Cisco forecasts annual revenue above estimates on sustained AI spending

By Juby Babu

Aug 12 (Reuters) - ‌Cisco Systems forecast ​fiscal ​2027 revenue above Wall Street expectations on Wednesday, signaling confidence that strong demand for its AI networking gear will ‌continue to power growth.

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

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 $72.2 billion and $73.4 billion, ahead ‌of analysts' average estimate of $68.69 billion, according to data compiled by LSEG.

It also sees $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 $4 billion for the fourth ​quarter ended July 25, bringing the total for fiscal 2026 to $9.3 billion.

For the first quarter, Cisco sees adjusted gross margin in the range of 65% to 66%, ‌slightly less than market estimates of 66.10%.

"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% to $17.25 billion, beating estimates of $16.82 billion.

(Reporting by Juby Babu in Mexico City; Editing by ‌Shinjini Ganguli)

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