Cisco Raises AI Revenue Target to $9 Billion After Revenue Grows 24%
Key Facts
Cisco raised its forecast for AI infrastructure revenue from hyperscale cloud providers to $9 billion in fiscal 2027, after posting quarterly revenue of $18.5 billion, up 24% year over year. The company said the new revenue target is more than double the total it generated from this business in fiscal 2026. The announcement accompanied results for the first quarter of fiscal 2027, which showed stronger growth in products than in services. CEO Chuck Robbins said the company was "in the very early stages of a multiyear networking cycle," adding that it was confident in its ability to capture the opportunity. The target puts hyperscalers’ demand for networking equipment at the forefront of the growth drivers the company is counting on.
Product revenue was $14.667 billion, compared with $11.077 billion in the year-earlier period, while services revenue reached $3.850 billion versus $3.806 billion. Based on the growth rates reported by the company, product revenue rose 32%, while services revenue increased just 1%. The gap reflects the greater role of product sales in quarterly growth, while services remained nearly flat. Within products, networking led performance with revenue of $11.132 billion, up 43%. Security revenue also rose 7%, collaboration 8% and observability 2%, with the four segments posting varying rates of growth.
Revenue growth extended across all three geographic regions Cisco reports, rising 28% in the Americas and 18% in Europe, the Middle East and Africa. In Asia Pacific, Japan and China, revenue grew 21%. The figures show that the annual increase was not limited to a single regional market, although growth rates varied. At the same time, adjusted gross margin fell to 65.6% from 68.1% a year earlier. The trend diverged between the two businesses: adjusted product margin declined to 63.7% from 67.2%, while services margin rose to 72.9% from 70.7%.
Cash flow from operating activities rose to $4.4 billion, up 36% from $3.2 billion in the first quarter of the previous fiscal year. Remaining performance obligations totaled $46.2 billion, up 8% year over year. Product obligations rose 7%, compared with a 9% increase in services obligations, indicating growth in both businesses, with services obligations rising faster. Chief Financial Officer Mark Patterson said revenue, adjusted operating margin and adjusted earnings per share all exceeded the high end of the quarterly forecast ranges. He added that strong performance prompted Cisco to raise its full-year outlook.
Cisco raised its fiscal 2027 revenue forecast range to between $74.8 billion and $75.8 billion, and its non-GAAP earnings forecast to between $5.47 and $5.53 per share. For the second quarter, the company expects revenue of between $18.0 billion and $18.2 billion and adjusted earnings of between $1.34 and $1.36 per share, with adjusted gross margin of between 65% and 66%. The forecasts indicate the revenue and profitability levels the company is targeting for the next quarter, following a decline in product margin in the first quarter. Cisco also declared a quarterly dividend of $0.42 per share, payable on January 20, 2027, to shareholders of record on January 4, 2027. Its forward guidance combines a higher full-year target with a quarterly outlook that includes an adjusted gross margin range.