Cisco reported two gross margins for the same quarter and they moved in opposite directions, and the reconciliation table shows a $355m legal charge in last year's figure with no counterpart in this one

Cisco's fourth quarter release carries two gross margins for the same three months. One of them went up. The other went down.

The company reported revenue of $17.3bn for the quarter ended 25 July, up 18 percent, with product revenue up 24 percent and services flat. On a GAAP basis total gross margin was 64.1 percent, against 63.2 percent a year earlier. On a non-GAAP basis it was 66.3 percent, against 68.4 percent. The product line moves the same way in each: up to 62.6 percent from 61.5 on the reported figures, down to 64.8 percent from 67.5 on the adjusted ones.

Nothing is hidden about this. The explanation is printed nine pages later in the section headed Reconciliations of GAAP to non-GAAP Measures, where the two quarters sit above one another.

The $355m line

In the quarter just gone, Cisco adjusted its product gross margin by $296m: share-based compensation of $59m, amortisation of acquisition-related intangible assets of $236m, and $1m of acquisition and divestiture costs.

In the year-ago quarter it adjusted the same line by $656m. Three of the four components are close to this year's. The fourth is a line reading "Legal and indemnification settlements/charges," at $355m, and there is no equivalent entry in the current table.

So the adjusted comparison is between a quarter carrying that add-back and a quarter carrying none of it. The reported comparison, which contains no add-backs on either side, rose.

The rest of the quarter

GAAP net income was $3.9bn and earnings per share $0.97, up 51 and 52 percent. Non-GAAP net income was $4.9bn and earnings per share $1.22, each up 23 percent. Operating expenses grew more slowly than revenue on both measures, up 10 percent on a GAAP basis and 5 percent on a non-GAAP one against revenue growth of 18, which took GAAP operating margin to 24.7 percent from 21.0 and the non-GAAP figure to 35.9 percent from 34.3.

Cisco put total product orders up 35 percent in the quarter, and up 25 percent excluding hyperscalers. It took $4bn of hyperscaler AI orders in the quarter and $9.3bn across the fiscal year, and delivered approximately $4bn of AI revenue against total revenue of $63.3bn. It expects $7.5bn of it next year.

For fiscal 2027 the company guided to revenue of $72.2bn to $73.4bn and non-GAAP earnings per share of $5.05 to $5.11. It declared a dividend of $0.42 per share, payable 21 October. Cash and investments finished the year at $15.9bn, below both the $16.6bn at the end of the third quarter and the $16.1bn a year earlier, after $3.2bn went back to shareholders in the quarter through buybacks and the dividend.