Cisco forecasts annual revenue above estimates on sustained AI spending

[MEXICO CITY] Cisco Systems forecast fiscal 2027 revenue above Wall Street expectations on Wednesday (Aug 12), signalling confidence that strong demand for its artificial intelligence networking gear will continue to power growth.

Shares of the company, however, fell over 4 per cent after initially rising 3 per cent in extended trading following the results, as investors had lofty expectations heading into the report. Cisco’s stock has risen more than 60 per cent so far in 2026.

While the company cleared a high bar, AI infrastructure winners are increasingly being judged on the rate of acceleration, said Jake Behan, Direxion’s head of capital markets.

“Cisco delivered strong results, but the company entered earnings with a lot of optimism already priced into the shares. The market appears to be treating this as confirmation of the AI infrastructure story rather than a new catalyst.”

The networking giant expects annual revenue between US$72.2 billion and US$73.4 billion, ahead of analysts’ average estimate of US$68.69 billion, according to data compiled by LSEG.

It also sees US$7.5 billion in revenue from AI infrastructure orders from hyperscalers in fiscal 2027.

Cisco has benefited from hyperscale cloud providers and enterprises building out their infrastructure to handle the complex demands of generative AI.

It received AI infrastructure orders from hyperscalers worth US$4 billion for the fourth quarter ended Jul 25, bringing the total for fiscal 2026 to US$9.3 billion.

For the first quarter, Cisco sees adjusted gross margin in the range of 65 per cent to 66 per cent, slightly less than market estimates of 66.1 per cent.

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“Even as revenue and earnings increase, margins are tight as Cisco deals with a more hardware-intensive product mix and elevated component costs,” said Joe Tigay, portfolio manager of the Rational Equity Armor Fund.

The company’s fourth-quarter revenue grew 17.6 per cent to US$17.25 billion, beating estimates of US$16.82 billion. REUTERS