Cisco highlights memory costs, Silicon One growth in Q2 recap

AI is driving new revenue for Cisco, while campus networking and other components added to a successful quarter for the vendor.

CEO Chuck Robbins told analysts on a conference call that overall networking revenue increased 21% year-over-year to nearly $8 billion in company’s fiscal second quarter. Other highlights from the Q2 recap include the rising cost of system memory, AI infrastructure uptake among hyperscalers and enterprise customers, and campus network refreshes.

Memory costs push price increases

A number of vendors and industry observers have noted the increased cost of system memory, and Robbins addressed it, too. Cisco is proactively implementing three key strategies, Robbins said: “First, we have already announced price increases and will continue to monitor market trends and make additional adjustments as necessary. Second, we are revising contractual terms with channel partners and customers to address evolving component prices. Third, Cisco’s operating scale and industry leading position help us negotiate favorable terms and secure supply to fulfill current and future demand.”

“Overall, we feel confident in our ability to manage this industry-wide dynamic better than our peers,” Robbins added.

“In terms of memory, we’re going to control what we can control,” noted Mark Patterson, executive vice president and CFO. “We’re going to stay very close to that and adjust as needed going forward.”

Demand for Silicon One and AI

Cisco shipped its one-millionth Silicon One chip in Q2, according to Robbins. “We plan to deploy our Silicon One architecture across our high-performance networking systems by fiscal year ’29,” he said.

“AI infrastructure orders taken from hyperscalers totaled $2.1 billion in Q2 compared to $1.3 billion just last quarter and equal to the total orders taken in all of fiscal year ’25, marking another significant acceleration in growth across our silicon, systems and optics,” Robbins said. “Given the strong demand for our Silicon One systems and optics, we now expect to take AI orders in excess of $5 billion and to recognize over $3 billion in AI infrastructure revenue from hyperscalers in FY ’26.”

Regarding enterprise uptake, Robbins said Cisco took in $350 million in AI orders from enterprise customers in Q2 and has a pipeline in excess of $2.5 billion for its high-performance AI infrastructure portfolio.

Cisco is seeing early enterprise use cases for AI around fraud detection and video analytics in sectors such as financial, manufacturing and pharmaceuticals, for example. “I also see examples in retail, where customers are leveraging agents on mobile devices in retail to help their staff do a better job engaging with their customers. We’re seeing a combination of both investment in cloud-based architectures as well as on prem,” Robbins said.

Networking rules

Cisco is experiencing a faster-than-historical ramp-up of next-generation platforms, including its Catalyst 9K, Wi-Fi 7, and smart switches, stated Sebastien Naji, a research analyst with William Blair, in a report after the call. He attributed it to three factors: an accelerated refresh cycle in the data center; early AI-readiness efforts in the enterprise; and end-of-support for legacy Catalyst and Nexus switches.

“We are seeing strong demand for our next-generation switching, routing and wireless products, which continue to ramp faster than prior product launches. We’re delivering AI-native capabilities across these products, including weaving security into the fabric of the network and modernizing the operational stack of campus networks,” Robbins said.

Co-packaged optics?

When asked about Cisco’s plans around optics and in particular co-packed optics, Robbins said Cisco “absolutely believes” CPO is going to happen. “We don’t believe it’s actually imminent right now. If you recall, we actually demonstrated this technology two years ago or more. And so we have the technology to build it, and we will, as customers want it. But today, they want choice, and I think in many cases, customers want the differentiation between optics and silicon, so they have choice and they don’t get locked in,” Robbins said.

He noted that Cisco’s 800G linear pluggable pptics (LPO) technology, announced just this week, “which gives customers huge power savings, greater efficiency for AI scale out, will continue to innovate as well.”