Cisco Systems (CSCO) initial fiscal 2027 revenue outlook appears conservative, with UBS's analysis of orders and backlog suggesting the implied second-half growth rate could be understated by at least 5 percentage points.
The company raised its fiscal 2027 AI revenue outlook to $7.5 billion from $6 billion, while trailing 12-month AI orders reached $9.3 billion. UBS said in a Wednesday note that the AI revenue outlook is appropriately conservative given the level of orders and only $4 billion of AI revenue recognized in fiscal 2026.
UBS said Cisco's product orders grew 35% year over year, led by a 95% increase in Service Provider/Cloud orders and a roughly 20% increase in Campus orders. AI infrastructure orders were about $4 billion in the quarter, above the $3.7 billion implied by the prior guidance, according to the note.
The investment firm raised its fiscal 2027 EPS estimate to $5.09 from $4.81 and fiscal 2028 to $5.78 from $5.63. It said gross margins could come under pressure in fiscal 2027 as AI and non-AI backlog converts to revenue, but expects operating margin to expand to roughly 35%, driving profit growth slightly above revenue growth.
UBS raised its price target on the company's stock to $138 from $132, with a buy rating.
Shares of Cisco Systems were down 9.5% in Thursday trading.
Price: $112.09, Change: $-11.80, Percent Change: -9.52%