Cisco raises its $9 billion AI revenue target for giant cloud operators after a record $18.5 billion quarter

Cisco's first-quarter report↗ settles the question our November 4 piece put on it: whether the AI backlog converts, and at what price ¹². It converts, at a thinner one. Revenue rose 24% to a record $18.5 billion, Cisco's▼−7.54% — Cisco, down 7.54 percent today strongest revenue and non-GAAP earnings-per-share growth in more than 15 years ¹, and adjusted earnings of $1.40 a share beat the $1.32 analysts expected ².

The raise that matters is one line. Cisco now expects $9 billion of AI infrastructure revenue this fiscal year from hyperscalers, the giant cloud operators, up from the $7.5 billion it last forecast↗ ³ and more than double the roughly $4 billion that business earned in fiscal 2026 ¹³. The report landed hours after Nvidia▼−3.21% — Nvidia, down 3.21 percent today said Jensen Huang had resigned as chief executive, with Nvidia shares closing down 4.3% ⁴; Cisco stock jumped as much as 8% on the release, then settled back to flat in late trading ⁵³.

The backlog is turning into shipments

Follow the chain. An AI cluster runs only as fast as data moves between its chips, so Big Tech's capital spending has spread beyond processors to the switches and routers that connect large data-center systems ³. Cisco missed the early years of the generative AI boom ⁶; networking is where it caught up, and networking revenue rose 43% to $11.13 billion, carrying the quarter ¹.

Cisco booked $9.3 billion of AI infrastructure orders last fiscal year ⁵; the new target is that backlog turning into shipments. Chief executive Chuck Robbins called it "the very early stages of a multi-year networking supercycle" ¹. The orders and the revenue are reported facts; the supercycle's duration is a forecast.

Product margin paid for the growth

The same release prices it. Product gross margin was 61.8% of revenue, roughly three points below a year earlier ¹, pressed by hardware-heavy AI deals and by memory costs climbing as suppliers prioritize chips for AI data centers ³. Inventories rose about $690 million in a single quarter, cash tied up in parts ahead of the ramp ¹. Higher up the income statement the arithmetic still holds: non-GAAP operating margin hit a record 37.8% ¹. The company kept its leverage; the product line sold more and kept less of each sale.

Shareholders carry the margin question

Cisco returned $3.7 billion to shareholders in the quarter ¹, and they hold the open question. The hyperscalers get their network capacity either way; shareholders fund the buyback while the product line keeps a smaller share of each AI dollar. Whether that share stabilizes as the $9 billion ramps is the fiscal-year test, and the second-quarter report, guided to $18.0 billion to $18.2 billion of revenue, arrives in February ¹. It is the first full reading on whether margin recovers with the volume.