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Investing.com - Shares of Cisco Systems were higher by more than 7% in premarket U.S. trading after the networking gear provider raised its annual financial guidance, in a wager on a surge in demand for the equipment needed to underpin massive data center expansion sparked by the artificial intelligence boom.
Cisco said it expects fiscal 2026 revenue to be between $60.2 billion and $61 billion, versus prior projections of $59 billion to $60 billion. Full-year adjusted per-share earnings are tipped to be $4.08 to $4.14, compared to $4 to $4.06 previously.
California-based Cisco’s CEO Chuck Robbins also predicted that the firm would rake in $3 billion in AI infrastructure revenue during its current year. Analysts at Morgan Stanley noted that AI orders in Cisco’s fiscal first-quarter were already at $1.2 billion.
"AI [is] connecting Cisco to more growth opportunities," the Morgan Stanley analysts including Meta Marshall and Mary Lenox said in a note.
For its fiscal 2025, Cisco’s AI infrastructure revenue stood at $2 billion, powered largely by hyperscaler customers, or businesses which operate large data centers and computing environments designed for huge scalability, Robbins said.
"Within our campus networking portfolio, we are seeing very strong demand for switching, routing, and wireless products, indicating that enterprise customers are investing in the connectivity needed for AI deployments," Robbins told investors in a post-earnings call.
Robbins added: "Product orders for AI use cases beyond hyperscaler training are also gaining traction, with orders for data center systems, including switching and compute, growing double digits in Q1 as customers prepare their networks for inferencing and agentic workflows."
Cisco’s share price has spiked by some 25% so far this year, underlining the boost it has received from businesses racing to upgrade data centers and shift workloads to the cloud in a bid to harness and ultimately monetize AI’s capabilities.
The company earned $1.00 per share on an adjusted basis on revenue of $14.88 billion in its quarter ending in October. Analysts polled by Investing.com anticipated $0.98 a share and $14.77 billion, respectively.
Writing in a note, analysts at Vital Knowledge said that while Cisco posted "healthy beat-and-raise" report and demonstrated "rising contribution from the hyperscaler AI buildout and a continued refresh in enterprise networks," Wall Street expectations heading into the results were high -- especially amid recent worries over frothy tech sector valuations.
"[I]nvestors lately have adopted a ’glass half empty’ attitude to tech news, which means some people may decide to focus on the (modest) sales shortfalls" in Cisco’s security and collaboration segments, along with a slight quarter-on-quarter dip in remaining performance obligations, a gauge of future revenue potential, the analysts said.
(Yasin Ebrahim contributed reporting.)