Cisco's High Revenue Forecast: AI Investments on the Rise

Cisco Systems Inc. updated its revenue forecast for the quarter ending in January to between $15 billion and $15.2 billion. Following this announcement, the company's shares gained value in late trading.

Cisco set its revenue forecast for 2026 at $61 billion with updates aimed at capturing a greater share of artificial intelligence (AI) spending. This figure is approximately $1 billion above its previous estimates and higher than Wall Street analysts' expectations.

As optimism grows that the company will benefit from increased AI investments, Cisco, based in San Jose, California, is updating its chips and networking equipment to connect server racks and data centers.

Competing against Broadcom Inc. and Juniper Networks, Cisco aims to gain a competitive advantage by collaborating with leading chip manufacturer Nvidia Corp.. Cisco CEO Chuck Robbins emphasized the growing demand for secure networking technologies as customers seek to quickly explore the potential of AI.

According to the report, shares rose by 8%. Cisco had seen a 25% increase at closing in 2023. The earnings per share forecast for 2026, excluding certain items, was set at $4.14, compared to the analysts' average estimate of $4.05, marking a positive development.

In a conference call with analysts, Robbins indicated that the AI opportunity would increase in the second half of the fiscal year. The company's revenue forecast for the fiscal second quarter, which ends in January, is expected to be between $15 billion and $15.2 billion, exceeding the average Wall Street estimate of $14.7 billion. The adjusted earnings expectation is around $1.02, which is above the 99 cents forecast.

The first quarter of the fiscal year ends on October 25, and Cisco's sales rose 8% to $14.9 billion. Earnings were recorded at $1, excluding certain items. Analysts had expected $14.8 billion in revenue and 98 cents in earnings for this period.

Additionally, AI infrastructure orders from major cloud providers were recorded at $1.3 billion during this period, up from $800 million in the previous quarter. Chuck Robbins stated that he is focusing on security products to diversify their portfolio and disclosed the acquisition of Splunk Inc. for $28 billion in 2024. Bloomberg Intelligence analyst Woo Jin Ho noted that the company's AI momentum has not waned, and despite the increases in forecasts, the outlook remains cautious.