Cisco tops Q1 estimates and hikes FY27 outlook as AI networking sales to cloud giants set to double

A beat and raise of this magnitude should provide support for the AI infrastructure trade beyond just Cisco. It indicates that hyperscaler capital expenditure continues to flow into networking, not only into chips. The upgraded revenue forecast places the new full-year range above the prior one, so analysts are likely to revise their estimates upward in the near term. For technology-heavy indexes, Cisco offers further evidence that AI spending is expanding into older hardware companies. That backs the view that the AI build-out still has momentum. The main threat to that interpretation is any slowdown in cloud spending plans, given that this outlook relies heavily on a small set of very large clients.

--- Cisco beat expectations for the quarter, guided significantly above forecasts, and boosted its full-year outlook as AI networking demand from cloud giants turns it into an AI infrastructure player.

Summary:

• Fiscal Q1 adjusted EPS of $1.40 surpassed the $1.33 consensus, and revenue of roughly $18.5bn, up 24%, exceeded forecasts near $18.1bn
• Q2 guidance: adjusted EPS of $1.34 to $1.36 versus $1.23 expected, and revenue of $18.0bn to $18.2bn against around $17.9bn
• FY27 adjusted EPS range raised to $5.47 to $5.53 from $5.05 to $5.11, compared with a $5.11 consensus
• FY27 revenue range raised to $74.8bn to $75.8bn from $72.2bn to $73.4bn, versus a consensus of roughly $73bn
• Networking revenue increased 43% and total product revenue 32%, while services grew just 1%
• Expected AI infrastructure revenue from hyperscalers raised to $9bn for FY27, more than double the FY26 total

Cisco Systems surpassed Wall Street projections for its fiscal first quarter and lifted its full-year outlook well above consensus. Demand for AI networking equipment from the largest cloud operators drove a sharp increase in product sales. Adjusted earnings came in at $1.40 a share, compared with expectations of $1.33. Revenue climbed 24% year over year to approximately $18.5 billion, ahead of the roughly $18.1 billion that analysts had predicted for the period ended 24 October.

Cisco Systems, headquartered in San Jose, California, ranks among the world's leading makers of networking equipment. Founded in 1984, it built its business on the routers and switches that transport data across corporate networks, telecom systems and the internet. Over the past decade it has shifted toward software, subscriptions and security. It also operates the Webex collaboration platform and acquired data analytics firm Splunk in 2024, which now serves as the core of its observability business. Cisco has long been viewed as a mature, steady technology company. It is now being repositioned as an AI infrastructure play, since the major cloud operators require its high-speed networking gear to connect the large clusters of chips used to train and run AI models.

The guidance represents the bigger development. Cisco stated in its earnings release that it expects second-quarter adjusted EPS of $1.34 to $1.36, well above the $1.23 consensus. It forecasts revenue of $18.0 billion to $18.2 billion, compared with estimates of roughly $17.9 billion. For the full fiscal 2027, Cisco lifted its adjusted EPS range to $5.47 to $5.53, from $5.05 to $5.11. It also raised its revenue range to $74.8 billion to $75.8 billion, from $72.2 billion to $73.4 billion. Consensus estimates had stood at $5.11 and approximately $73 billion, roughly at the top and the middle of the previous ranges.

Networking did the heavy lifting. Product revenue advanced 32%, with networking up 43%, while services barely changed, rising 1%. Security, collaboration and observability all posted single-digit growth. Every region recorded gains, led by the Americas at 28%. Cisco also increased its expected AI infrastructure revenue from hyperscalers to $9 billion this fiscal year, more than double its fiscal 2026 total.

Chief executive Chuck Robbins said the company is in the early stages of what he described as a multi-year networking supercycle. Chief financial officer Mark Patterson said the quarter gave management the confidence to raise its forecasts. Cisco also returned $3.7 billion to shareholders via dividends and buybacks, and has $6.1 billion of buyback authorization remaining.

The key question now is whether the growth persists. A guidance increase of this magnitude suggests Cisco can see demand extending well beyond one quarter, but it also depends heavily on hyperscaler spending. Any indication that the large cloud operators are slowing their AI build-out would affect the networking line first. Services growth of just 1% is also a reminder that the rest of the business is not keeping pace with the AI-driven product cycle.