Cisco Systems (NASDAQ:CSCO) shares fell more than 5% in U.S. premarket trading on Thursday despite the networking technology group forecasting fiscal 2027 revenue and earnings comfortably above Wall Street estimates. Strong demand for networking equipment and artificial intelligence infrastructure continues to support growth, but investors appeared to have expected even more following a rally of more than 60% in Cisco shares this year.
High expectations overshadow bullish guidance
Cisco’s latest outlook highlighted continued momentum across its core operations, although analysts said the company’s elevated valuation had created a particularly demanding benchmark ahead of the results.
“FY27 outlook implies core business growth of 10% which is impressive, but there was a high bar for results as valuation was extended heading into earnings and FQ4 AI results were largely in-line with expectations,” analysts at Barclays said in a note.
They also highlighted potential pressure on profitability from the growing contribution of artificial intelligence hardware.
The outlook “implies lower product gross margin, which we think may be due to AI dilution,” the analysts added.
Cisco’s strong share-price performance this year has reflected investor enthusiasm surrounding accelerating demand for the networking infrastructure required to build and operate advanced AI systems.
Cisco forecasts stronger-than-expected first quarter
Demand from hyperscale technology customers remains a major growth driver and is providing additional momentum for Cisco’s traditional networking operations.
For the first quarter, the company expects adjusted earnings of between $1.32 and $1.34 per share, substantially above the Wall Street consensus of $1.14.
Revenue is projected at $18 billion to $18.2 billion, compared with analysts’ average estimate of $16.66 billion.
The company also issued a robust full-year outlook. Cisco expects fiscal 2027 adjusted earnings of $5.05 to $5.11 per share, well ahead of the $4.28 consensus estimate.
Fiscal-year revenue is forecast at between $72.2 billion and $73.4 billion, compared with Wall Street expectations of $62.91 billion.
Fourth-quarter results beat Wall Street forecasts
Cisco also exceeded analyst expectations for its latest quarter.
Adjusted fourth-quarter earnings reached $1.22 per share, ahead of the $1.17 consensus forecast.
Revenue increased 18% year over year to $17.3 billion, exceeding analysts’ expectations of $16.82 billion.
Underlying order trends remained strong. Total product orders increased 35% compared with the previous year, while networking product orders surged 40%.
The quarter represented Cisco’s eighth consecutive period of double-digit order growth, reinforcing signs of sustained demand across its portfolio.
Product revenue increased 24%, supported by a 28% rise in networking revenue.
AI infrastructure orders accelerate
Artificial intelligence infrastructure continues to emerge as an increasingly important contributor to Cisco’s growth.
The company recorded $4 billion of AI infrastructure orders from hyperscale customers during the fourth quarter, taking total fiscal 2026 orders in the category to $9.3 billion.
Cisco generated approximately $4 billion of AI infrastructure revenue during fiscal 2026 and expects that figure to increase sharply to $7.5 billion in fiscal 2027.
The growth illustrates how spending by large cloud and technology companies on AI computing capacity is creating additional demand for Cisco’s networking products.
However, investors are also watching whether the changing product mix could weigh on margins as AI infrastructure becomes a larger percentage of overall sales.
Full-year revenue and profit climb
Cisco finished fiscal 2026 with substantial growth across both revenue and earnings.
Full-year revenue increased 12% to $63.3 billion, while unadjusted net income rose 30% to $13.3 billion.
The company also continued returning capital to investors. Cisco distributed $3.2 billion through dividends and share repurchases during the fourth quarter and declared a quarterly dividend of $0.42 per share.
Despite the premarket decline, Cisco’s results point to continued strength across networking and AI infrastructure. The market reaction instead highlights the challenge created by elevated expectations after the stock’s powerful rally, with investors now looking for growth strong enough to justify its higher valuation while preserving product margins.
Cisco stock price
