Cisco Systems (NASDAQ:CSCO) is emerging as a key player in the AI infrastructure space, despite its reputation as a legacy tech company. The company reported a 24% year-over-year revenue increase to $18.5 billion in its fiscal first quarter, with adjusted earnings per share rising 40% to $1.40. Networking revenue, which includes critical components for AI data centers, surged 43%.
The standout figure was Cisco's revised forecast, now expecting $9 billion in AI infrastructure revenue from hyperscalers in fiscal 2027. This is a significant jump from the $7.5 billion forecast in August and more than double the $4 billion delivered in fiscal 2026. CEO Chuck Robbins emphasized that the company is still in the early stages of a networking super cycle driven by AI deployments.
Despite the strong earnings report, Cisco's stock fell more than 6% the following day. Challenges included higher memory costs and a shift toward hardware, which reduced adjusted gross margins by 2.5 percentage points to 65.6%. Product order growth also slowed to 21% from 35% the prior quarter.
Cisco's valuation remains attractive, trading at about 17 times the midpoint of its fiscal 2027 earnings guidance. The company offers a quarterly dividend of $0.42 per share and recently bought back $2 billion of stock. Analysts suggest that Cisco is undervalued given its AI revenue growth and overall top-line expansion.