Cisco’s AI Orders Hit $9B as Margins Slip 330bps; Firewalls Grow 10%
FTNT•Cisco raised its AI infrastructure order forecast to $9 billion but saw non-GAAP gross margin slip 330 basis points to 64.3% as hardware mix and higher memory costs bite. Palo Alto Networks reported nearly 10% Q2 hardware revenue growth in firewalls, citing rising AI traffic boosting security demand.
1. Cisco AI Hardware Margin Pressure
Cisco boosted its AI infrastructure order forecast to $9 billion for the fiscal year but reported non-GAAP gross margins of 64.3%, down 330 basis points year-over-year. Management attributed the decline to heavier AI hardware mix and higher memory costs, signaling potential margin headwinds in high-growth products.
2. Palo Alto’s Firewall Revenue Surge
Palo Alto Networks highlighted software firewalls as the next billion-dollar opportunity and delivered nearly 10% hardware revenue growth in Q2. Executives pointed to escalating AI workload traffic as the main driver of renewed demand for core network security appliances.
3. Implications for Fortinet
As a cybersecurity peer expanding AI-focused appliances, Fortinet may face similar margin pressures if hardware mix shifts toward lower-profit AI systems. At the same time, broader firewall demand driven by AI traffic represents an opportunity, making margin stability and competitive positioning key metrics to monitor.
