Cisco Systems raised its fiscal 2027 revenue and earnings outlook after reporting record first-quarter sales, as demand for networking equipment and artificial intelligence infrastructure drove its strongest revenue and earnings growth rates in more than 15 years. Revenue rose 24% to a record $18.5 billion. The stock fell 7% the next day. That gap between what the business delivered and what the market priced is exactly why this stock belongs on today’s list.
Adjusted EPS of $1.40 marked six consecutive quarters in which Cisco beat Wall Street’s earnings expectations. Cisco lifted its fiscal 2027 hyperscaler AI infrastructure revenue forecast to $9 billion from $7.5 billion, citing customer demand and improved visibility, and reported 18 AI infrastructure design wins over five quarters. CEO Chuck Robbins called Q1 “the very early stages of a multi-year networking supercycle.”
Networking revenue was up 43% year over year, led by triple-digit AI infrastructure growth and double-digit data center switching and campus networking growth. Management expects hyperscaler AI infrastructure revenue to represent 12% of total revenue in fiscal 2027, up from 6% in fiscal 2026. Management raised FY27 guidance, supported by remaining performance obligations of $46.2 billion and rising AI infrastructure commitments.
Why Wall Street Is Paying Attention
Non-GAAP gross margin fell to 65.6% from 68.1%, and non-GAAP product gross margin dropped to 63.7% from 67.2%, linked to AI networking hardware, higher hardware mix, and elevated memory costs. Orders were the sore spot. Product orders grew 21%, down from 35% in Q4. Excluding hyperscalers, growth slowed to 14% from 25%. Citi called the quarter solid but said the guidance suggests growth peaked in the October quarter, cutting its price target to $120 from $139 while keeping its Buy rating.
Cisco shares closed at $102.01. After the Friday selloff to roughly $95.64, the stock trades at approximately 18.5 times the midpoint of management’s revised fiscal 2027 adjusted EPS guidance. JPMorgan and Bank of America maintained Buy recommendations with $150 price targets.
What Is Driving the Opportunity
In addition to hyperscaler demand, Cisco saw accelerated growth in AI infrastructure orders from neocloud, sovereign and enterprise customers in Q1, with Nexus data center switches tagged for AI deployments up 47% year over year. AI infrastructure revenue is projected to reach $9 billion in fiscal 2027, more than double the prior year, driven by hyperscaler design wins and growing adoption of Cisco’s Silicon One-based platforms and Acacia optics.
What Could Go Wrong
Revenue is a lagging indicator and orders lead it, so investors are pricing in the deceleration. The CEO also called AI orders “lumpy”, and Cisco is moving to revenue-based AI disclosure, which gives less order visibility. An increasing hardware mix and component costs remain important considerations for profitability.
The Bottom Line
A business compounding revenue at 24%, raising its AI forecast, and sitting on $46 billion in performance obligations deserves more than 18.5 times forward earnings. At the current price, the market is paying for the margin concern and ignoring the cycle thesis. Cisco reported its strongest top-line and bottom-line growth rates in over 15 years, prompting an increase in full-year guidance for both revenue and earnings. If Robbins is right that the supercycle is just beginning, the selloff has created the entry point this stock rarely offers.
