Cisco Beats Forecasts, Sees AI Revenue From Cloud Giants Doubling
Cisco's quarterly revenue rose 24% to $18.5 billion, and the networking company raised its full-year outlook on demand for AI infrastructure.
Cisco Systems, the Silicon Valley maker of networking equipment that carries much of the world’s internet and corporate data traffic, reported quarterly results on Thursday that beat Wall Street’s expectations. The company also said revenue from building artificial intelligence infrastructure for the largest cloud companies should more than double this fiscal year to $9 billion.
Revenue for Cisco’s fiscal first quarter, which ended Oct. 24, rose 24% from a year earlier to about $18.5 billion, CNBC reported, ahead of the roughly $18.1 billion analysts had expected, according to LSEG data. Adjusted earnings came to $1.40 per share, compared with the $1.33 consensus estimate. Cisco shares rose in extended trading after the report.
What happened
Networking hardware drove the quarter. Cisco’s networking revenue climbed 43% from a year earlier to about $11.1 billion, according to figures from the company’s report summarized by the financial sites investingLive and Panabee. Overall product revenue rose 32%, while services revenue grew just 1%, to about $3.9 billion. The security, collaboration and observability businesses grew at single-digit rates, investingLive reported, and every region posted growth, led by the Americas at 28%.
On a standard accounting basis, net income rose to $4.6 billion, or $1.14 per share, from $2.9 billion, or 72 cents per share, a year earlier, CNBC reported.
Chuck Robbins, Cisco’s chair and chief executive, said in the earnings release that the company had “delivered the strongest revenue and non-GAAP earnings per share growth rates for Cisco in over 15 years.” In comments reported by CNBC, he said customers were turning to Cisco to help them scale, secure and optimize their networks for what he called the agentic AI era, a reference to AI software that can carry out tasks on its own. According to investingLive, Robbins described the current period as the early stages of a “multi-year networking supercycle.”
Not every measure improved. Cisco’s product gross margin, a gauge of how profitable each sale of hardware is, slipped to 61.8% from 64.5% a year earlier, according to Panabee’s summary of the results. Total gross margin also fell, by 1.8 percentage points to 63.7%.
Raised outlook
Cisco lifted its forecasts for both the current quarter and the full fiscal year, which ends in July 2027:
- Fiscal second quarter: revenue of $18.0 billion to $18.2 billion, above the average analyst estimate of about $17.9 billion, and adjusted earnings of $1.34 to $1.36 per share, well above the $1.23 analysts expected.
- Full fiscal 2027: revenue of $74.8 billion to $75.8 billion, up from a previous range of $72.2 billion to $73.4 billion, and adjusted earnings of $5.47 to $5.53 per share, up from $5.05 to $5.11, according to investingLive.
- AI infrastructure: revenue from hyperscalers, the handful of giant cloud operators such as Microsoft, Amazon and Google, is now expected to reach $9 billion, more than double the fiscal 2026 total.
Mark Patterson, Cisco’s chief financial officer, said the quarter’s performance gave management the confidence to raise its forecasts, investingLive reported.
The company also returned $3.7 billion to shareholders during the quarter through dividends and share buybacks, and it has about $6.1 billion remaining under its repurchase authorization.
Why it matters
The results mark a turnaround in perception for a company that was widely seen as having missed the early years of the generative AI boom. While chipmakers such as Nvidia captured most of the initial spending on AI data centers, the huge clusters of processors those companies sell must be connected by high-speed switches, routers and optical gear, which is Cisco’s core business.
Investors have rewarded the shift. Cisco stock was up about 35% this year as of Thursday’s close, compared with a gain of roughly 9% for the Nasdaq Composite over the same period, according to CNBC.
The report also adds to a run of strong results from companies that supply the AI buildout, as the largest technology firms continue to pour money into data centers.
Risks and what comes next
The stronger outlook leaves Cisco more dependent on a small group of very large cloud customers, whose spending plans can change quickly. How long the current pace of data center construction can last remains an open question across the industry.
Cisco’s sluggish services growth and lower hardware margins are also likely to draw attention as AI-related equipment makes up a larger share of its sales. The company had about $46.2 billion in remaining performance obligations, a measure of contracted revenue not yet recognized, at the end of the quarter, according to Panabee. In the coming quarters, investors will be watching whether hyperscaler demand turns into revenue on the schedule Cisco has set out.
