Cisco Systems ( NASDAQ : CSCO ) announced quarterly revenue of $18.5 billion, a 24% increase from the same period last year; at the same time, the company raised its forecast for infrastructure revenue in fiscal year 2027 ( AI ) to $9 billion due to accelerating demand for artificial intelligence network equipment.
According to Cisco's official financial report, the adjusted earnings per share are $1.40, representing a year-on-year increase of 40%. This result also exceeds the company's previous revenue forecast of approximately $18.1 billion mentioned in its performance preview.
A stronger outlook indicates that Cisco is further transforming from a traditional enterprise network provider into a hyperscale cloud vendor. Broadcom and other companies are also competing for the expanding infrastructure budget. AI
Cisco raises its revenue target for AI to $9 billion
Cisco currently expects that in fiscal year 2027, infrastructure revenue from hyperscale cloud customers will reach $9 billion, which is higher than the previously estimated $7.5 billion and also exceeds the actual revenue of about $4 billion in fiscal year 2026.
This means that the company's forecast for annual AI revenue has increased by $1.5 billion, indicating that the demand for high-performance networks is stronger than what management previously anticipated.
In the fiscal year 2026, the company received infrastructure orders worth $9.3 billion for AI. Previously, there was a surge in AI orders, which propelled the network business to become one of its fastest-growing areas.
CEO Chuck Robbins describes the current expansion as an early stage of a multi-year “super cycle” for the internet, reflecting the growing complexity of the infrastructure required to connect thousands of AI accelerators.
Unlike AI, a cloud service provider that needs to raise funds for massive computing infrastructure, Cisco primarily generates demand by providing the network technology that connects these systems.
Growth in online business drives Cisco's performance
Cisco's network business generated revenue of $11.13 billion this quarter, a year-on-year increase of 43%, accounting for approximately 60% of the company's total sales.
Product revenue increased by 32% to $14.67 billion; service revenue only increased by 1% to $3.85 billion. Security business revenue grew by 7%, collaboration business grew by 8%, and observability business grew by 2%.
Cisco has also raised its full-year revenue guidance to $74.8 billion to $75.8 billion, and at the same time increased its adjusted earnings per share forecast to $5.47 to $5.53.
Stronger performance contrasts with the market's growing concerns about the rising infrastructure debt of AI, as cloud service providers and data center developers are facing increasingly expensive expansion plans.
What does a forecast of $9 billion AI mean for Cisco's stock price?
Despite accelerated sales, Cisco still faces challenges in terms of profitability. Its adjusted gross margin has dropped to 65.6%, lower than the 68.1% from the same period last year, indicating that rapid growth in the hardware business does not necessarily translate into higher profit margins.
This difference is important because investors are re-evaluating whether the broader AI spending boom can bring sustainable returns throughout the entire technology supply chain.
Cisco's forecasts also depend on whether the hyperscalers in cloud computing continue to invest in AI networks. If spending on cloud infrastructure slows down, component costs rise, or competition intensifies, future revenue and profitability could be affected.
