Cisco lifts AI forecast to $9b

Cisco, a California-based networking equipment maker, raised its fiscal-year forecast for AI infrastructure and hyperscaler orders to US$9 billion from US$5 billion.

The company also said it will cut about 5% of its workforce as demand for AI tools and data center equipment rises.

The company is shifting resources toward AI-focused segments, silicon, and optics, and some affected employees may move into those roles, CEO Chuck Robbins told CNBC.

Cisco shares rose 14% after the update, putting them on track for their best day in more than two decades.

The fast-changing AI market limits booking visibility and Cisco has passed on some hyperscaler projects, Robbins said.

🔗 Source: CNBC

🧠 Food for thought

Implications, context, and why it matters.

Cisco’s AI growth lands amid older business declines and tough competition

Cisco’s AI push has not lifted every unit. Networking revenue rose 15% in Q1 FY26. Security fell 2% and Collaboration slipped 3% 1.
Competition remains fierce. Cisco ranked third in data center Ethernet switches in Q1 2025 with US$1.25 billion in sales 2. Arista Networks, a cloud networking gear maker, finished ahead 2. Nvidia, the AI chip company, also led as it expands fast in this market 2.
Demand is spreading beyond the largest cloud providers. Cisco has a pipeline above US$2 billion from sovereign cloud, neo cloud providers, and enterprise customers 1. Sovereign cloud refers to cloud services designed to keep a country’s data under local control. Neo cloud providers are newer cloud infrastructure companies 1.
Cisco also expects a separate multi-year refresh cycle for its core campus networking equipment, which is used in office and corporate site networks, as older product lines near end-of-support 1.

The AI boom squeezes margins and changes Cisco’s product mix

Cisco is spending more to capture AI growth, including inventory to meet rising demand for AI infrastructure 1.
Large orders from hyperscalers, large cloud companies that operate huge data centers, bring a tradeoff 3. These high-volume deals can carry lower gross margins than traditional enterprise sales, which puts pressure on profitability 3.
Cisco is leaning on its Silicon One chips and Acacia optics, optical networking technology from Cisco’s Acacia unit 1. That lines up with a wider move toward vertical integration as vendors try to control more of the technology stack for AI workloads 1.
Cisco booked strong AI infrastructure orders from hyperscalers 1. All hyperscalers now buy its coherent pluggable optics, a type of high-speed optical connection used to move data between data centers and networking systems 1.