Cisco Raises AI Infrastructure Revenue Forecast to $9 Billion
Key Facts
Cisco reported results on November 12 for the first quarter of its fiscal 2027, which ended on October 24, and raised its forecast for AI infrastructure revenue from hyperscale customers to $9 billion from $7.5 billion. The company said the new forecast is more than double total revenue from this business in fiscal 2026. It also raised its fiscal 2027 annual revenue forecast range to $74.8–75.8 billion from $72.2–73.4 billion. Quarterly results came in above analysts’ average estimates for revenue and adjusted earnings per share. The company pointed to demand for networking as a key growth driver, while component cost pressures continued to weigh on margins.
Quarterly revenue was $18.5 billion, up 24% year over year, while adjusted earnings per share were $1.40, up 40%. Analysts’ estimates, according to data compiled by LSEG and reported by Reuters, called for revenue of $18.14 billion and adjusted earnings per share of $1.33. Actual results topped both estimates, with the company posting record quarterly revenue and record adjusted earnings per share. Product revenue rose 32%, while services revenue increased just 1%. Within products, networking revenue grew 43%, highlighting a clear gap between the performance of the hardware and networking business and that of services.
Chief Executive Chuck Robbins said the company is "in the very early stages of a multiyear networking supercycle." The comment puts demand for networking equipment at the center of the company’s growth outlook for the coming years, alongside its raised forecast for AI infrastructure for hyperscale customers. But revenue growth did not prevent margins from declining compared with the same period in the prior fiscal year. Adjusted gross margin was 65.6%, versus 68.1%, and adjusted product margin fell to 63.7% from 67.2%. By contrast, adjusted services margin rose to 72.9% from 70.7%, according to company data.
Reuters reported that a shortage of memory chips raised hardware component costs, keeping margins in investors’ focus. The report quoted an analyst saying the slight margin decline was not a major concern amid higher memory and component costs. This reflects a challenge for the company in converting growth in demand for networking equipment into comparable growth in profitability, at a time when product revenue rose far more than services revenue. The quarterly figures in the company’s announcement do not detail the extent to which memory costs affected margins. The year-over-year margin comparison indicates that sales growth came alongside pressure on product profitability.
Cisco shares closed at $102.01 in regular trading on November 12, after opening at $99.61. The stock rose 1.24% during the session, according to a republished Reuters report on trading, before falling 1.36% to $100.62 in extended trading after the results. Reuters described the shares’ extended-hours movement as steady amid volatility, and reported that the stock had risen about 32% year to date through Thursday’s close. Extended-hours trading differs from the regular-session close, as the decline came after the stock rose during normal trading hours. The after-hours move therefore does not reflect a 5% daily drop in the November 12 session.
For the second quarter of fiscal 2027, Cisco forecast revenue of between $18.0 billion and $18.2 billion, and adjusted earnings per share of between $1.34 and $1.36. It also declared a quarterly cash dividend of $0.42 per share, payable on January 20, 2027, to shareholders of record as of the close of January 4, 2027. The company thus set its next-quarter forecast alongside its raised annual revenue range and AI infrastructure revenue forecast. Margins and component costs remain among the indicators investors will track in upcoming results. The dividend is scheduled for payment in January on the dates announced by the company.