure: GAAP product margin decreased 270 basis points to 61.8%, and non-GAAP product margin fell 350 basis points to 63.7%. Services margins moved in the opposite direction, with GAAP services margin rising to 70.9% from 68.4%.

Despite the gross-margin decline, operating margins expanded because expenses grew much more slowly than revenue. GAAP operating expenses fell 3% to $6.190 billion and declined to 33.4% of revenue from 42.9%. Non-GAAP operating expenses rose 2% to $5.140 billion, but fell to 27.8% of revenue from 33.7%. Lower restructuring charges and purchased-intangible amortization also contributed to the decline in reported operating expenses.

This expense leverage explains why GAAP operating income increased 66% and GAAP EPS rose 58% on revenue growth of 24%. Non-GAAP operating income and EPS also grew faster than revenue, increasing 37% and 40%, respectively.

Cash Flow and Balance Sheet

Operating cash flow increased to $4.357 billion from $3.212 billion. Accounts receivable declined by $1.542 billion from the end of FY2026, while inventory increased by $690 million, or about 12%, to $6.384 billion.

Cash, cash equivalents, and investments totaled $15.845 billion, compared with $15.918 billion at the end of FY2026. Remaining performance obligations were $46.169 billion, up 8% year over year, while deferred revenue increased 7% to $30.058 billion. Product RPO grew 7%, and services RPO rose 9%.

Cisco returned $3.656 billion to shareholders during the quarter. That included $1.654 billion in dividends and approximately $2.002 billion used to repurchase 18 million shares at an average price of $112.38. The remaining share-repurchase authorization was $6.1 billion.

Earnings Guidance

Cisco said it raised its FY2027 revenue and non-GAAP EPS guidance, although the release did not provide the previous numerical ranges. The company also lifted its FY2027 hyperscaler AI infrastructure revenue expectation to $9 billion, more than double the FY2026 total.

Management View

Chair and CEO Chuck Robbins characterized Cisco as being in the early stages of a multiyear networking supercycle, with organizations investing to scale and secure infrastructure for agentic AI. CFO Mark Patterson attributed the faster earnings growth to operating leverage as the business scales and cited the quarter’s performance as the basis for raising the full-year outlook.

Recent Insider Transactions

The supplied six-month summary shows 114,689 shares sold across 18 transactions and 5,773 shares purchased across five transactions, resulting in net sales of 108,916 shares. The latest 10 reported transactions consisted of one zero-value stock grant and nine sales with a combined reported value of approximately $3.62 million; these disclosures alone do not establish insiders’ views on Cisco’s outlook.

Risks Investors Need to Watch

• Growth concentration in Networking: Networking increased 43% and generated about 60% of quarterly revenue, while services grew only 1% and Observability grew 2%. A slowdown in networking demand would therefore have an outsized effect on Cisco’s overall growth.
• Product gross-margin pressure: Product revenue expanded rapidly, but both GAAP and non-GAAP product margins declined. If that pressure persists, Cisco may need continued expense leverage to sustain operating-margin expansion.
• Hyperscaler deployment timing: The $9 billion FY2027 AI infrastructure revenue expectation depends on the timing and scale of deployments by hyperscaler customers. Cisco also identifies large, concentrated cloud and hyperscaler purchases as a source of potential variability.
• Higher inventory: Inventory increased by approximately 12% from the end of FY2026. Although operating cash flow improved this quarter, excess or obsolete inventory could pressure future cash flow and margins if demand or product mix changes.

Summary

Cisco’s Q1 FY2027 performance was driven primarily by Networking and broad geographic growth. Lower gross margins were more than offset by operating expense leverage, allowing operating income and EPS to grow substantially faster than revenue, while cash flow and contracted revenue indicators also improved. The main items to monitor are the durability of networking and hyperscaler demand, product margin trends, inventory levels, and execution against the raised FY2027 outlook.