Cisco’s bold move last year to focus more efforts on AI surpassed what were probably modest expectations are paying dividends in boosting its legacy networking business but were not quite enough to counter a softening of security sales during its most recent fiscal quarter that were tied to its federal customer base.

Cisco reported $800 million in AI-related revenues during the fourth quarter of its fiscal 2025, which pushed its full fiscal-year haul to $2.1 billion. That blew past Cisco’s initial forecast of $1 billion in AI-related revenues for the full year.

Cisco CEO Chuck Robbins explained to investors during its earnings call that basically all of this growth was coming from its hyperscaler customers, with two-thirds of AI-related orders tied to Cisco systems, with the remaining one-third tied to its optics portfolio.

Cisco’s networking business also continued to show robust growth, with the vendor posting a 12% year-over-year increase in sales. That growth was led by internet infrastructure, enterprise routing, and switching that partially offset a drop in server networking sales during the quarter.

Robbins noted that Cisco’s most recent AI-infused product refresh “marks the beginning of a major multi-year refresh cycle opportunity for Cisco’s large installed campus switching base.”

Robbins explained that Cisco was seeing a pull in networking demand from customers that are bracing for an explosion in AI-generated data that will need to be sent across network resources, and then Cisco is bracing for increased networking demand tied to expected product refresh cycles.

“There's tens-of-billions of dollars of installed bases there that we can go after,” Robbins said of that refresh opportunity.

Robbins later explained that Cisco’s recent move to more tightly integrate its cloud-based Meraki-management platform to control its Catalyst devices will drive more opportunities.

“I think there's 35 million devices now being managed by the cloud, and so it just gives customers choice,” Robbins said of that integration. “It rationalizes the hardware down to a single platform that you can run in either mode. You can run it [on-premises] or you can run it cloud managed. And I think that's a big benefit for our customers as we go forward.”

Cisco’s AI-related networking ambitions are running into increased market competition. Rivals like Juniper-enhanced Hewlett Packard Enterprise (HPE) and Extreme Networks are aggressively rolling out AI-fueled networking products.

Gartner recently placed a “challengers” label on Cisco’s SASE offering, noting the vendor was one of the ranking’s smaller participants. Gartner estimated the networking giant served around 500 active SASE platform enterprise customers at the time its report was released last month.

However, a Dell’Oro Group report from late last year lumped Cisco into a group of six SASE heavyweights that combined controlled 72% SASE market share worldwide. Those other leading vendors included Zscaler, Palo Alto Networks, Broadcom-VMware, Fortinet, and Netskope.

Cisco’s security mixed

Cisco’s security business was a mixed bag, as the vendor posted strong growth from its Splunk business and its secure access service edge (SASE) offering, but Robbins noted that overall security sales were hurt by “U.S. federal, which had a tough year.”

That drag dropped what would have been a double-digit-percentage growth in overall security sales to a more modest mid-single-digit-percentage growth rate.

Despite the security struggles, Robbins expressed optimism for that business unit coming out of the quarter. Some of that was based on Cisco’s latest product update release, which included updates to its Hypershield management platform and its secure service edge (SSE) offering that bolster its secure access service edge (SASE) component.

“We have 80 new Hypershield customers … largely connected to this new smart switch, so that strategy is working, and … we have 480-plus new SSE customers during the quarter, so that's … really getting good traction,” Robbins said. “Based on how we see this stuff evolving, I would see the growth rate continuing to improve as we get through the fiscal year this year.”

Robbins further noted that “the vast majority” of those new Hypershield enterprise customers were bundling that feature with Cisco’s latest n9300 smart switch.

The Cisco executive also dutifully downplayed any concerns from Palo Alto Networks’ recent move to acquire identity and privileged access management (IAM/PAM) vendor CyberArk for $25 billion, a number that was just slightly less than the $28 billion Cisco spent on observability giant Splunk.

“The good news for us is we don't have to wait for an acquisition to close. We have a lot of great talent that's already working on this,” Robbins said. “I think that the advantage that we're going to have here with identity and agentic security is that you're going to have to do it real time, and we are the only company that has networking and security and identity specifically within security. So we think that gives us an advantage.”