SEATTLE: Cisco Systems Inc projects US$7.5bil in sales tied to the artificial intelligence (AI) data centre boom this fiscal year, disappointing investors who’ve seen the world’s largest networking gear supplier amass US$9.3bil in AI-related orders over the past year.
AI sales will make up about 10% of Cisco’s projected total revenue of US$72.2bil to US$73.4bil in the financial year 2027, according to a company statement issued on Wednesday.
That marked the first time Cisco had given a full-year AI revenue forecast, and analysts questioned how it lined up with AI-related orders that totalled US$4bil alone in the quarter that ended July 25.
“That just strikes me as very, very conservative,” David Vogt, an analyst at UBS, said during a conference call with Cisco executives to discuss the company’s quarterly results.
The shares fell about 4% in extended trading after closing at US$123.88 in New York. The stock had gained nearly 25% over the past three months on investor anticipation that its focus on AI would drive higher sales.
Cisco is facing high expectations that it will profit from the worldwide build-out of data centres powering AI systems.
The company has been restructuring in an attempt to score more contracts tied to the AI boom, but it’s also now in closer competition with the likes of Broadcom Inc and Hewlett Packard Enterprise Co.
Cisco chief executive officer Chuck Robbins said during the call that the company generated about US$4bil in AI revenue in fiscal 2026, even while orders totalled more than US$9bil.
“These are non-linear orders that are massive in scale and are usually placed well ahead of time,” he said, describing the AI sales guidance “a good, prudent guide for the year”.
The AI guidance overshadowed Cisco’s outlook for sales and profit in the first quarter, which topped analysts’ estimates.
Revenue will be US$18bil to US$18.2bill in a period that runs through October, compared with analysts’ average projection of US$16.8bil, according to data compiled by Bloomberg. Profit, excluding some items, will be US$1.32 to US$1.34 a share, also well above estimates.
Fiscal fourth quarter sales rose 18% from a year earlier to US$17.3bil.
Analysts, on average, predicted US$16.8bil. Profit, excluding some items, was US$1.22 a share, compared with an average estimate of US$1.17.
Despite its focus on supplying AI data centres, San Jose, California-based Cisco still depends on its traditional businesses for much of its sales.
Earlier this year, the company announced a reorganisation to focus more closely on the AI market and estimated that related job cuts would result in as much as US$1bil in severance costs and other one-time expenses.
Sales from Cisco’s security business totalled US$2.23bil in the fourth quarter, up 14% from a year earlier.
Cisco chief financial officer Mark Patterson said he expected AI models, which are proving increasingly capable of identifying cyber vulnerabilities and exploiting them, to drive further growth.
“From that perspective, that’s creating a shift of dollars from other areas in the organisations to information technology to actually do that work,” he said. — Bloomberg
