Cisco Systems, Inc. (CSCO.US) Q1 revenue rose 24%, the strongest in 15 years; AI infrastructure revenue forecast doubled to US$9 billion; shares rose more than 8% at one point after hours.

Network equipment giant Cisco Systems, Inc. (CSCO.US) released its fiscal 2027 first-quarter earnings after the U.S. market close on November 12, Eastern Time, with both revenue and profit beating expectations and full-year guidance raised. Quarterly revenue was US$18.52 billion, up 24% year-over-year, the strongest revenue growth for Cisco Systems, Inc. in nearly 15 years and significantly above the LSEG consensus estimate of US$18.1 billion; GAAP net income was US$4.6 billion, up 59% year-over-year, with diluted earnings per share of US$1.14; adjusted earnings per share were US$1.40, up 40% year-over-year and above the market consensus estimate of US$1.33. This marks the sixth consecutive quarter in which Cisco Systems, Inc. has beaten profit expectations. The core engine of the results was the networking business. Quarterly networking revenue reached US$11.13 billion, surging 43% year-over-year, driving overall product revenue growth of 32%; the security business (including Splunk) grew 7% to US$2.12 billion, the collaboration business grew 8%, and the observability business grew 2%. All three major regions (Americas, EMEA, Asia-Pacific) achieved double-digit growth. Remaining performance obligations (RPO) rose to US$46.17 billion, above market expectations, indicating that the order backlog remains solidwhich also corroborates management's judgment that "the demand cycle is sustainable." AI is the biggest narrative of this round of results, and it has already moved from expectations to the order level. Cisco Systems, Inc. accumulated more than US$9.3 billion in hyperscaler AI infrastructure orders in the previous fiscal year (FY2026), roughly 4.5 times that of the prior fiscal year, of which about 60% were switching systems based on its in-house Silicon One chips and 40% were Acacia high-speed optical interconnect products; Acacia's orders alone exceeded US$1 billion in a single quarter. Based on this order momentum, the company raised its hyperscaler AI infrastructure revenue forecast for the current fiscal year from US$7.5 billion to US$9 billion, more than double the actual level of the previous fiscal year. Management said that the accelerated deployment of agentic AI is driving data center demand for switches, routers and 400G/800G high-speed optical interconnects to extend from AI processors to network equipment, and that training and inference have extended to cloud, on-premises and edge environments; Cisco Systems, Inc. is using this to enter the generative AI infrastructure wave it previously missed. However, this round of high growth also brings concerns about earnings quality. As the share of AI-related hardware (hyperscaler switches, Silicon One, Acacia optical modules) revenue rose, quarterly adjusted gross margin was 65.6%, down 2.5 percentage points year-over-year; GAAP gross margin was 63.7%, down 1.8 percentage points year-over-year. This is precisely the focus of recent market attentionearlier this month, Morgan Stanley downgraded Cisco Systems, Inc. on the logic that "AI hardware revenue is recognized immediately and dilutes gross margin before software revenue arrives," causing the stock price to fall at one point. Fortunately, economies of scale continued to be unleashed, with adjusted operating margin rising to a record high of 37.8% (market expectation 36.1%), and operating cash flow surging in tandem, driving profit growth well above revenue growth and partially offsetting gross margin pressure. Management also flagged tariffs, component costs pushed up by the memory chip shortage, supply chain constraints, and concentration risk with large hyperscaler customers. In terms of outlook, Cisco Systems, Inc. substantially raised its full-year guidance: fiscal 2027 revenue is expected to be raised to US$74.8 billionUS$75.8 billion (previously US$72.2 billionUS$73.4 billion), and adjusted earnings per share is expected to be raised to US$5.47US$5.53 (previously US$5.05US$5.11). Second-quarter revenue guidance is US$18.0 billionUS$18.2 billion and adjusted EPS US$1.34US$1.36, both clearly above market expectations (revenue US$17.88 billion, EPS US$1.23). Chairman and CEO Chuck Robbins said: "We are in the early stages of a multi-year networking supercycle, with enterprises seeking Cisco Systems, Inc.'s help to scale, secure and optimize their environments for the agentic AI era." CFO Mark Patterson called the quarter "another record quarter," with revenue, operating margin and EPS all above the upper end of guidance, and pledged that profit would "land on the books at a faster pace," with operating leverage being unleashed. The company also revealed that Cisco Systems, Inc. is building software tools to help enterprises build their own armies of AI agents to defend against cybersecurity threats, extending AI capabilities into security and observability. On the stock side, Cisco Systems, Inc. closed regular trading on November 12 up 1.24% at US$102.01 and rose more than 8% at one point after hours. It has gained about 32% year-to-date, significantly outperforming the Nasdaq (about +9%) and the S&P 500 (about +10.9%) over the same period; however, compared with its early-November high, the stock has still pulled back noticeably after Morgan Stanley's downgrade, and signals from this month's U.S. midterm elections indicate that opposition to data center projects is growing, which has also weighed on recent stock price performance to some extent.