The AI trade has spent the last week asking whether the spending can last. Cisco's answer, delivered after the close on Thursday, was the loudest one yet: its best quarter in a decade and a half, and a forecast that says the boom is still in its opening act.

Revenue hit a record $18.5 billion, up 24% year over year, while adjusted earnings per share rose 40% to $1.40 — both ahead of Wall Street's expectations, and, Cisco said, the company's strongest revenue and adjusted EPS growth rates in over 15 years. The engine was networking, up 43% to $11.1 billion: the switches and routers that stitch AI data centers together. Product revenue rose 32% overall; services, the slow-and-steady half of the business, grew just 1%.

Chief executive Chuck Robbins didn't hedge. "We are in the very early stages of a multi-year networking supercycle," he said, "and we're confident in our ability to continue capturing the multi-billion-dollar opportunity it represents for Cisco." The company raised its full-year guidance — revenue now $74.8 billion to $75.8 billion, up from $72.2 billion to $73.4 billion — and lifted its expected AI infrastructure revenue from hyperscalers to $9 billion for the fiscal year, more than double last year's roughly $4 billion and above the $7.5 billion it had previously forecast.

Investors, who had punished the stock for much of the past month on worries about AI financing and margin pressure, bought it: shares rose about 3% in after-hours trading, after closing the regular session up 1.2% at $102.01.

The caveat is in the margins. Non-GAAP gross margin slipped to 65.6% from 68.1% a year ago, as lower-margin hyperscaler hardware takes a bigger share of the mix — the same concern Morgan Stanley flagged when it downgraded the stock last week. Cisco's bet is that the volume more than compensates. If Robbins is right that this is a supercycle and not a surge, the margin math works itself out. If he's wrong, the quarter that just posted will look like the top.

The other half of the AI plumbing agrees with him, for now. Applied Materials reported its own record quarter the same evening — $10.41 billion in revenue, up 53% — as chipmakers keep buying the tools to build the processors Cisco's gear will connect. Two companies, two records, one evening: the AI buildout's suppliers are still selling everything they can make.

— via Cisco