Cisco Systems Adjusts AI Revenue Projections Amidst Investor Disappointment
SEATTLE: Cisco Systems Inc forecasts approximately US$7.5 billion in sales related to the burgeoning artificial intelligence (AI) data centre sector for the current fiscal year.
This announcement has left investors with a sense of letdown, particularly given that the preeminent networking equipment manufacturer has secured a remarkable US$9.3 billion in AI-related orders over the preceding twelve months.
According to a statement released on Wednesday, AI sales are anticipated to contribute roughly 10% to Cisco’s projected total revenue, which is expected to range between US$72.2 billion and US$73.4 billion for the financial year 2027.
This marks the inaugural occasion on which Cisco has provided a comprehensive forecast for AI revenue, inciting skepticism among analysts regarding its alignment with a staggering US$4 billion in AI-related orders recorded in the quarter ending July 25.
“That just strikes me as very, very conservative,” remarked David Vogt, an analyst at UBS, during a teleconference with Cisco executives to deliberate on the company’s quarterly results.
Following the announcements, shares plummeted nearly 4% in after-hours trading after concluding the day at US$123.88 in New York.
Notably, the stock had previously surged nearly 25% over the last three months in response to optimistic investor sentiment regarding the company’s AI strategy.
Cisco is under considerable pressure to capitalize on the global expansion of data centres that underpin AI systems.
The company has been undergoing a restructuring process aimed at securing additional contracts linked to the AI surge, while concurrently facing intensified competition from industry giants such as Broadcom Inc and Hewlett Packard Enterprise Co.
During the call, Cisco’s CEO, Chuck Robbins, indicated that the company generated about US$4 billion in AI revenue in fiscal 2026, despite orders exceeding US$9 billion.
“These are non-linear orders that are massive in scale and are usually placed well ahead of time,” he noted, characterizing the AI sales guidance as “a good, prudent guide for the year.”
However, the subpar AI outlook overshadowed Cisco’s upbeat projections for sales and profit in the first quarter, which surpassed analysts’ expectations.
Revenue is expected to fall between US$18 billion and US$18.2 billion for the quarter ending in October, surpassing analysts’ average forecast of US$16.8 billion, as per data gathered by Bloomberg.
Profit, excluding certain items, is projected to be between US$1.32 and US$1.34 per share, also exceeding estimates.
In the fiscal fourth quarter, revenues surged 18% from the previous year, reaching US$17.3 billion. Analysts had anticipated an average of US$16.8 billion.
Profit, excluding specific items, stood at US$1.22 per share, outperforming the average estimate of US$1.17.
Despite its strategic pivot towards AI data centres, Cisco, based in San Jose, California, continues to rely significantly on its traditional business segments for the bulk of its revenue.
Earlier this year, the corporation announced a reorganization designed to better align with the AI market, estimating that ensuing job cuts could incur severance and other one-time costs amounting to up to US$1 billion.
In the fourth quarter, sales from Cisco’s security division reached US$2.23 billion, reflecting a 14% increase from the previous year.
Mark Patterson, Cisco’s chief financial officer, expressed confidence that increasingly sophisticated AI models, adept at identifying and exploiting cyber vulnerabilities, will catalyze additional growth.
“From that perspective, that’s creating a shift of dollars from other areas in the organizations to information technology to actually do that work,” he commented.
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