Cisco boosts AI revenue target by $1.5B after strong quarter

Cisco bumped up its full-year sales forecast after it topped Wall Street’s first-quarter revenue expectations. It raised its annual revenue outlook to between $74.8 billion and $75.8 billion, well above its earlier ceiling of $73.4 billion. For the upcoming quarter ending in January, the firm is also now eyeing about $18.1 billion in revenue, outpacing the $17.8 billion analysts had predicted. 

Having steadily expanded its AI focus with targeted investments, the company particularly anticipates a healthy revenue lift from its AI division. The firm lifted its fiscal 2027 projection for hyperscaler AI infrastructure revenue from $7.5 billion to $9 billion, more than double the $4 billion it earned a year prior. 

Beyond its revenue projections, Cisco also raised its full-year earnings expectations. The company now anticipates non-GAAP earnings per share of $5.47 to $5.53 in fiscal 2027, up from its previous forecast of $5.05 to $5.11.

For the second quarter, it expects non-GAAP earnings per share of $1.34 to $1.36. The improved outlook indicates that management expects growing demand for networking equipment and AI infrastructure to support stronger earnings throughout the financial year.

Cisco’s Q1 revenue surpasses $18 billion

For its first quarter ending October 24, 2026, Cisco brought in $18.5 billion in revenue. On a GAAP basis, net income hit $4.6 billion, or $1.14 per share, while adjusted (non-GAAP) net income came in at $5.6 billion, or $1.40 per share.

“In Q1, we delivered the strongest revenue and non-GAAP earnings per share growth rates for Cisco in over 15 years,” said Chuck Robbins, chair and CEO of Cisco. The executive contended that the company was seeing growing demand for its trusted technology and industry expertise, which help customers scale their operations, strengthen security, and optimize their systems for the agentic AI era. 

“We are in the very early stages of a multi-year networking supercycle, and we’re confident in our ability to continue capturing the multi-billion-dollar opportunity it represents for Cisco,” he added.

In the quarter, the company’s networking product orders spiked 28%. Even better, the company saw double-digit growth across every single product category—including service provider routing, compute, enterprise routing, wireless, data center switching, and campus switching.

Cumulatively, the networking segment sales surged 43% year-over-year to $11.13 billion, which the company credited to strong demand for AI infrastructure and network upgrades.

Meanwhile, subscriptions remained a key part of Cisco’s business, bringing in 44% of the company’s total revenue for the quarter. However, this was marginally lower than usual; subscriptions generally account for about half of its overall revenue.

Cisco’s remaining performance obligations (RPO) also signal that demand for its products and services remains. At the end of Q1, Cisco had $46.2 billion in RPO — up 8% year over year. Product-related obligations rose 7%; services-related obligations rose 9%. Those numbers show a pipeline of contracted business that Cisco expects to recognize as revenue over time, giving it greater visibility into future demand for networking and infrastructure solutions.

Investors are worried about data center development given the Democrats’ win

As much as Cisco expects to see more demand for its products, Wall Street is becoming increasingly jittery. The fear is that current data center expansions may face challenges due to higher borrowing costs on highly leveraged projects and the recent political change following the sweeping Democratic victory in the US midterms.

Several newly elected democrats have reiterated the need to put the brakes on the development of advanced AI. For instance, Representative Yassamin Ansari of Arizona, on X, advocated halting the development of advanced AI, increasing regulatory scrutiny, and prohibiting artificial superintelligence.

The slowdown in order growth compared to the last quarter has also affected investor sentiment. The company saw 21% year-over-year order growth, compared to 35% in the previous quarter. Nonetheless, Robbins promised investors that this kind of mixed result is normal, adding that their revenues are bound to fluctuate quarter to quarter, meaning stronger earnings in some quarters than in others. 

However, some remain worried that the company will not maintain healthy profit margins under current conditions. Lately, component costs have increased across manufacturers due to a shortage of memory chips. Bob O’Donnell, president and principal analyst at TECHnalysis Research, nevertheless, maintains a more optimistic outlook.

He believes that a small decline in gross margins is not an issue due to higher costs of memory and other components. Furthermore, he claimed that Cisco’s better-than-expected results, along with its improved financial forecasts, are what investors expect from an AI infrastructure-related company.