Cisco Systems, Inc. — Q1 FY 2027 Earnings Summary

Financial Performance:

• Total revenue reached a record $18.5 billion, a 24% increase year-over-year from $14.9 billion in Q1 FY 2026.
• GAAP net income was $4.6 billion, up 59% year-over-year, with diluted EPS of $1.14, up 58% year-over-year.
• Non-GAAP net income was $5.6 billion, up 39% year-over-year, with non-GAAP diluted EPS of $1.40, up 40% year-over-year.
• GAAP operating income was $5.6 billion, up 66% year-over-year, with a GAAP operating margin of 30.2%.
• Non-GAAP operating income was $7.0 billion, up 37% year-over-year, with a non-GAAP operating margin of 37.8%.
• Product revenue grew 32% year-over-year to $14.7 billion, while services revenue grew 1% to $3.9 billion.
• GAAP gross margin was 63.7%, down from 65.5% in Q1 FY 2026; non-GAAP gross margin was 65.6%, down from 68.1%.
• GAAP operating expenses were $6.2 billion, down 3% year-over-year; non-GAAP operating expenses were $5.1 billion, up 2%.
• Cash flow from operating activities was $4.4 billion, a 36% increase compared to $3.2 billion in Q1 FY 2026.
• Remaining Performance Obligations (RPO) totaled $46.2 billion, up 8% year-over-year.
• Deferred revenue was $30.1 billion, up 7% year-over-year.
• Cash and cash equivalents plus investments were $15.8 billion at the end of the quarter.

Guidance and Future Outlook:

• Raised full-year FY 2027 revenue guidance to $74.8 billion to $75.8 billion.
• Raised full-year FY 2027 non-GAAP EPS guidance to $5.47 to $5.53 (GAAP EPS estimated at $4.38 to $4.44).
• Provided Q2 FY 2027 revenue guidance of $18.0 billion to $18.2 billion.
• Provided Q2 FY 2027 non-GAAP EPS guidance of $1.34 to $1.36 (GAAP EPS estimated at $1.07 to $1.09).
• Raised expectation for AI infrastructure revenue from hyperscalers to $9 billion in FY 2027, more than double the total for FY 2026.
• Management expects to achieve an effective tax provision rate of approximately 14.5% for GAAP and 18.5% for non-GAAP results in Q2 FY 2027.
• Management expects an effective tax provision rate of approximately 16% for GAAP and 18.5% for non-GAAP results for FY 2027.

Business Segments and Product Lines:

• Networking revenue grew 43% year-over-year to $11.1 billion.
• Security revenue grew 7% year-over-year to $2.1 billion.
• Collaboration revenue grew 8% year-over-year to $1.1 billion.
• Observability revenue grew 2% year-over-year to $279 million.
• Geographic revenue growth included Americas up 28%, EMEA up 18%, and APJC up 21%.
• Closed the acquisition of WideField Security Inc., a privately held security company, in Q1 FY 2027.

Market and Competitive Landscape:

• Reported broad-based high demand for Cisco technology with double-digit growth across all geographies and customer markets.
• Management described the current environment as the "very early stages of a multi-year networking supercycle."
• Organizations are increasingly turning to Cisco to scale, secure, and optimize environments for the "agentic AI era."

Risks and Challenges:

• The press release notes forward-looking statements are subject to risks including global economic conditions, geopolitical uncertainties, tariffs, and supply constraints.
• Risks include variations in customer demand, timing of orders, manufacturing lead times, and potential component cost variability.
• Potential risks involve competition in product and services markets, dependence on new product acceptance, and cybersecurity threats.
• A restructuring plan announced on May 13, 2026, is expected to be substantially completed by the end of fiscal 2027, with associated charges included in guidance.

Management Commentary and Tone:

• Chuck Robbins, Chair and CEO, stated the quarter delivered the strongest revenue and non-GAAP EPS growth rates in over 15 years.
• Mark Patterson, CFO, noted that revenue, non-GAAP operating margin, and non-GAAP EPS all exceeded the high end of guidance ranges.
• Management highlighted significant operating leverage enabling earnings to grow much faster than revenue as the business scales.
• The tone was confident regarding the ability to capture the multi-billion-dollar opportunity represented by the networking supercycle.

Other Key Points:

• Declared a quarterly dividend of $0.42 per common share, payable January 20, 2027, to stockholders of record as of January 4, 2027.
• Returned $3.7 billion to stockholders in Q1 FY 2027 through share buybacks and dividends.
• Paid a cash dividend of $1.7 billion and repurchased approximately 18 million shares for an aggregate price of $2.0 billion.
• The remaining authorized amount for stock repurchases under the program is $6.1 billion with no termination date.
• Conference call for Q1 FY 2027 results was held on November 12, 2026.