Cisco posted robust operating results for its most recent fiscal quarter, bolstered by strong growth in networking sales and continued heat coming from its AI focus that offset a slump in its security business, echoing a trend set during its previous quarter.

That security slump was highlighted by a 2% drop in segment revenues during the first quarter of Cisco’s fiscal 2026 compared to the same quarter last year. CEO Chuck Robbins tied the drop to a faster shift of Splunk customers switching their consumption models, “with a shift to more cloud subscriptions and fewer on-premises deals.”

Cisco 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.

“While this shift negatively impacted security revenue growth in Q1 it is purely a timing issue.,” Robbins spun in regards to Cisco’s $28 billion acquisition. “We are actually pleased to see more cloud subscriptions for Splunk as they enable greater adoption and expansion and allow us to deliver innovation faster to enable customers to unlock value from AI.”

Cisco CFO Mark Patterson did add that the vendor saw more granular growth from its secure firewall, Duo Security, and secure access service edge (SASE) offerings.

Despite the positive connotations, Robbins was blunt in his view on a segment that is one of three focus areas for the vendor.

“None of us are happy about where we are right now, let me be clear about that,” Robbins said of Cisco’s security results. “But we think that it'll continue to accelerate through the year, and it'll come out of the year at a much higher rate. And then I think the normalization of this sort of mix-shift is probably gonna take us four quarters to get to where the year-over-year comparisons are sort of apples-to-apples on the mix side. … “We're going to just give you as much transparency as we possibly can.”

Networking, AI surge

Despite the security slump, Cisco is continuing to see strong demand from its networking and AI work.

Networking segment revenues surged 15% year over year, which Cisco management attributed to a strong campus refresh cycle and … wait for it … continued strong AI demand. Robbins explained that the networking growth was spread across “hyperscale infrastructure, enterprise routing, campus switching, wireless industrial IoT, and servers.”

“Within our campus networking portfolio, we are seeing very strong demand for switching, routing, and wireless products, indicating that enterprise customers are investing in the connectivity needed for AI deployments,” Robbins said.

Cisco’s Acacia division also continued to see strong demand for its coherent pluggable optic offerings, with Robbins noting that “all hyperscalers are now customers of these products.” This has provided Cisco with participation both inside and outside of the data center.

“We're blessed to have great solutions in both inside the data center and then outside the data center, DCi (data center infrastructure) scale across,” Robbins said. “I think we'll continue to innovate there. … We now are selling our pluggable optics to all of the hyperscalers, all the major hyperscalers, and I think that we'll continue to see great opportunities across both of those. … It's a really large market that is meaningful, even on par with sort of the switching side of it, so we're pleased to be in both sides of it.”

Cisco also remains confident in its AI opportunities and is forecasting $4 billion in AI-related revenues for its fiscal 2026. That is a near-doubling from what Cisco generated during its previous fiscal year, which itself was more than double its initial forecast.

Robbins, explained that a vast majority of that revenue will come from hyperscalers, and repeatedly stated the broad growth trajectory of its AI sales and attempted to counter growing “AI bubble” concerns by touting the stability of its customer base as compared to previous technology bubbles.

“The companies that are investing in this are massive, strong balance sheet, strong cash flow, profitable companies, and a lot of the spend is coming from companies that are incredibly strong, who view this as is existential,” Robbins said. “There aren't as many companies that are making bets that don't have business models. … There's clearly going to be winners and losers, but I think there's such a concentration of spend from highly profitable, strong balance sheet, strong cash flow companies, I think that's a big difference, and I think the pace at which this is moving is meaningfully different.”

However, one analyst did question Cisco’s core growth outside of this surging AI opportunity. Patterson agreed that Cisco would indeed be pressured a bit to post year-over-year growth numbers similar to the 11% and 8% growth results it reported for the second half of fiscal 2025, noting “much, much tougher comps there.”