Cisco continues to lean heavily on its legacy networking business and AI opportunities to drive business, a lean that helped the vendor post the usual “beat-and raise” results for its most recent fiscal quarter.

Cisco’s networking business surged 21% during the vendor’s latest second fiscal quarter compared to last year, which CEO Chuck Robbins highlighted was its sixth consecutive quarter of double-digit growth. That timing also goes back to a Cisco corporate restructuring that included folding its networking business into its cybersecurity and collaborations team under the guidance of current chief product officer Jeetu Patel.

Robbins pinned the most recent networking sales surge to Cisco’s service provider routing, data center switching, campus switching, wireless servers, and industrial IoT products. “Within our campus networking portfolio, we are seeing strong demand for our next-generation switching, routing, and wireless products, which continue to ramp faster than prior product launches,” Robbins added.

These products also continue to gain AI abilities that are driving adoption and refresh opportunities. Robbins noted that Cisco’s installed product base portends to “tens-of-billions-of-dollars across early Catalyst generations nearing end of support” that “underpin the multi-year, multibillion-dollar refresh opportunity for Cisco.”

“This demand is driven by onshoring of manufacturing to the United States, the increase of AI workloads at the network edge, and the emergence of physical AI,” Robbins said.

Cisco’s AI angle also continued to gain pitch, with hyperscaler customer AI infrastructure-related orders surging from $1.3 billion the previous quarter to $2.1 billion in the most recent quarter, an amount that also equals total orders placed for fiscal 2025. Robbins later noted that AI infrastructure sales remain at a mix of 60% systems and 40% optics.

Splunk continues to slog, CPO in time

While networking and AI remain hot, Cisco’s Splunk integration continues to struggle through a broader market transition. Splunk sales continued to accelerate toward cloud subscriptions as opposed to on-premises deployments, that Robbins said was “creating a drag on revenue growth, which we expect to continue in the second half of fiscal year [2026].”

Cisco had previously disclosed that it had initially expected an even split between cloud and on-premises Splunk deployments but ended up with a split closer to two-thirds vs one-third between the two models.

Cisco also continues to see opportunities with its co-packaged optics (CPO) push, but the timing remains difficult to pin down.

“We absolutely believe it's going to happen, we all believe it's actually imminent right now,” Robbins said. “If you recall, we actually demonstrated this technology, I think, two years ago or more, and so we have the technology to build it, and we will, as customers want it. But, today, they want choice, and I think in many cases customers want the differentiation between optics and silicon, so they have choice and they don't get locked in. It reduces their multivendor choice.”

Broadcom CEO Hock Tan proffered a similar argument during that vendor’s most recent earnings call, noting that while CPO is lining up to be a way to “create basically, much better, more efficient, lower power interconnects in not just scale out, but hopefully scale up,” before adding, “I could see a point in time, in the future, when silicon photonics matters as the only way to do it. … We're not quite there yet, but we have the technology, and we continue to develop the technology.”

Memory shortage strategies

Robbins also took a minute to specifically highlight how Cisco is managing the ongoing memory shortage situation, noting the firm has implemented a trio of “key strategies” to mitigate the impact. These include already announced price increases, with plans to “monitor market trends and make additional adjustments as necessary.”

Cisco is also “revising contractual terms with channel partners and customers to address evolving component prices,” and is leaning on its overall scale to “negotiate favorable terms and secure supply to fulfill current and future demand.”

“Overall, we feel confident in our ability to manage this industry wide dynamic better than our peers,” Robbins said.

Cisco’s mitigation strategies were echoed by Extreme Networks CEO Ed Meyercord, who told investors during the vendor’s most recent earnings call that it had implemented a 7% price increase and the results were “like a tree falling in the forest, a total non-issue,” a reaction Meyercord said showed the “price inelasticity of networking.”

“If you think about an organization, think about your organization, there's no discussion about whether or not you need a network and that you need a modern network with modern networking tools. This is true for all of our customers. It's kind of a non-negotiable,” Meyercord said during the earnings call. “I'd say our customers are very resilient from a pricing perspective.”

Meyercord furthered this notion to SDxCentral, stating that “even if we have small increases in our prices, customers will bear that because they need to. They need to support critical infrastructure.”

That ability to support small price increases is also due to market dynamics. Meyercord explained that Extreme is able to manage its price increases under similar moves being made by market heavyweight Cisco.

“Cisco is the largest player in our market. They sort of set a pricing umbrella and we're able to sort of come in under that, and they never let a good component shortage go to waste, so we kind of slide up under that,” Meyercord said.

Despite Cisco’s continued market dominance and seeming continued ability to at least meet projections, analysts remain cautious on its ability to fend off smaller rivals.

Financial analyst firm William Blair noted in a report on Cisco’s latest earnings that while the vendor’s “solid beat-and-raise” results were “bolstered by accelerated AI infrastructure growth and strong refresh activity for networking hardware. … Tough competition across its core markets will limit Cisco’s ability to maintain its current growth momentum.”