Cisco Q1 2027 earnings: Revenue rises 24% as AI forecast reaches $9 bn

Cisco (NASDAQ: CSCO) reported record revenue of $18.5 bn for the first quarter of fiscal 2027, an increase of 24% year over year, supported by demand for networking infrastructure and AI-related technology.

For the quarter ended October 24, 2026, GAAP net income increased 59% to $4.6 bn, while diluted earnings per share rose 58% to $1.14. Non-GAAP net income reached $5.6 bn, up 39%, and adjusted EPS increased 40% to $1.40.

• Cisco’s Q1 FY2027 revenue increased 24% to $18.5 bn, with GAAP net income rising 59% to $4.6 bn and non-GAAP EPS reaching $1.40.
• Networking revenue climbed 43% to $11.1 bn, while the company raised its FY2027 AI infrastructure revenue forecast from hyperscalers to $9 bn.
• Cisco increased its full-year revenue outlook to $74.8 bn-$75.8 bn and expects non-GAAP EPS of $5.47-$5.53.

The company recorded its strongest revenue and non-GAAP EPS growth rates in more than 15 years. Revenue, non-GAAP operating margin and adjusted earnings exceeded the upper end of Cisco’s previous guidance ranges.

Management raised its fiscal 2027 revenue and earnings forecasts and increased its expectation for AI infrastructure revenue from hyperscalers to $9 bn, more than double the amount generated in fiscal 2026.

Cisco Q1 2027 financial results and profitability

Cisco’s product revenue increased 32% to $14.7 bn, while services revenue grew 1% to $3.85 bn. Operating income rose significantly faster than revenue as the company reduced GAAP operating expenses.

GAAP operating income increased 66% to $5.6 bn, while the operating margin expanded to 30.2% from 22.6% a year earlier.

Non-GAAP operating income increased 37% to $7.0 bn, generating a record adjusted operating margin of 37.8%, compared with 34.4% in the prior-year quarter.

GAAP operating expenses declined 3% to $6.2 bn, representing 33.4% of revenue compared with 42.9% a year earlier. Non-GAAP operating expenses rose 2% to $5.1 bn but declined as a proportion of revenue to 27.8% from 33.7%.

Research and development spending was relatively stable at $2.42 bn, while sales and marketing expenses declined to $2.83 bn from $2.87 bn. General and administrative expenses decreased to $717 mn.

Restructuring and other charges fell to $28 mn from $147 mn. Gross margins moved in the opposite direction. Cisco’s GAAP gross margin declined to 63.7% from 65.5%, while its non-GAAP gross margin decreased to 65.6% from 68.1%.

Product gross margin declined to 61.8% on a GAAP basis and 63.7% on a non-GAAP basis. Services gross margin improved to 70.9% and 72.9%, respectively.

“Q1 FY27 was another record quarter for Cisco, with revenue, non-GAAP operating margin, and non-GAAP EPS all exceeding the high end of our guidance ranges,” said CFO Mark Patterson.

Patterson attributed faster earnings growth relative to revenue to improved operating leverage as the business expanded.

The GAAP effective tax rate was 17.2%, compared with 15.7% in the previous year. The non-GAAP effective tax rate declined to 18.5% from 19%.

AI infrastructure revenue forecast rises to $9 bn for FY2027

Cisco increased its expected fiscal 2027 AI infrastructure revenue from hyperscaler customers to $9 bn, more than twice the total recorded in fiscal 2026.

The revised outlook accompanied strong demand for networking equipment, particularly as large technology companies expand infrastructure supporting AI workloads.

Cisco expects AI infrastructure revenue from hyperscalers to reach $9 bn in FY2027, more than doubling its FY2026 total.

CEO Chuck Robbins described the company’s latest results as evidence of growing demand for networking, security and infrastructure technologies supporting AI deployments.

“In Q1, we delivered the strongest revenue and non-GAAP earnings per share growth rates for Cisco in over 15 years,” Robbins said.

He said enterprise customers were seeking technology to scale, secure and optimize their systems for agentic AI applications.

Cisco expects growing investment in AI computing infrastructure to generate additional demand for its networking products, particularly among hyperscale cloud providers.

“We are in the very early stages of a multi-year networking supercycle, and we’re confident in our ability to continue capturing the multi-billion-dollar opportunity it represents for Cisco,” Robbins said.

The company identified hyperscaler investment, enterprise networking modernization and growing demand for AI infrastructure as important drivers of its current business performance.

Cisco networking revenue jumps 43% as demand expands

Networking was Cisco’s largest and fastest-growing product category in the quarter, generating $11.13 bn in revenue, up 43% from a year earlier.

Security revenue increased 7% to $2.12 bn, while Collaboration rose 8% to $1.14 bn. Observability revenue reached $279 mn, an increase of 2%.

Networking generated approximately 60% of Cisco’s total quarterly revenue, with its 43% annual growth accounting for much of the company’s sales expansion.

The strong networking performance contrasted with more moderate growth across Cisco’s other product businesses.

Product revenue totaled $14.67 bn, compared with $11.08 bn a year earlier, while services revenue increased to $3.85 bn from $3.81 bn.

