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Cisco Systems (CSCO +4%) is trading sharply higher after reporting Q1 (Oct) results that topped expectations and issuing upbeat guidance for Q2 (Jan) and FY26. Revenue climbed 7.5% yr/yr to $14.88 bln, modestly above estimates, while EPS also came in slightly ahead of consensus. However, the real driver behind the stock's strength is Cisco's bullish outlook, fueled by accelerating AI infrastructure demand and a multiyear networking upgrade cycle.

• Total product revenue rose 10% to $11.1 bln, while service revenue increased 2% to $3.8 bln.
• AI infrastructure orders from hyperscalers reached $1.3 bln in Q1, balanced between Silicon One systems and optics, marking a sharp acceleration. Cisco expects to recognize about $3 bln in AI infrastructure revenue from hyperscalers in FY26.
• Networking product orders advanced in the high-teens range, the fifth straight quarter of double-digit growth, driven by hyperscale infrastructure, enterprise routing, campus switching, wireless, industrial IoT, and servers.
• Cisco highlighted robust demand for Acacia's pluggable optics, which offer significant cost and power savings; all major hyperscalers are now customers.
• In campus networking, strong uptake of Cat9k switches, next-gen secure routers, and WiFi 7 products underscores a major multiyear, multibillion-dollar refresh cycle as enterprises upgrade for AI-driven workloads.
• Industrial IoT orders surged 25% yr/yr, supported by US manufacturing onshoring and the rise of edge and "physical AI" applications.
• The Security segment dipped 2% yr/yr, reflecting declines in legacy products and the ongoing transition to cloud-based Splunk subscriptions.

Briefing.com Analyst Insight:

Cisco's results and outlook are a pleasant surprise for a company long viewed as a mature networking play. The AI infrastructure momentum, particularly among hyperscalers, gives CSCO a credible growth angle that could sustain multiple expansion. While the topline beat was modest, the underlying product demand trends—especially in optics, switching, and IoT—signal real traction. The upgraded FY26 outlook suggests management has high confidence in execution and pipeline visibility. That said, the security business remains a soft spot. Still, with Cisco's valuation (around 13x forward EPS) well below AI peers, investors may see this as an underappreciated AI infrastructure play.