Cisco Q1 2027: $9B AI outlook and a 43% networking surge

Cisco reported its strongest revenue and earnings-per-share growth rates in over 15 years for the fiscal first quarter of 2027, with revenue of $18.52 billion beating expectations. Adjusted EPS of $1.40 also beat expectations, marking six consecutive quarters in which the company has beaten Wall Street's earnings expectations.

The headline number behind the beat was Networking, where revenue climbed 43% year over year to $11.13 billion, pulling overall product revenue up 32%. Security grew 7% to $2.12 billion and Collaboration added 8% to $1.14 billion, but Networking was clearly doing the heavy lifting as hyperscaler demand for AI infrastructure accelerated.

CEO Chuck Robbins called Q1 'the very early stages of a multi-year networking supercycle,' and the financials back that characterization. Non-GAAP operating margin reached a record 37.8%, with operating income and operating cash flow both rising sharply. The company also raised its expectation for AI infrastructure revenue from hyperscalers to $9 billion for the full fiscal year.

With results in hand, Cisco raised its full-year FY2027 guidance to revenue of $74.8 billion to $75.8 billion and non-GAAP EPS of $5.47 to $5.53, and guided Q2 FY2027 revenue to $18.0 billion to $18.2 billion with non-GAAP EPS of $1.34 to $1.36. The raised full-year outlook, alongside a $6.1 billion remaining share-repurchase authorization and a quarterly dividend of $0.42 per share, underscores management's confidence that the demand cycle has durability.

One risk worth monitoring is gross margin compression: GAAP gross margin came in at 63.7%, down from 65.5% a year ago, as the hardware-heavy mix of AI infrastructure orders weighs on profitability even as it lifts revenue. Management also flagged tariffs, supply constraints, and concentration risk from large hyperscaler purchases as factors that threaten the trajectory of an otherwise robust quarter.