Cisco Systems raised its annual revenue forecast on Thursday after reporting first-quarter results above Wall Street expectations, as the networking equipment maker benefits from growing demand for the infrastructure needed to connect expanding artificial intelligence data centers.
The company now expects fiscal 2027 revenue of between $74.8 billion and $75.8 billion, up from its previous forecast of $72.2 billion to $73.4 billion. It also increased its revenue projection for AI infrastructure products sold to hyperscale cloud providers to $9 billion, from an earlier estimate of $7.5 billion.
The revised outlook signals that spending on AI infrastructure is creating opportunities beyond the processors used to train and run advanced models. As technology companies build larger data centers, they also need high-performance switches, routers, and other networking equipment to connect thousands of servers and move data across computing systems.
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“We are in the very early stages of a multi-year networking supercycle,” Chief Executive Chuck Robbins said in a statement.
Cisco reported first-quarter revenue of $18.5 billion for the three months ended October 24, exceeding the $18.14 billion expected by analysts, according to LSEG data. Adjusted earnings reached $1.40 per share, above the consensus estimate of $1.33.
The company’s AI infrastructure business has become an increasingly important growth driver. Revenue from hyperscalers in that segment reached $4 billion a year earlier, and the new $9 billion forecast points to expectations of a substantial increase in orders as cloud providers expand their computing capacity.
Cisco has increased its exposure to the AI infrastructure market through investments and product development as spending by major technology companies moves beyond graphics processing units and other specialized processors.
Large data centers require extensive networking systems to link computing hardware, transfer information, and manage workloads. This means a market for Cisco’s switches and routers, positioning the company to benefit from the expansion of AI infrastructure even though it does not compete directly with leading AI chipmakers.
The opportunity is considered huge because the economics of AI deployment depend on more than access to processors. Companies must also build the supporting infrastructure that allows large numbers of chips and servers to operate together efficiently.
Cisco is also developing software tools that businesses can use to deploy AI agents to protect their information technology infrastructure against cybersecurity threats. These systems are designed to automate aspects of security monitoring and threat response, extending the company’s AI strategy into enterprise software and services.
However, investors have questioned whether the current pace of data-center construction can be sustained. Concerns have grown following Democrats’ sweeping victory in the US midterm elections, while rising borrowing costs have raised questions about the financial burden of debt-funded infrastructure expansion.
Higher financing costs could make some data-center projects more expensive and force operators to reconsider the timing of planned investments. Cisco’s higher forecast suggests that management expects demand from major cloud providers to remain strong, although its projections will depend on customers maintaining their infrastructure spending.
The company’s growth outlook comes with pressure on profitability. A shortage of memory chips has increased component costs for hardware manufacturers, while suppliers prioritize demand from AI data-center customers.
Cisco’s adjusted gross margin was 65.6% in the first quarter, matching analyst expectations but falling from 68.1% in the same period a year earlier.
The decline highlights the cost pressures facing networking equipment manufacturers as competition for critical components intensifies. Higher memory and other input costs can reduce the profitability of hardware sales, even when demand and revenue are growing.
Bob O’Donnell, president and chief analyst at TECHnalysis Research, said a modest decline in gross margin was not a major concern given higher memory and component costs.
He added that Cisco’s stronger results and increased annual forecast were the kind of performance investors wanted to see from a company exposed to AI infrastructure spending.
Cisco shares were little changed in volatile extended trading on Thursday. The stock had gained about 32% from the start of the year through the regular session’s close.
The results provide further evidence that the AI investment cycle is generating business for suppliers outside the semiconductor industry. Analysts say Cisco’s ability to convert hyperscaler spending into sustained revenue growth is now tied to the pace of data-center expansion, while its margins will remain exposed to component shortages and rising hardware costs.