US technology major Cisco Systems has raised its full-year revenue forecast after reporting strong first-quarter results, supported by growing demand for artificial intelligence (AI) networking equipment and data centre infrastructure. Rising investments by cloud computing companies and businesses looking to expand their AI capabilities have strengthened the company’s growth prospects.
Cisco reported revenue of $18.5 billion for the first quarter of fiscal 2027, a 24% increase from $14.9 billion in the corresponding period last year. The performance exceeded market expectations and marked the company’s strongest revenue growth in more than 15 years.
The company also recorded a sharp improvement in profitability. Its net income under generally accepted accounting principles (GAAP) rose 59% year-on-year to $4.6 billion, compared with $2.9 billion a year earlier. Earnings per share increased 58% to $1.14 from $0.72.
On an adjusted basis, Cisco reported earnings per share of $1.40, up 40% from $1 in the year-ago quarter. Adjusted net income climbed 39% to $5.6 billion, reflecting stronger business performance.
The results underline how the growing adoption of AI is creating fresh opportunities for networking companies. While much of the attention surrounding AI investments has focused on semiconductor manufacturers and chipmakers, the technology also requires powerful networking systems to transfer large volumes of data between processors, servers and data centres.
Cisco is benefiting from this shift as technology companies and hyperscalers increase spending on the infrastructure required to develop and operate advanced AI systems.
Its networking business emerged as the biggest gainer during the quarter, with revenue surging 43% year-on-year. Security revenue increased 7%, while collaboration revenue grew 8%. Observability, which includes technology used to monitor and manage digital systems, recorded the weakest growth among these segments at 2%.
Product revenue increased 32%, while services revenue rose just 1%. The contrasting performances highlight how demand for physical networking equipment is currently contributing more significantly to Cisco’s growth than some of its other business segments.
The expansion of generative AI and other advanced applications is increasing the need for faster switches, routers and optical networking equipment. These technologies help data centres handle rising traffic and ensure that information moves efficiently between computing systems.
Cisco expects this trend to continue. The company has raised its forecast for revenue from AI infrastructure supplied to hyperscale customers to $9 billion in fiscal 2027, compared with its earlier estimate of $7.5 billion. The revised target is more than double the approximately $4 billion recorded in fiscal 2026.
Hyperscalers are large cloud computing companies that operate extensive data centre networks and provide computing services to businesses and consumers. Their investments in AI servers, cloud platforms and specialised networking equipment have become an important growth opportunity for technology suppliers.
Cisco Chief Executive Officer Chuck Robbins said organisations were increasingly turning to the company for technology that could help them expand, secure and optimise their digital infrastructure for the emerging agentic AI era.
Agentic AI refers to systems capable of performing tasks and making decisions with limited human intervention. Their growing adoption is expected to increase demand for reliable networks, computing capacity and cybersecurity solutions.
The stronger demand outlook has encouraged Cisco to revise its financial expectations for the current financial year. The company now expects fiscal 2027 revenue to range between $74.8 billion and $75.8 billion, compared with its earlier forecast of $72.2 billion to $73.4 billion.
Cisco has also raised its adjusted earnings per share guidance to between $5.47 and $5.53 for the full year. For the second quarter of fiscal 2027, it expects revenue of $18 billion to $18.2 billion and adjusted earnings per share of $1.34 to $1.36.
The improved outlook comes despite some pressure on product margins. Cisco’s adjusted gross margin declined to 65.6% from 68.1% in the corresponding quarter last year. Higher memory and component costs remain an area to watch as demand for networking equipment increases.
However, the company managed to improve its overall operating efficiency. Its adjusted operating margin reached a record 37.8%, supported by stronger revenue growth and controlled expenses. Adjusted operating expenses increased just 2% during the quarter, significantly slower than the 24% rise in revenue.
Cisco’s operating cash flow also strengthened, increasing 36% year-on-year to $4.4 billion. The company ended the quarter with $15.8 billion in cash and investments, providing financial flexibility to support business operations and shareholder returns.
Another important indicator of future business activity was its remaining performance obligations (RPO), which represent contracted revenue yet to be recognised. Cisco reported total RPO of $46.2 billion, an increase of 8% year-on-year. Product RPO grew 7%, while services RPO increased 9%.
The company also continued returning money to shareholders through dividends and share repurchases. During the first quarter, Cisco returned approximately $3.7 billion to investors, including $1.7 billion in dividends and $2 billion through the repurchase of around 18 million shares.
Cisco declared a quarterly dividend of 42 cents per share, payable on January 20, 2027, to shareholders on record as of January 4.
The latest results highlight the changing role of networking companies in the global technology industry. As businesses and cloud providers expand their AI infrastructure, the systems connecting powerful processors and data centres are becoming increasingly important.
Cisco’s improved revenue forecast suggests that the benefits of AI-related spending are spreading beyond semiconductor manufacturers to companies supplying networking and data centre infrastructure. Its ability to sustain demand, manage component costs and protect margins will remain important in the coming quarters.
For investors, the pace of hyperscaler spending, networking equipment orders and profitability will be key factors to watch. The latest performance indicates that AI networking demand is becoming an increasingly important driver of Cisco’s revenue and earnings growth.