Cisco's Shifting Focus: Hyperscale AI Orders Outpace Campus Refresh

Cisco Systems (CSCO) has undergone a significant change in its pitch over the past year, reflecting the company's shifting focus. In August 2025, CEO pitched a refresh of the installed campus switching base as the beginning of a major cycle for its large installed campus switching base.

By August 2026, however, the opening pitch had shifted to agentic AI fueling a networking super cycle. The word 'refresh' still appeared in the CEO's answers to analysts and sign-off, but it was no longer the main theme.

The business of hyperscalers, meaning Silicon One-based systems and optics, has become a significant driver for Cisco's growth. In fiscal 2026, AI infrastructure for hyperscalers booked $9.3 billion in orders, about 4.5 times the total from fiscal 2025. This represents just 6% of revenue in fiscal 2026, but management projects $7.5 billion from it in fiscal 2027.

When stripping out hyperscale revenue, core growth is around 10% for fiscal 2027, compared to 15% for the whole company. Management expects a slight gross margin headwind due to hyperscaler hardware through fiscal 2027, but argues operating margin will still rise because that business requires little added spending.