Cisco Expands Secure AI Factory as Security Revenue Jumps 14%

Cisco is betting that embedding security into the AI infrastructure stack itself will give it an edge over Palo Alto Networks and Fortinet in the race to secure enterprise AI deployments.

Cisco's expanded Secure AI Factory with Nvidia embeds security directly into AI infrastructure as security revenue jumped 14 percent to $2.23 billion in fiscal Q4, intensifying competition with Palo Alto Networks and Fortinet.

"This expansion enables customers to easily manage complex, high-density AI clusters alongside non-AI workloads," Cisco said in announcing the Aug. 25 expansion, which adds Supermicro rack-scale compute and liquid-cooled systems to the architecture.

The expanded platform combines Cisco networking, Nvidia AI infrastructure and Supermicro rack-scale compute, with security built from silicon through applications and AI agents. Cisco will offer Supermicro's liquid- and air-cooled GPU systems starting in October, supporting Nvidia Vera Rubin NVL72 and HGX Rubin NVL8 platforms for trillion-parameter training and high-throughput inference. The architecture unifies Cisco Silicon One front-end switches with Nvidia Spectrum-X back-end switches under Cisco Nexus One.

The move targets a security market where agentic AI is expanding the attack surface. Cisco added more than 6,400 net new customers for products including Secure Access, XDR, Hypershield and AI Defense since launch, and expects security and observability growth to improve to high single digits in fiscal 2027. But Palo Alto's Prisma AIRS has surpassed 300 customers, and Fortinet's SASE Firewall business grew 34 percent to more than $2 billion in Q2 2026.

Rack-scale compute changes the competitive calculus

The Supermicro partnership marks a shift from selling networking gear into AI clusters to selling the entire rack as a computing system. Rack-scale systems such as the Nvidia NVL72 can exceed 200 kW per rack, making liquid cooling a system-level requirement rather than an option. Cisco is combining its liquid-cooled networking equipment with Supermicro's liquid-cooled servers to create what it describes as rack-to-fabric liquid cooling.

Cisco claims it is the only Nvidia technology partner using its own networking switches and network operating system in an Nvidia Cloud Partner-compliant solution. The company is also adding Validated Infrastructure Services aligned with Nvidia Infrastructure Services to certify that deployed infrastructure matches its reference architecture, and building a dedicated large-scale AI lab for testing.

Fortinet and Palo Alto push back on different fronts

Fortinet challenges Cisco's strategy by combining high-performance network security, SASE and AI-driven security operations on a unified FortiOS platform. Its FortiGate appliances and proprietary FortiASIC technology offer strong price-performance and local security enforcement, potentially competing with Cisco for enterprises building secure AI infrastructure.

Palo Alto poses a broader threat through its AI-focused platformization strategy. Prisma AIRS secures AI models, applications and agents from development through runtime, while XSIAM provides automated security operations. Palo Alto operates more than 125 million sensors across network, endpoint and cloud environments, processing over 17 petabytes of telemetry daily.

For investors, the question is whether Cisco's integrated approach can convert its networking installed base into AI security revenue faster than Palo Alto and Fortinet can expand their platforms. Cisco's firewall orders grew more than 30 percent in fiscal Q4, and the company expects security and observability growth to improve to high single digits in fiscal 2027. Palo Alto's next-generation firewall bookings increased nearly 40 percent year over year during early AI data-center deployments, suggesting the competitive gap remains narrow.

This article is for informational purposes only and does not constitute investment advice.