Cisco beats earnings expectations as AI spurs networking gear demand

(Reuters) -Cisco Systems forecast quarterly revenue and profit above Wall Street estimates after posting upbeat first-quarter results, helped by improving demand for its networking gear amid the AI boom.

Shares of the computer networking equipment maker were down 1.4% in extended trading after the company forecast annual revenue broadly in line with estimates.

Companies have been ramping up investments in AI technologies which require heavy computing power, creating a spike in demand for data centers, which use Cisco (NASDAQ:CSCO )'s products such as ethernet switches and routers.

However, the California-based company has been trying to reduce reliance on its massive networking equipment business, which has suffered in recent years from supply chain issues and a post-pandemic slowdown in demand.

The company had announced two rounds of layoffs this year in a bid to cut costs, as it shifts focus to cybersecurity, cloud systems and AI-driven products.

Cisco completed its $28 billion acquisition of Splunk (NASDAQ:SPLK ) in March, which aims to boost its software business amid an AI boom while also helping to offset a post-pandemic slowdown in demand by enhancing its cybersecurity capabilities.

The company expects second-quarter revenue to be between $13.75 billion and $13.95 billion, which was above analysts' average estimate of $13.73 billion, according to LSEG-compiled data.

It forecast quarterly adjusted profit per share of 89 cents to 91 cents, compared with estimates of 87 cents.

The company's revenue fell 6% to $13.84 billion in the first quarter ended Oct. 26, beating estimates of $13.77 billion. Adjusted profit per share of 91 cents also beat estimates of 87 cents.



Cisco now expects annual revenue to be between $55.3 billion and $56.3 billion, compared with its earlier forecast of between $55.0 billion to $56.2 billion. Analysts were expecting $55.89 billion.

It raised its annual adjusted profit forecast range to $3.60 to $3.66, from $3.52 to $3.58.

Source: Investing.com