Silicon One G200 Finally Drives Cisco’s AI Networking Business

Everybody has been waiting to see the AI spike at Cisco Systems, and it just happened in its most current quarter.

Cisco has been telling Wall Street for the past two quarters that it expected to sell at least $1 billion in AI equipment in fiscal 2025, which ends in July. And in the third fiscal quarter that ended in April, Cisco blew right through that number thanks to the hyperscalers and cloud builders who are adopting the company’s Silicon One G200 switch ASICs or machines based on them and acquired from Cisco to build Ethernet-based back-end networks for their AI clusters.

And there is a lot more money for Cisco to take in thanks to a tight partnership between Cisco and Humain, the AI company set up by the Saudi Arabian sovereign wealth fund two weeks ago.

The G200 ASIC, which was unveiled in June 2023, was explicitly created to wrest the mantle of preferred AI network away from Nvidia’s implementation of InfiniBand, which is the only commercially available variant of InfiniBand available on the market and which has been commanding a very high premium due to its low latency in the early years of the GenAI boom. (There are some proprietary implementations of InfiniBand still being made in China, as far as we know.)

But the world wants a cheaper and more scalable alternative, and that alternative is a much-improved and stripped-down Ethernet designed to do what InfiniBand does well (high bandwidth, low latency, adaptive routing, and congestion control) and fill in gaps where InfiniBand has them (security, microsegmentation, and multiple vendors competing) all while maintaining compatibility with the Ethernet standard.

Eventually, this will be called Ultra Ethernet, but what Cisco has done with the G200 was in the works long before the Ultra Ethernet Consortium laid down the gauntlet at the feet of InfiniBand in July 2023. That threat – which was really a promise – made Nvidia start pushing its Spectrum-X combination of Ethernet switches and ConnectX NICs and BlueField DPUs as a better alternative for massive AI clusters. The pressure on InfiniBand is so great that Cisco and Nvidia have even cross-pollenated their AI networking, with Cisco making Nexus switches based on Nvidia’s Spectrum 4 Ethernet ASIC and running its own NX-OS network operating system and paired with Nvidia’s BlueField DPUs to help with the traffic shaping and congestion control.

In the quarter, Cisco brought in more than $600 million in AI-related product sales, which was significantly higher than expected. Our model says it was $609 million, more than double from the year-ago period and up 71.5 percent sequentially from Q2 F2025. As far as we can reckon, that puts Cisco’s AI sales for fiscal 2025 at $1.28 billion so far – we think $311 million in Q1 F2025 and $355 million in Q2 F2025 – and now the question is will Cisco do between $300 million and $600 million in the Q4 F2025 that ends in July? And if so that will put AI sales for the year at $1.6 billion to $1.9 billion, which is a big beat indeed. Or, maybe Cisco low-balled that $1 billion in AI sales forecast to Wall Street so it could blow through it?

The truth is, the hyperscalers and cloud builders hold their cards pretty tight and it is hard for Cisco and other ASIC and equipment makers to really know when these tech titans are going to do what. Only because of the supply chain follies caused by the coronavirus pandemic did these hyperscalers and cloud builders – who utterly dominate AI hardware spending and have for the past decade – actually tell their ASIC and gear suppliers what they would spend, and when. Now, everything has normalized and the tech titans have returned to their secret ways.

Here is what we know. In the third fiscal quarter ended in April, none of the “more than $600 million” in AI revenues were driven by Humain, but did come from the tech titans.

“The G200 chip, I would say it is at the heart of the any of these systems orders,” Chuck Robbins, Cisco’s chief executive officer, told Wall Street analysts on a call going over the numbers. “So I made a comment that of the $600-plus million. Two thirds of it was for systems, and those systems would be based on the G200. And I would tell you that right now, those customers are telling us that if we could get more capacity out, they would buy more. So it is actually doing well right now. And we’ve got a number of other chips that are in various stages of the process for the next-generation platforms that we are also looking forward to.”

By the way, the other third of AI orders was for optics – transceivers and cables and such.

The other thing that Cisco can look forward to is that the company has done plenty of deals with Tareq Amin, the chief executive officer at Humain. Amin was in charge of technology development and automation at Jio, the Indian telecommunications company, and after that was chief technology officer and chief executive officer at Japanese mobile telecom company Rakuten. That Humain has launched and the key executive in charge is one that has bought tons of Cisco gear was not in any of Cisco’s forecasts.

But now everyone on Wall Street has to figure out how to update them, as does Cisco. Listen to this comment from Robbins:

“So on the Middle East front, I will just tell you that Tareq made a comment to me that they are behind and they are going to catch up. So I think they’re going to spend a lot of money, and I think they’re going to spend it as quickly as they possibly can. It’s hundreds of billions of dollars at the end of the day that they will be spending. If you go to the Humain their website and scroll down, they list their initial strategic partners. So you can see, but our discussions with them have been around the networking, compute, security and observability. So that represents a pretty good opportunity for us. And I think they will be as big as any of the major web scalers in the United States is how I would think about it.”

So, the world just got a new hyperscaler, apparently. And Cisco had better punch out some more G200s – and G300s and G400s while it is at it. . . .

In the April quarter, Cisco posted product sales of $10.37 billion, up 15 percent, and services sales of $3.78 billion, up 2.6 percent. Overall revenues rose by 11.4 percent to $14.15 billion, but operating income shot up by 46.1 percent to $3.2 billion and net income spiked by 32.1 percent to $2.49 billion. Don’t jump to the wrong conclusion and think that margin expansion was because of the G200 deals; these no doubt hurt margins. It is the refresh in datacenter and campus networks among enterprises that drives margins.

Cisco ended the quarter with $15.64 billion in cash and investments, a perfectly healthy amount of dough but not exceptional. Competition for the past decade has been hard on Cisco’s piggy bank, and so has been the $28 billion acquisition of Splunk.

In the quarter, Cisco posted sales of $7.07 billion for its networking group, up 8.4 percent year on year and up 3.2 percent sequentially. And just to be absolutely clear, Cisco has a lot of AI orders booked, which is what that $1.28 billion in fiscal 2025 is, but a lot of that has not flowed through as revenue as yet. Networking product orders – which includes switches, routers, and servers – were up “double digits” in the quarter, including campus switching up “high single digits” and datacenter switching up “double digits” year to date compared to the first three quarters of fiscal 2024. Enterprise routing was also up “double digits.”

If you add it all up, and take a longer historical view of server, switch, and router sales, this is what it looks like for Cisco since the Great Recession:

Here’s the thing to remember about the future. Somewhere around 20 percent of “hundreds of billions of dollars” is tens of billions of dollars, and even with dual sourcing of networking, that is still many billions to tens of billions of dollars. Add in servers, routers, security, and observability, and the Saudi Arabian buildout could be a very large boost for Cisco, taking it to a whole new level.