Cisco lifts FY27 outlook as networking growth powers an AI infrastructure surge

The AI infrastructure boom is beginning to show up in Cisco’s numbers. Cisco Systems, Inc. (NASDAQ:CSCO) reported record fiscal first-quarter revenue of US$18.5 billion, up 24% year on year, and raised its full-year outlook after networking product revenue jumped 43% to US$11.1 billion.

Chief executive Chuck Robbins described the quarter as Cisco’s strongest revenue and non-GAAP earnings-per-share growth in more than 15 years, saying organisations were turning to the company as they scale and secure systems for what he called the “agentic AI era” (NASDAQ:CSCO). Cisco’s expectation for fiscal 2027 AI infrastructure revenue from hyperscalers has now reached US$9 billion, more than double the total recorded in fiscal 2026. That is a company forecast, rather than a booked revenue figure, and the release cautions that the timing and scale of AI deployments remain uncertain.

Networking drives Cisco’s quarterly acceleration

The growth was concentrated in Cisco’s core product businesses. Networking revenue rose 43% year on year, while security increased 7%, collaboration 8% and observability 2%. Product revenue overall climbed 32% to US$14.7 billion, while services revenue was largely flat at US$3.85 billion.

Growth reached all three reported regions: the Americas rose 28%, EMEA 18% and Asia Pacific, Japan and China 21%. Remaining performance obligations increased 8% to US$46.2 billion, including 7% growth in product obligations and 9% in services. The backlog measure offers some visibility into future delivery, although it does not determine when the associated revenue will be recognised.

Higher earnings guidance rests on operating leverage

GAAP net income rose 59% to US$4.6 billion, producing diluted earnings per share of US$1.14. Non-GAAP net income increased 39% to US$5.6 billion, with non-GAAP EPS up 40% to US$1.40. Cisco reported a GAAP operating margin of 30.2% and a record non-GAAP operating margin of 37.8%.

The gap between the two measures matters. Cisco’s non-GAAP results exclude items including share-based compensation, acquisition-related intangible amortisation, acquisition and divestiture costs, restructuring charges and investment gains or losses. The company’s US$911 million share-based compensation expense in the quarter was among the adjustments used to bridge GAAP operating results to its non-GAAP presentation. GAAP operating expenses still fell 3% year on year to US$6.2 billion, while non-GAAP operating expenses rose 2% to US$5.1 billion.

Raised FY27 targets and shareholder returns

Cisco now expects fiscal 2027 revenue of US$74.8 billion to US$75.8 billion and non-GAAP EPS of US$5.47 to US$5.53. Its second-quarter revenue forecast is US$18.0 billion to US$18.2 billion, with non-GAAP EPS of US$1.34 to US$1.36. The company also declared a quarterly dividend of US$0.42 per share, payable in January 2027 subject to the stated record-date conditions.

Capital returns reached US$3.7 billion in the quarter, comprising US$1.7 billion in dividends and about US$2.0 billion in share repurchases. Cisco bought back approximately 18 million shares at an average price of US$112.38, leaving US$6.1 billion available under its repurchase authorisation. It also completed the acquisition of privately held security company WideField Security, although the release gave no purchase price or detailed financial terms.

The immediate test is whether hyperscaler demand can convert into a sustained, broad-based networking cycle rather than a small number of large deployments. Cisco’s own risk disclosures point to customer concentration, supply constraints, changing product mix and the timing of AI infrastructure roll-outs as variables that could affect the raised targets. The next quarter should offer an early indication of whether the US$9 billion AI infrastructure ambition is building through orders, margins and cash flow, or remains primarily an outlook statement.