A：In the first quarter of fiscal year 2026, Cisco reported strong financial results with Q1 revenue and earnings per share coming in above the high end of guidance ranges. Total revenue increased 8% year over year, with product revenue up 10%, driven by robust demand for AI infrastructure and campus networking solutions. Non GAAP EPS grew 10%, and the company returned $3.6 billion in capital to shareholders through dividends and share repurchases, representing 125% of free cash flow in Q1. Annualized recurring revenue and remaining performance obligations also provided a strong foundation for future performance.

A：Cisco's strong start to fiscal 2026 indicates a massive opportunity for the company in providing critical infrastructure for the AI era. According to the 2025 Global AI Readiness Index, only one third of organizations' IT infrastructure can accommodate their planned AI projects, which signals a need for modern, scalable, and secure networking infrastructure. This creates a significant opportunity for Cisco with its leading networking portfolio and AI-native security solutions.

A：Total product orders grew 13% year over year in the first quarter with contributions from all geographies and customer markets. Enterprise product orders grew 4% year over year, with strength in campus switching and wireless solutions contributing to public sector orders growth of 12% year over year. Service provider and cloud customer product orders increased 45% year over year, driven by high double-digit order growth in hyperscalers. Telco customer orders also showed strong growth, increasing more than 25% year over year.

A：Cisco expects to recognize roughly $3 billion in AI infrastructure revenue from hyperscalers in fiscal year 2026 as these customers look to extend AI clusters across their infrastructure. This is marked by the acceleration in growth in AI infrastructure orders taken from hyperscalers, which total $1.3 billion, balanced between Silicon 1 systems and optics.

A：The latest Cisco 8223 router, announced in the first quarter, is the first to market 51.2 Tb per second fixed Ethernet routing system designed for intense AI workload traffic between data centers. This router features Silicon 1 P200 chips and is aimed at providing performance and speed across data centers, which was previously achievable only within data centers with a switching infrastructure.

A：Cisco is expanding its strategic partnerships to capture AI opportunities, including an expansion of the partnership with G42 in the UAE to power, connect, and secure large-scale AI clusters featuring AMD GPUs. Other partnerships include collaborations with Humane and Stargate UAE, as well as an expanded sovereign critical infrastructure portfolio for European customers. The company also announced a new partnership with Nvidia, introducing the N 9100 switch based on Spectrum Silicon, which is the first to offer networking compliant with Nvidia's Cloud reference architecture.

A：The performance of Cisco's security portfolio is strong, with order growth for new and refreshed products that comprise one third of the security portfolio, including secure access XDR, Hyper Shield AI defense, and refreshed firewalls. The company has seen nearly 3000 customer purchases of new products since launch, with mid-teens growth in demand for next-generation firewalls. Recent innovations include the introduction of CCO Week, a converged platform for network edge computing, and Cisco Data Fabric, a Splunk-powered architecture to unify and manage machine data across various sources, which supports enterprises in building AI models with their previously unused proprietary data.

A：The growth segments in Q1 were Networking with 15% growth, driven by service provider routing largely from AI infrastructure, followed by data center switching, enterprise routing, and campus switching with double-digit growth. Security revenue was down 2%, influenced by prior generation product declines and a shift to cloud subscriptions. The decrease was in the Collaboration segment, down 3%, reflecting declines in devices and Webex observability which grew by 6%.

A：Total RPO grew by 7% to 42.9 billion, product RPO grew by 10% to 11.8 billion (of which the longest-term portion was 11.8 billion, up 13%), and total Arrangement Revenue (ARR) ended the quarter at 31.4 billion, an increase of 5%, with product ARR growth of 7%.

A：The non-GAAP operating margin was 34.4%, which was above the high end of the guidance range. The non-GAP tax rate was 19% for the quarter.

A：Cisco ended Q1 with total cash, cash equivalents, and investments of $15.7 billion. Operating cash flow was $3.2 billion, down 12% due to investments to meet growing customer demand for AI infrastructure.

A：For Q2, the revenue is expected to be in the range of $15 billion to $15.2 billion with a non-GAAP gross margin range of 67.5% to 68.5%. The operating margin is expected to be in the range of 33.5% to 34.5%. For the fiscal year, the revenue is expected to be in the range of $60.2 billion to $61 billion, and non-GAAP earnings per share is expected to range from $4.80 to $5.14.

A：The $3 billion revenue number mentioned refers to revenue from hyperscale AI infrastructure in the fiscal year. The expectation is that orders for this fiscal year will be at least 2 times the orders received in the previous fiscal year from the same set of customers, indicating a solid pipeline and expanding use cases.

A：The enterprise pipeline for the remaining three quarters of the fiscal year exceeds $2 billion, with $200 million booked in Q1, providing an incremental opportunity for the future, especially as the fiscal year ends.

A：The supply chain challenges have impacted the business with significant price increases for memory, DRAM, and optics. The company has considered these factors in their updated guidance for Q2 and the year.

A：The expected challenges for the second half of the year in terms of sales comparisons are significantly tougher comps. In the first quarter (Q1) and second quarter (Q2) a year ago, the company had order growth rates of -6% and plus 9%, respectively. In contrast, the expected comp growth for the third quarter (Q3) and fourth quarter (Q4) is plus 11% and plus 8% on the top line.

A：The significance of the new product launches in the enterprise routing space is that they are ramping faster than historical launches, which indicates to the company that customers are aggressively adopting these new offerings. The refresh opportunity with the new suite of products, including new Wi-Fi 7 portfolio and campus switches, is driven by the end-of-support for older product lines such as the Cat 4K and Cat 6K. This fast ramp-up suggests strong interest in these new portfolios.

