Cisco Sees 18% Q2 Order Growth with $2.1B Hyperscaler AI Demand
Cisco’s fiscal Q2 product orders grew 18%, driven by $2.1 billion in hyperscaler AI infrastructure purchases and a $1.8 billion rise in advanced purchase commitments over 90 days. The company is accelerating price increase lead times and faces gross margin pressure from surging memory costs and a hardware-heavy mix.
1. Surging AI and Campus Networking Demand
Cisco reported an 18% increase in fiscal Q2 product orders, led by $2.1 billion in new AI infrastructure purchases from hyperscale customers. Excluding hyperscalers, global orders still rose 10%, while multi-year campus refresh demand accelerated upgrades in wireless, routing, and switching platforms.
2. Price Increases and Margin Pressures
Advanced purchase commitments climbed by $1.8 billion over the past 90 days to secure memory supply amid unprecedented price hikes. Cisco tightened the window between announcing and implementing price increases, focusing on compute and high-memory products, as hardware-heavy growth weighed on gross margins.
3. Profitability and RPO Strength
Cisco delivered its highest operating margin in four quarters, targeting 33.5%–34.5% for Q3 while prioritizing EPS growth over top-line expansion. Software and subscriptions comprised just over 50% of revenue, supported by $43 billion in remaining performance obligations that underpin predictable, recurring revenue.
4. Security Transition and Hyperscaler Strategy
Security revenue faced a headwind from Splunk customers shifting to cloud contracts with ratable recognition, though new security offers added 1,000 customers in Q2. Cisco rebuilt hyperscaler relationships through strategic acquisitions, talent hires, and its Silicon One chips, offering programmable network engines to meet evolving AI data demands.