Dive Brief:
- Cisco reaped the rewards of an ongoing AI infrastructure building boom, piling up $1.3 billion in hyperscaler business over the three months ending Oct. 26. The company expects orders from four major cloud providers to double year over year to $3 billion during its current fiscal year, which began Aug. 1, Cisco Chairman and CEO Chuck Robbins said during a Q1 earnings call Wednesday.
- Demand for Cisco hardware is spreading beyond the hyperscalers as use cases expand to include agentic automation, according to Robbins. “Agents are transforming network traffic from predictable bursts to persistent high intensity loads with agentic AI queries generating up to 25x more network traffic than chatbots,” he said. “We see a growing pipeline in excess of $2 billion for our high-performance networking products across sovereign, neocloud and enterprise customers.”
- Cisco doubled down on AI earlier this year, announcing upgrades across its portfolio of switches, routers and secure networking solutions in June. The company saw revenue increase 8% to nearly $15 billion, led by networking, which grew 15% year over year in Q1, marking the fifth consecutive quarter of double-digit growth in the segment.
Dive Insight:
As eagerness to deploy AI-ready infrastructure spills into the enterprise market, Cisco is leaning on its channel partners to drive a massive multiyear hardware refresh.
“Many customers still have a lot of work to do to ensure they have the modern, scalable, secure networking infrastructure to support their AI goals,” Robbins said, referencing a June survey of more than 8,000 senior IT and business leaders commissioned by Cisco. Nearly three-quarters of respondents said outdated infrastructure was an impediment to their organization.
To ease infrastructure upgrades, Cisco launched an AI-enabled network management platform called AI Canvas and overhauled its channel partner program. The two-tiered system uses an index to determine which partners qualify for preferred status based on their readiness to help customers lay the groundwork for AI adoption.
Cisco provided partners with resources to prepare for the new program, which takes effect on January 26.
“We've launched tools to help them assess the monetary impact of the new program versus their old program,” Robbins said. “Does it get better? Does it hurt you? And if it's hurting you, how can you adjust your sales strategy or your go-to-market strategy to actually increase your performance in the program?”
The company has a new channel chief, SVP of Global Partner Sales Tim Coogan, who was appointed four months ago, and is monitoring the transition, Robbins added.
“Every time we do one of these major changes, we know there's a reasonable chance that we miss something along the way,” he said. “If we miss something, we'll fix it … we're going to continue to adapt the program to make sure it drives our growth priorities and helps [partners] have a profitable journey alongside us.”
Cisco is hoping to strike the right chord with its partners through financial incentives and simplified processes, Cisco VP and CFO Mark Patterson said during the earnings call.
“The new program rewards partners for not only portfolio breadth, but the depth of expertise,” Patterson said. “It gets them laser-focused on what really matters, what truly matters, and that's campus refresh, AI, security and then premium services.”
On Thursday, Cisco announced its intent to purchase enterprise-grade small language model platform provider NeuralFabric for an undisclosed sum. The acquisition will complement Cisco AI Canvas capabilities and is expected to close in the next quarter.