A：Customers are focused on modernizing their network infrastructure in preparation for AI workloads and enhanced functionality. The new switching platforms, which enable security to be deeply integrated into the network, are gaining traction as customers recognize the need to apply security policies directly in the network as traffic moves, rather than offloading it to a firewall.

A：Silicon One is gaining traction within the product portfolio and as a standalone product, with projections to fully roll out across the portfolio by the end of fiscal year 29, which is in another 2.5 years. The transition is expected to result in a diverse range of offerings with performance, programmability, and low power consumption. The revenue impact is positive as it allows for greater flexibility and direct adoption by customers.

A：The shift in revenue mix to cloud during the quarter was unexpected, with a decrease in on-premise revenue to a third of the total revenue from about 50/50 in the prior quarter. The revenue shift is positive as it indicates customer adoption and allows for real-time innovation. Despite a one-time timing issue on the revenue front, order growth remained positive, and customer demand appears strong. The long-term implication is a stickier relationship with customers and potentially more revenue over time due to the cloud's stickier nature.

A：The faster-than-anticipated adoption of the new campus solutions can be attributed to a variety of factors including competitive products, better competitive strategies, and confusion in the marketplace regarding wireless technology. Additionally, the need for AI preparation and the belief that security must be integrated into the network have also contributed to the increased demand for these solutions.

A：The company plans to address the end-of-life product issue by upgrading customers, particularly government and public sector entities, once funding becomes available and is dispersed. This strategy aims to align with the potential increase in government spending as a result of budgetary changes and to ensure that the equipment is updated for cyber risk management and overall hygiene.

A：The company expects strong growth in the optical solutions market, with participation in both data centers and non-data centers. There is a focus on continued innovation and selling of pluggable optics to major hyperscalers. The market for optics is considered large and comparable in value to the switching side of the business.

A：The company anticipates that the number of orders from hyperscale customers for this year will be at least two times the orders received from the same customer group last year, using the same products and customers for measurement.

A：The expected orders from sovereign customers, which amount to $2 billion plus for the remainder of the year, are not included in the 2x number mentioned for hyperscale customers' orders. The reason is that some of these orders will start flowing only in the second half of the fiscal year and they are not considered material to the current year's guidance.

A：The G 42 partnership with AMD is significant, and the company is optimistic about future collaborations as there are multiple GPU providers, particularly in the inferencing domain. The company aims to be a connectivity layer across various GPUs and other providers, which is anticipated to be important as the demand for integrated compute and networking solutions in data centers becomes more prevalent.

A：The company is overhauling its channel partner program to align with growth opportunities and incentivize partners similarly. The new program aims to simplify rewards, incentivize for portfolio breadth and depth of expertise, and focus on core business areas such as campus refresh, AI, security, and premium services. The changes are seen as positive, and the company is committed to addressing any issues that may arise.

A：AI sales are a significant part of the company's revenue, with a strong margin demonstrated in the first quarter at 68.1%. The company projects top-line growth to exceed bottom-line growth for the remainder of the year, indicating a focus on profitable growth. While exact figures for the contribution of AI sales to the $3 billion target are not provided, the guidance suggests a balanced growth across various business segments including optics, web-scale service providers, and core enterprise portfolios.

A：Security revenue is down 2%, but the company remains committed to achieving mid-teens growth in revenue for the security segment. The challenges are attributed to a mix shift that is expected to normalize over the next few quarters, leading to year-over-year comparisons being more favorable. The company doesn't require a significant improvement in security revenue to meet its current guidance for the second quarter or the year.

A：The incremental revenue of $1 billion in fiscal 26 is a result of a combination of stronger-than-anticipated growth in AI orders and earlier-than-expected refresh in the enterprise campus segment. While specific numbers are not provided, the growth is attributed to a mix of both AI and enterprise campus refresh activities.

A：The company has not provided a direct answer regarding whether it has secured sufficient capacity for a doubling of AI orders among hyperscalers for the year. However, the growth forecast includes an increase in AI orders from hyperscalers and the broader business, indicating an expectation for meaningful growth in this area.

A：Recent trends show that inventory plus advanced purchase commitments have increased by almost a billion dollars in the last 90 days, with a year-over-year increase of about 38%, amounting to over 3 billion dollars.

A：The potential opportunities for the Cisco Unified Edge are significant across various industries including retail, healthcare, and manufacturing, due to its ability to perform real-time inferencing at the edge without sending data back and forth to a data center.

A：The unified edge revitalizes previous deployment strategies of integrated compute and security. Potential players could include CDN operators, and partnerships with carriers and telcos who can offer it as a consumption service, as well as on-premises deployment by enterprises.

A：The company expects to have scale-up silicon offerings in the future, transitioning to a version of Ethernet. It intends to participate in the scale-up market and anticipates releasing products over time for this purpose.

A：The motivation for campus refreshes is driven by the need to upgrade an estimated billions of dollars of end-of-support equipment that was not upgraded in 2023. The strength in the company's international government business is attributed to investments in public sector infrastructure, especially in Europe, due to defense and geopolitical factors, as well as global sovereignty drives around data and tech.

A：The current AI build-out is moving even faster than the late 90s internet build-out, with stronger, more profitable, and balanced companies driving the investments. This is considered a key difference, as the current build-out is centered around companies with established business models and balance sheets, resulting in a pace of investment and innovation that is significantly different from the dot-com era.