Cisco Raises AI Revenue Target to $9 Billion in 2027
Key Facts
Cisco raised its forecast for AI infrastructure revenue from hyperscalers to $9 billion in fiscal 2027, up from $7.5 billion, as it announced first-quarter results on November 12. Revenue for the period ended October 24 was $18.5 billion, up 24% year over year. The company said its new AI infrastructure revenue target is more than double the total it generated from the business in fiscal 2026. Reuters coverage linked the higher revenue outlook to demand for networking equipment needed to build AI infrastructure. The target announcement and annual forecast revision together signal the growing weight of this business in the company's trajectory.
Cisco raised its fiscal 2027 revenue forecast to a range of $74.8 billion to $75.8 billion, compared with its previous range of $72.2 billion to $73.4 billion. The move follows quarterly revenue growth of 24%, while adjusted earnings per share came in at $1.40, up 40% from the same quarter of the previous fiscal year. The results included GAAP earnings per share of $1.14, up 58% year over year. These figures put quarterly results and the annual outlook on a shared growth trajectory, with the target revenue range for the fiscal year expanding. The comparison between the two annual ranges also shows the scale of the improvement Cisco made to its previous estimate.
Networking was the largest contributor to product growth, with revenue of $11.132 billion, up 43% year over year. Total product revenue rose 32%, while services revenue increased 1%, making the acceleration in products and networking a key driver of quarterly growth. AI infrastructure orders from hyperscalers totaled more than $9 billion in fiscal 2026, up 4.5 times from the previous year. Those prior orders provide a backdrop for the base of activity the company is seeking to convert into revenue in the current fiscal year. CEO Chuck Robbins said the company was "in the very early stages of a multiyear supercycle" in networking.
Cisco recorded $4 billion in AI infrastructure revenue in fiscal 2026, equivalent to 6% of its total revenue that year. That compares with the $9 billion target for fiscal 2027, which the company said exceeds more than double the prior year's total. Remaining performance obligations stood at $46.2 billion at the end of the first quarter, up 8% overall year over year. Product obligations rose 7%, while services obligations increased 9%. These obligations add an indicator of contracted business not yet recognized as revenue, alongside sales recorded in the quarter.
Cash flow from operating activities rose to $4.4 billion in the first quarter, up 36% from $3.2 billion in the same period a year earlier. In contrast, the adjusted gross margin was 65.6%, compared with 68.1% a year earlier. An analyst quoted by Reuters said, "The slight decline in gross margin is not a major concern given higher memory and component costs." This puts operating cash growth alongside the annual decline in margin, while the analyst linked the margin decline to higher input costs. Robbins also described the networking cycle as still being in its early stages, pointing to the multiyear horizon underpinning the company's discussion of the opportunity.
Cisco shares were steady in volatile after-hours trading following the results announcement, according to Reuters coverage. The stock had risen about 32% year to date through Thursday's close on November 12. The after-hours move followed the announcement of a higher annual forecast and quarterly revenue up 24% year over year. The immediate trading reaction did not amount to a clear upward move, despite the stock's gains since the start of the year. The year-to-date increase remains part of the performance recorded through the close on the day results were announced.
For the second quarter of fiscal 2027, Cisco expects revenue of $18.0 billion to $18.2 billion, adjusted earnings per share of $1.34 to $1.36, and GAAP earnings per share of $1.07 to $1.09. It also declared a quarterly dividend of $0.42 per share, payable on January 20, 2027, to shareholders of record at the close of business on January 4. The forecast sets the revenue and earnings levels the company is targeting in the period following its first-quarter results. The dividend sets a later date for cash payment to shareholders. The $9 billion AI infrastructure revenue target remains tied to fiscal 2027.