Cisco Reports Robust Recovery in Service Provider Spending, Driven by AI and Network Refresh
December 1, 2025
The global service provider market, a critical bellwether for telecommunications and networking infrastructure investment, is showing strong signs of a sustained rebound. This recovery signals renewed capital expenditure from telecom operators and cable companies, essential for supporting the next wave of digital transformation, including the explosive growth of artificial intelligence and cloud services.
Cisco Systems, a leading provider of networking hardware and software, has reported a significant uptick in demand from service providers. Guru Shenoy, Cisco's Senior Vice President for Data Center and Provider Connectivity, stated in an interview that the company is "certainly seeing the service provider market recovering nicely," evidenced by a global increase in requests for proposals and quotations.
This optimism is reflected in Cisco's financials. For its first fiscal quarter of 2026, the company reported that orders from telecommunications service providers grew more than 25% year-over-year. While Cisco groups service providers with cloud customers in its reporting, the combined cloud and service-provider sector saw total orders surge by 45% compared to the previous year. This growth builds upon the triple-digit order expansion from hyperscale cloud providers seen in the year-ago period.
According to Shenoy, the recovery is being driven by several concurrent factors. A primary driver is the basic need for network refreshes, as much of the infrastructure deployed for 5G rollouts six to eight years ago is now reaching the end of its lifecycle. Furthermore, sustained demand for broadband and investments in network edge and core capabilities are contributing to new spending.
A significant new demand vector is the infrastructure required for artificial intelligence and data center interconnectivity. Hyperscalers and other large cloud players are investing heavily in new data centers and are turning to service providers for high-capacity fiber links to connect these facilities. Shenoy noted that some operators are also proactively preparing their networks for the anticipated wave of AI-driven traffic. Beyond carrying traffic, service providers are exploring opportunities to host AI inference infrastructure at the network edge, leveraging their existing facilities to offer "inferencing as a service."
This shift presents a strategic opportunity for service providers to move beyond being mere connectivity conduits. Shenoy emphasized that "service providers are in a perfect spot to bring AI to the masses." To capitalize on this, providers are also looking to better monetize their networks through technologies like network APIs, allowing enterprise customers to programmatically configure network paths for low latency or sustainability.
While Cisco's data points to a strong recovery, other industry analyses suggest a more nuanced picture. Research firm Dell'Oro Group recently reported that global telecom capital expenditures stabilized in the second quarter of 2025 after two years of decline, noting that operators are reallocating investments from broad coverage builds toward capacity, network quality, and automation.
Source: fierce-network
