Cisco shares rose on Thursday after the networking equipment manufacturer reported better-than-expected results for the first quarter of its fiscal year. The company raised its revenue forecast and expects continued strong demand from companies expanding their AI infrastructure.
Cisco is trying to gain a foothold in the development of AI infrastructure after largely missing out on the early years of the generative AI boom. The manufacturer has significantly expanded its AI efforts through a number of strategic investments. The company noted that Big Tech is not only investing more in AI processors but is also increasingly focusing on the switches and routers needed to connect large data center systems.
The manufacturer expects revenue for fiscal year 2027 to range between $74.8 billion and $75.8 billion, compared to the previous forecast of $72.2 billion to $73.4 billion. For the second quarter, Cisco anticipates revenue between $18 billion and $18.2 billion, which is higher than analysts’ average estimate of $17.88 billion. The company expects adjusted earnings per share of $1.34 to $1.36, exceeding the average estimate of $1.23.
Multi-year supercycle
According to CEO Chuck Robbins, the industry is in the very early stages of a multi-year “supercycle” in networking. “Organizations are turning to Cisco because of our reliable technology and our expertise to help them scale, secure, and optimize their environments for the era of agent-based AI.”
The company raised its fiscal year 2027 forecast for revenue from AI infrastructure for hyperscalers from $7.5 billion to $9 billion. A year earlier, this segment generated $4 billion in revenue.
Cisco’s gross margin is a concern for investors, as a shortage of memory chips has driven up component costs for hardware manufacturers, while suppliers are prioritizing chips for customers with AI data centers.