Cisco tightens compute order terms amid AI-driven memory cost surge

The networking giant introduces new cancellation flexibility and pricing safeguards as AI-driven infrastructure demand intensifies supply pressures across the global server and component ecosystem.

Cisco has modified its contract and pricing framework for compute products in response to sharp increases in global memory costs, according to a communication sent to channel partners recently. The changes, effective immediately, reflect mounting pressure across the IT infrastructure ecosystem as AI-driven demand outpaces supply.

Under the revised policy, Cisco now reserves the right to cancel compute orders up to 45 days prior to shipment. The company has also introduced provisions allowing it to adjust pricing between the order and shipment dates if there are significant increases in component expenses, manufacturing costs, tariffs, currency fluctuations or other external factors beyond its control. In addition, Cisco indicated that it plans to modify its quote price protection period, though specific timelines were not disclosed.

AI boom strains global supply chains

In a note to partners, Tim Coogan, Senior Vice President of Global Partner Sales at Cisco, said the global IT industry continues to face supply constraints and rising input costs, largely fuelled by accelerating AI adoption. He noted that demand for memory and storage components has exceeded production capacity, resulting in longer lead times and pricing volatility across the server and infrastructure markets.

The move follows similar steps by competitors, including Hewlett Packard Enterprise, which recently informed partners it could cancel certain server and GreenLake orders up until shipment.

During the company’s Q2 2026 earnings call, Cisco CEO Chuck Robbins outlined a three-pronged strategy to address cost pressures: implementing price increases where necessary, revising contractual terms with partners and customers, and leveraging Cisco’s scale to secure favourable supply agreements. He expressed confidence that Cisco’s supply chain capabilities would help the company manage the volatility better than peers.

Chief Financial Officer Mark Patterson added that advanced purchase commitments have risen sharply in recent months, with a significant portion tied to memory procurement, underscoring the company’s effort to stabilise supply.

Partners seek clarity

Channel partners have largely described the policy changes as pragmatic but are seeking greater clarity around revised quote validity terms. Faisal Bhutto, CEO of Houston-based Cisco partner Alykas, said proactive communication will be critical in helping solution providers manage customer expectations amid ongoing supply chain uncertainty.

Industry executives note that lessons learned during the COVID-19-era shortages have prepared partners for volatility, but transparency on pricing timelines will remain essential as AI-driven infrastructure demand continues to reshape the market.