In a strategic pivot towards emerging technology sectors, Cisco Systems Inc. (CSCO) has revised its annual revenue forecast upwards, signaling a robust demand for its products in cybersecurity, cloud systems, and artificial intelligence (AI)-driven solutions.
The San Jose, Calif.-based company announced on Wednesday that it now anticipates annual revenue to range between $55.3 billion and $56.3 billion, an increase from its previous outlook of $55.0 billion to $56.2 billion. Cisco also raised its adjusted earnings per share outlook to a range of $3.60 to $3.66, up from the previous forecast of $3.52 to $3.58. This adjustments reflect a recovery in market demand, particularly driven by the surge in AI technology investments.
The tech conglomerate’s products, such as ethernet switches and routers, are integral to data centers, which are seeing increased investment due to the high computational needs of AI applications. In fact, product orders in Q1 rose 20%, following an increase of 14% in the preceding three months.
CEO Chuck Robbins emphasized the company’s role in this technological evolution, stating, “Our customers are investing in critical infrastructure to prepare for AI, and with the breadth of our portfolio, we are uniquely positioned to capitalize on this opportunity.”
This year, Cisco has undertaken significant restructuring, including two rounds of layoffs, aimed at reducing costs and sharpening its focus on high-growth areas like cybersecurity. These efforts are in part to counteract the post-pandemic market slowdown and to enhance its position in the rapidly expanding AI and cybersecurity markets.
A notable move in this direction was Cisco’s completion of its $28 billion acquisition of Splunk in March. This acquisition is intended to fortify Cisco’s software business, leveraging AI’s growing influence while also bolstering its cybersecurity offerings.
Despite these strategic maneuvers, Cisco’s first-quarter revenue experienced a 6% decline to $13.84 billion for the period ending October 26, although this figure still surpassed analyst expectations of $13.77 billion. Additionally, its adjusted profit per share stood at 91 cents, outperforming the consensus estimate of 87 cents.
Meanwhile, net income came in at $2.71 billion, or 68 cents per share, down from $3.64 billion, or 89 cents per share, in the same period last year.
In a broader industry context, Cisco’s competitor, Arista Networks (ANET), has also shown optimism for the market, projecting its fourth-quarter revenue to exceed Wall Street’s estimates, suggesting a sector-wide interest in networking solutions that support the burgeoning AI and cloud technology landscapes.
Price Action: Cisco shares are down 3.24%, or $1.92, in after-hours trading to $57.26. The stock is up 17% year-to-date and 11% over the past year.
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