Cisco also completed its acquisition of privately held WideField Security Inc. during the quarter, expanding its security portfolio.

Product revenue increased 32% year over year, substantially outpacing the 1% growth recorded in services.

The results indicate that hardware and infrastructure demand contributed most of Cisco’s revenue growth during the quarter, even as the company continued developing its security, collaboration and observability businesses.

Cisco revenue grows across all geographic markets

Cisco reported double-digit revenue growth in every geographic segment, supported by demand across customer markets.

The Americas generated $11.51 bn, an increase of 28% year over year, making the region Cisco’s largest market.

Europe, the Middle East and Africa (EMEA) contributed $4.46 bn, up 18%, while Asia-Pacific, Japan and China (APJC) revenue rose 21% to $2.56 bn.

The Americas accounted for approximately 62% of Cisco’s quarterly revenue, with sales increasing 28% to $11.51 bn.

Geographic gross margins varied. The Americas recorded a 64.1% gross margin, compared with 68.9% in EMEA and 66.5% in APJC.

The regional figures demonstrate broad-based revenue expansion rather than growth concentrated in a single market.

Cisco reported revenue increases of 28% in the Americas, 18% in EMEA and 21% in APJC during Q1 FY2027.

Cisco raises FY2027 revenue and earnings guidance

Following the stronger-than-expected first quarter, Cisco increased its financial outlook for fiscal 2027.

The company now expects full-year revenue of $74.8 bn-$75.8 bn, with non-GAAP earnings per share between $5.47 and $5.53.

GAAP earnings per share are projected at $4.38-$4.44.

Cisco’s revised FY2027 guidance calls for revenue of $74.8 bn-$75.8 bn and non-GAAP EPS of $5.47-$5.53.

For the second quarter of fiscal 2027, Cisco forecasts revenue of $18 bn-$18.2 bn. Non-GAAP EPS is expected to reach $1.34-$1.36, while GAAP EPS is projected at $1.07-$1.09.

The company anticipates a second-quarter non-GAAP gross margin of 65%-66% and an operating margin of 36%-37%.

Financial guidance	Q2 FY2027	Full FY2027
Revenue	$18.0 bn-$18.2 bn	$74.8 bn-$75.8 bn
GAAP EPS	$1.07-$1.09	$4.38-$4.44
Non-GAAP EPS	$1.34-$1.36	$5.47-$5.53
Non-GAAP gross margin	65%-66%	Not specified
Non-GAAP operating margin	36%-37%	Not specified

Cisco’s second-quarter outlook assumes an effective GAAP tax rate of approximately 14.5% and a non-GAAP rate of 18.5%.

For the full year, the company assumes effective tax rates of approximately 16% on a GAAP basis and 18.5% on a non-GAAP basis.

The revised guidance reflects management’s expectation that continued revenue growth and operating efficiency will support higher earnings throughout fiscal 2027.

The company cautioned that its forecasts remain subject to changes in demand, AI infrastructure investment, component costs, customer ordering patterns and global business conditions.

Cisco cash flow, deferred revenue and remaining performance obligations

Cisco generated $4.36 bn in operating cash flow during the first quarter, an increase of 36% from $3.21 bn a year earlier.

Cash, cash equivalents and investments totaled $15.8 bn at October 24, 2026, broadly unchanged from $15.9 bn at the end of fiscal 2026.

Remaining performance obligations (RPO) increased 8% year over year to $46.2 bn. Product RPO rose 7% to $23.4 bn, while services RPO increased 9% to $22.8 bn.

Cisco’s remaining performance obligations reached $46.2 bn, including $23.4 bn associated with products and $22.8 bn with services.

Deferred revenue increased 7% to $30.1 bn, reflecting 6% growth in deferred product revenue and 9% growth in deferred services revenue.

Of the total, $16.85 bn was classified as current deferred revenue and $13.2 bn as noncurrent.

Cisco reported total assets of $129.5 bn at quarter-end, compared with $129.6 bn at the end of fiscal 2026.

Total liabilities decreased to $77.9 bn from $79.4 bn, while stockholders’ equity increased to $51.6 bn from $50.3 bn.

Inventories rose to $6.38 bn from $5.69 bn during the quarter.

Cisco returns $3.7 bn to shareholders through dividends and buybacks

Cisco returned approximately $3.7 bn to shareholders in Q1 FY2027 through dividends and stock repurchases. The company paid a quarterly cash dividend of $0.42 per share, representing approximately $1.7 bn in distributions. It also repurchased approximately 18 mn shares at an average price of $112.38, spending about $2.0 bn.

Cisco allocated $3.7 bn to shareholder returns during the quarter, including $2.0 bn in share repurchases and $1.7 bn in dividends.

At the end of the quarter, Cisco had $6.1 bn remaining under its authorized stock repurchase program, which has no specified expiration date.

The board also declared another quarterly dividend of $0.42 per common share, payable on January 20, 2027, to shareholders of record as of January 4, 2027.

The next quarterly dividend will remain at $0.42 per share, with payment scheduled for January 20, 2027.

Future dividends remain subject to board approval. Cisco said it intends to maintain its focus on earnings growth and continued capital returns while investing in networking and AI infrastructure opportunities.